July 24, 2022
There was no City Council meeting last week so today I’ll write about something other than Lowell politics. While at work at the registry of deeds recently, I fielded a call from a gentleman who had paid off his mortgage a while ago. He wanted to know why we had not sent him his title. I explained that’s not how real estate works and then we had a long discussion about our system of land ownership. The conversation ended with him asking, “Why aren’t people better educated about this stuff?” That seems like a good writing prompt for this week’s newsletter. So here are some basics that everyone who owns a home in Massachusetts, or aspires to own a home, should know:
Title to Your Home:
People assume a home mortgage works like automobile financing. When you pay off your car loan, you get the title for your car in the mail. That title is an important document that you will need when it comes time to sell the car.
Real estate doesn’t work that way. In real estate, the “title” isn’t a tangible thing; it’s an opinion by someone who has examined the records at the registry of deeds regarding who owns what interest in a particular property. In real estate, there is no equivalent to your car title (with one minor exception I’ll get to later).
The way we own real estate has its roots in English land law from nearly 1,000 years ago. To transfer ownership of land back then, the seller and buyer would go to the property. Once there, the seller would pick up a twig and hand it to the buyer. That passing of the stick symbolized the transfer of ownership of the property. That’s all it took.
At some point, people decided to make a written record of these transfers. Eventually people dispensed with going to the property altogether and instead used the written record of the transfer – which became known as a deed – as a substitute for the twig.
In a modern real estate sale, when the seller hands the executed deed to the buyer at the closing, this mystical notion of “ownership” passes along with it. The buyer then records the deed at the registry of deeds to put the world on notice that there is a new owner of the property, but ownership passed when the deed was delivered.
Consequences of Having a Mortgage
Whether or not you get a mortgage has no effect on your deed. A mortgage is actually two distinct transactions. The first is a contract: the borrower signs a promissory note in which they promise to repay the amount borrowed with interest. The second is a conveyance of real estate: the borrower signs a document called a mortgage which is a kind of deed. By this “mortgage deed” the borrower transfers an interest in the property they just bought to the lender. That interest is the right to foreclose on the property if the note is not paid in accordance with its terms. The borrower still owns the property, but they own it subject to the lender’s right to foreclose.
Your deed is not held as security until you pay off your mortgage. Once the deed is recorded when you first buy the property, the registry just scans the original deed and immediately sends it back to whoever recorded it which is usually the lawyer for the buyer. The lawyer then sends it to the buyer/new homeowner, typically within a week or two of the purchase. However, because most buyers think their deed is held as security, they don’t realize they have received the original deed and file it away and forget about it.
The good news is that you don’t need the original deed to sell the house. You really don’t need it for anything. The electronic copy of the deed that was recorded at the registry of deeds is what’s important. When it comes time to sell, you don’t need your original deed. Instead, your lawyer will prepare a new deed from you to the buyer. When you show up at the closing, the buyer gives you a check, you give the buyer this new deed which you have signed and had notarized. Ownership passes with the “delivery” of this new deed to the buyer.
You’ve Paid Off Your Mortgage
When you do pay off your mortgage, the lender creates a document called a discharge of mortgage. This gets recorded at the registry of deeds to show that the mortgage has been paid off. Some lenders record the discharge themselves; others send the original to the borrower and leave it to them to record it. That’s all that happens. As explained above, the homeowner does not then get their original deed because they already have it. (And if they don’t, they can contact the registry for a free copy).
If you don’t pay off your mortgage and default on the repayment of the promissory note, the lender can foreclose on the property. This is done by the lender selling the property at auction. The lender takes the money from that sale and applies it to your debt. If there is money left over, you as the former homeowner get it (although there is rarely money left over). If the amount realized at the foreclosure auction doesn’t cover the amount owed, there is a deficiency, and the lender can sue you for the balance.
Registered Land
Since nothing about real estate law is ever simple, let’s revisit the “title” issue. Massachusetts has two separate recording systems, both administered by the registry of deeds. Ninety percent of all property is in the “recorded” land system. Everything I’ve written above applies to that. But ten percent of property is “registered” land which is treated differently.
Land becomes registered when sometime in the past there was a dispute about ownership or boundaries and the dispute was resolved in the Massachusetts Land Court. In such a case, the Land Court retains jurisdiction over the property which then goes into the registered land system. When you purchase registered land, you still get a deed from the seller, but when you “register” the new deed at the registry of deeds, we create a certificate of title by which the Commonwealth of Massachusetts states that you are the owner of the property. The new owner doesn’t get the certificate of title; it’s kept at the registry of deeds.
The registered land system was created in Massachusetts in 1898 to make real estate ownership more rational, however, it never really caught on which is why it involves such a small percentage of property. Only two other states, Hawaii and Minnesota, have registered land systems.
Add a Name to Your Deed
Another frequently asked question is “how do I add a name to my deed?” That really means, “I want to make this other person a co-owner of my property.” To do that, you create a new deed transferring the property from you as the current owner to yourself and this other person as the new owner. It’s a lot like selling the property except the seller is also one of the buyers and no money changes hands. Unless you have some experience with real estate, you should hire a lawyer to prepare the new deed for you.
Remove a Name or Co-Owner Dies
What happens if you want to “remove” someone’s name from a deed? If that person is still alive, they have to sign a new deed transferring away their interest in the property. If that person has died, the subsequent ownership depends on the wording of the deed that created the joint ownership. If the deed created a right of survivorship between the co-owners (“joint tenants” or “tenants by the entirety”) then the surviving joint owner is automatically the sole owner upon the death of the co-owner. All that is needed is to record a death certificate of the deceased co-owner. Then, the deed showing a right of survivorship and the death certificate showing that one of the co-owners died, taken together, show that the surviving co-owner is the sole owner of the property. However, if there was no right of survivorship (tenants in common), then the deceased co-owner’s interest must to go through probate to determine who owns it.
Change of Name
There are many reasons why a property owner might change their name. The good news is that if you do change your name, there is no need to do anything to your deed. In fact, there’s nothing you can do. You still own the property regardless of what you call yourself. The way it is handled with land records is that the next time you have a document to record, you would identify yourself by your current name then put “formerly known as” your prior name. That way, the registry of deeds records will show that both names refer to the same person.
Title Theft
Finally, a frequent question these days is “how will I know if someone has stolen my title?” Usually, the person asking this question watches a lot of TV because for the past two or three years there has been a proliferation of commercials warning of “title theft” and offering a service to “monitor” your title.
Here is the scenario contemplated by these ads: A bad guy types up a new deed that purports to transfer your house from you to him. He forges your signature on the deed, forges a notary public’s signature, and then records the deed at the registry of deeds. The bad guy then applies for a mortgage that uses your house (which the registry records show was just transferred to him) as collateral for the loan. The bad guy never makes a single payment and, because he gave the lender a fictitious mailing address, no one ever responds to the late payment notices. The first time the homeowner/victim knows of any of this is when an auctioneer and some lawyers show up at the property to do the foreclosure sale.
This all sounds pretty scary but under Massachusetts law, a forged signature does not convey ownership so the forged deed would be void as would the new mortgage that is being foreclosed. The real risk is not that you will lose your property, it is that you will be saddled with the hassle and cost of proving to everyone that you did not execute the forged deed. Because of all the layers of forgery involved, it wouldn’t be hard to prove that, however, the burden would be on you to initiate the lawsuit needed to determine that. In some cases, your title insurance policy would provide a lawyer to represent you in such a matter although it depends on the fine print of your policy. (Most lenders require a borrower to obtain title insurance so it’s something you probably have without even knowing it).
What these companies seen on TV do is periodically search the records at the registry of deeds for any new documents recorded in your name. If they find something, they alert you to it. That’s their service. They do have “enhanced” protection which I assume would provide you with a lawyer if litigation was needed.
So is this type of service needed by a typical homeowner? It’s hard to say. In my 27 years as register of deeds, I’ve never once heard of this happening in the Middlesex North District. It’s conceivable but not as likely as the TV ads might lead you to believe. What is more common, unfortunately, is a family member taking advantage of an infirm elder but that’s something completely different than the threat advertised on TV. And if you are concerned about something happening to your real estate, you can go to the registry of deeds website yourself, search your name, and see everything that’s been recorded up to the minute.
Back to Lowell Politics Next Week
That’s it for today. The City Council has a meeting this coming Tuesday. With 20 motions on the agenda and numerous other reports, votes and petitions, there will be plenty of Lowell politics for next week’s newsletter.