Homestead Issues When Dealing With Real Estate
It is vital that any homestead issues are identified and dealt with early in a real estate transaction. Failure to do so can result in a deal being lost, or worse, liability for those representing buyers and sellers.
To deal with homestead issues, we must first understand what homestead rights are. When spouses live together in a property that one of them owns, the non-owner spouse must consent to any sale or to the entering of a valid offer to purchase. It can be difficult determining who has homestead rights. To illustrate this point, only one spouse can have homestead rights in a property at any given time and leaving a residence does not terminate a spouse’s homestead rights. Think of the situation where someone owns a property, has lived in the property with a spouse, they split up without formally dealing with the separation, now the property owner has a new spouse who has moved in. If you are considering homestead rights, at first impression the property owner’s current spouse has homestead rights and must consent however it is in fact the first spouse. It is easy to see how this can be a problem when trying to get a binding agreement or close a transaction.
The other question is how a buyer or a seller’s realtor can know about these homestead issues, especially where the seller does not disclose it, either intentionally or not. If the seller swears a statutory declaration indicating that the property is not homestead property, a buyer does not need to inquire further, and if the buyer is unaware of any falsity in that statement a sale will be valid. Such a statutory declaration is signed as part of the transfer documents, so after a deal closes, this is less concerning, but to avoid any unexpected issues before closing, or, in my opinion, to hold any seller liable where they can’t close because a spouse won’t consent, a seller can sign a statutory declaration at the time of the offer indicating that the Land is not homestead.
Often, we are seeing spouses owning property together, so it is not an issue, however there are still some where there is only one spouse on title, so it pays to pay extra attention in these cases. In the past year we had a deal fail to close because an ex-spouse registered a notice of Homestead rights on the property right before closing. It was unfortunate for all parties, as the buyers had no where to move to, the seller’s lost the deal, and the realtors did all that work and lost their commissions. Assuming a seller is honest, this issue could have been identified before the property was listed and if the spouse was going to refuse to sign, a lot of time, and money could have been saved by all involved.
- Chris Lange, Lange Khokhar Law
