Heirs, Tenants in Common, and Marketable Title
Nina is under contract to buy a duplex from Owen for $310,000, closing in 30 days. Owen says his aunt 'left him the building' in her 2019 will and signs the purchase agreement as sole seller. The title company's preliminary report shows the aunt's 2020 executor's deed conveyed the property 'to Owen and his sister Ruth as tenants in common,' each owning an undivided one-half interest. Ruth lives in Florida and refuses to sign any deed unless Owen pays her $25,000. Owen tells Nina's agent, 'I can sign alone; Ruth has not been involved for years.' Nina's lender will require title insurance and a clear fee simple interest. The contract has no title contingency.
1. Can Owen alone convey the marketable title Nina's lender expects? Explain the ownership and deed problem.
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No. The executor's deed made Owen and Ruth tenants in common, each owning an undivided one-half interest. A tenant in common can convey only his own share; Owen's signature alone cannot convey the whole fee simple. Nina's lender and title insurer will require all owners to join in the deed or a valid power of attorney. Owen's belief that his aunt 'left him the building' does not override the recorded deed. Without Ruth's signature, the title commitment will except her half interest, so marketable title fails.
2. What options does Nina have, and what should her agent advise before closing?
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Nina should not close on Owen's assurance. Options: (1) require Owen to obtain Ruth's signature on a deed, or a recorded power of attorney; (2) negotiate a purchase of Ruth's interest directly, with title company involvement; (3) have Owen pursue partition or a quiet-title action, which takes time; (4) extend closing with a written amendment; or (5) terminate if no title contingency exists, but get counsel because the contract has no title contingency. Her agent should give written notice of the title defect, avoid advising on legal title, and recommend an attorney. Do not release earnest money without a signed release.
3. What role should the title company and settlement agent play?
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The title company should issue a commitment listing Ruth's interest and any exceptions, and the settlement agent should not disburse or record a deed until all necessary parties sign. The settlement agent can prepare a deed from both Owen and Ruth, obtain payoff or estate documents, and record the deed and any releases. Title insurance should be issued only after the defect is cured. The agent should coordinate but not give legal advice.