Bulletin: NJ000033

Dear Associates:

We are often asked under what circumstances must a spouse, who is not in title, join in either a conveyance or mortgage made by his or her spouse who is solely in title to a parcel of real property.

The short answer is:

Both spouses must join in all cases.

The long answer is, as is often the case in matters requiring interpretation of both statutory and case law, and applying specific factual consideration, somewhat more complicated. In matters where the non-title spouse is either unable or unwilling to join in the deed or mortgage, such matters should be regarded as unusual risks and the company's approval must be obtained before insuring.

Discussion:

As of May 28, 1980 all future dower and curtesy rights were abolished in New Jersey (N.J.S.A. 3B:28-2). In effect, any property acquired by a married person after May 28, 1980 would no longer be subject to the dower or curtesy rights of that person's spouse. In place of the common law rights of dower and curtesy, the state legislature created a "right of joint occupancy" in the "principal matrimonial residence" (N.J.S.A. 3B:28-3). Presumably, this "right of possession" in the marital home was intended, among other things, to give the non-title spouse a right to live in the marital home without fear of ejectment by the other spouse. In addition to the right of possession, other statutes provide that a non-title spouse has a right to "equitable distribution" as to certain real property of his or her spouse in the event of a divorce (N.J.S.A. 2A:34-23 et seq.).

On the other hand, other statutes appear to generally permit a spouse to convey or release to the other spouse any and all rights in and to any real property (N.J.S.A. 37:2-18); to permit the mortgaging of the principal marital residence by the spouse in title with the consent of the non-title spouse (N.J.S.A. 3B:28-3.1); and to generally permit premarital agreements which may provide for the release of the right of possession and settle claims of equitable distribution, as well as any other real property interest. Although these generally worded statutes appear to authorize a conveyance between spouses of either, the right of possession under N.J.S.A. 3B:28-3 or rights of equitable distribution under N.J.S.A. 2A:34-23, there is presently no case specifically upholding such conveyances. In other words, there is not court confirmation that a spouse who makes a conveyance to his or her spouse and later seeks an order from a court in a divorce proceeding setting aside his or her own deed and trying to re-establish whatever rights may have been conveyed, or asserting some new rights in the property, will not be successful in obtaining such an order.

The little case law that has come down under the statutes seems to favor the non-title spouse and disfavor any attempt by the spouse in title to deprive the non-title spouse of either the right of possession or rights of equitable distribution (See Arnold v. Anvil Realty, 233 N.J. Super. 481 and Wamco v. Farrell, 301 N.J. Super. 73).

Because of this state of the law, it is difficult for Stewart to set a hard and fast underwriting policy without being overly restrictive. This is why our current guidelines require the non-titled spouse to join in mortgages and conveyances unless specific circumstances do not require such written consent. Such cases must be submitted to the company on a case by case basis for approval.

In considering each case, all relevant facts must be considered. If the property is residential in nature, it must be assumed to be the principal matrimonial residence and the non-title spouse must join in the conveyance or mortgage, unless it can be clearly demonstrated that it is not the matrimonial residence. The self serving affidavit of the spouse in title that it is not the principal matrimonial residence or the fact that the non-title spouse has vacated the premises is not sufficient. If it is claimed to be rental or investment property, the proof should be required as to leases, rental insurance coverage, the location of the principal matrimonial residence or other independently verifiable information which would confirm the premises are not the matrimonial residence. Such factors, however, are only relevant as to a conveyance of the property. Because of the possibility of any residential property later becoming the marital residence, both spouses must always join in a mortgage transaction, either by signing the insured mortgage or other record evidence of the consent and subordination of the non-title spouse to the insured mortgage.

If the property is not residential in nature, there is no issue as to the right of possession.

However, as to both residential and non-residential property, the question of a possible equitable distribution issue must be considered. If there has been a recent divorce or there is a divorce pending, any court orders or judgment relative to the divorce must be reviewed to make sure the non-title spouse has not been granted an interest in the property. What property is subject to a claim of equitable distribution is a difficult factual question involving when the property was acquired, how it was acquired, when the parties were married and other factors. It should not be assumed that a claim of equitable distribution is not possible without consulting the company. Similarly, interim or pendente lite orders may not be relied upon to determine equitable distribution rights, as such orders are subject to change. The standard affidavit of title requires disclosure of all pending law suits, which includes matrimonial actions and a complete marital history of the deponent, which requires disclosure of a pending divorce action. Absence any actual knowledge to the contrary or a lis pendens giving constructive notice of a claim or equitable distribution as to a particular premises, the representations of the affidavit of title should be sufficient warranty for a bona fide purchaser to take free and clear of any claim of the non-title spouse.

Any property, residential or otherwise, acquired prior to May 28, 1980, and while the grantee was married is still subject to rights of dower and curtesy. As to those properties the non-title spouse must join in any conveyance or mortgage.

There is one clear case where a non-title spouse need not join in a mortgage made by the spouse in title. Where a married person is buying property and granting a purchase money mortgage, the non-title spouse need not join in such a purchase money mortgage. N.J.S.A. 3B:28-3.1 (c) specifically grants such mortgages priority over the right of possession.

The reason the non-title spouse cannot or will not consent to the transaction must be considered. There can be logistical, financial or other legitimate reasons for the non-title spouse not joining in the transaction and the company will take such reasons into consideration.

In those cases where a non-title spouse is willing to convey his or her interest to the spouse in title, but for any number of reasons is unable to join in the deed of conveyance or mortgage to be insured, a separate deed may be appropriate. In such cases, we suggest the following recital appear in the bargain and sale (covenants vs. grantor's acts) deed:

Recital:

"Without limitation as to the general nature of this conveyance, it being the grantor's intent to convey any and all, present or future, estate, right, title and interest in and to the land and improvements described herein (the "Premises") to the grantee, however, acquired, the grantor specifically extinguishes any marital rights in the Premises and; conveys and releases his/her right of joint occupancy or possession in and to the Premises pursuant to N.J.S.A. 3B:28-3 and his or her right, if any, of equitable distribution in or to the Premises pursuant to N.J.S.A. 2A:34-23 et seq., either now or which may arise in the future. The grantor acknowledges that subsequent mortgagors and grantees (either by gift or purchase) of the grantee herein may rely upon this deed to determine that the grantor has conveyed and released to the grantee all of his/her present and future estate, right, title or interest in the Premises of whatever nature, however acquired now and in the future and may take title or an interest in the Premises or a mortgage on the Premises free and clear of any interest the grantor may have had or may acquire in the future in the Premises without need of further consent or joinder of the grantor."

There is not guaranty, however, that this language will survive a later attack on the deed by the grantor spouse. So where such a deed appears in the chain of title, it may not be relied upon without the specific approval of the occupancy. This language is sufficient, however, in matters in which we are being asked to insure a conveyance or mortgage from a spouse in title, where the non-title spouse wishes to relinquish his or her rights in the property by separate deed rather than joining directly in the deed or mortgage to be insured, so long as the deed from the non-title spouse is given contemporaneously with the insured transaction and the non-title spouse makes the deed with full knowledge of the pending transaction.

Summary:

In the vast majority of cases, the non-title spouse joins in the deed or mortgage as required by our general underwriting policy and there is not issue. In those minority of matters where the non-title spouse is unable or unwilling to so join, specific approval is required from the company before insuring.