Question:
My wife and I are separated right now in the process of getting a divorce. We own two houses together; she is living in one with our kids and I am in the other.
How can we get each other to be legally responsible for only the house the party is living in? I don’t want her name on the house I’m living in and she doesn’t want my name on her house.
Answer:
In Texas, several things may affect the ability of divorcing spouses in regards to obtaining ownership interests in property and the debt that may exist on those same properties into one party’s name solely. While I am able to provide you with a general overview of how these issues may be resolved, these matters may be significantly more complex than the facts you presented, and as such I would recommend speaking with an attorney in detail regarding these matters.
That being said, if both parties are in agreement, existing debt on real property may always be refinanced into one party’s name solely even during pending divorce proceedings. These matters typically must be reduced to a written agreement between the parties and typically require filing that same agreement with the Court to ensure proper division of existing assets by the court at later proceedings.
If, however, the parties are unable to refinance property due to income or credit issues, typically parties may agree to insulate themselves from non-payment by the opposing party by executing documents known as a Deed of Trust to Secure Assumption along with a Special Warranty Deed. The Deed of Trust to Secure Assumption is used to protect the party giving away their interest in the property (grantor) in the event of default by the party receiving the interest in the property (grantee).
The deed of trust sets out the terms of the parties’ agreement for enforcement if grantee defaults on the real estate lien. If grantee fails to repay either the grantor, or the lender of the original purchase money, grantor can foreclose on the property to protect grantor’s interest. The document must be recorded in the deed records of the county where the property is located.
The Deed of Trust to Secure Assumption entitles one party to assume the full liability of any existing mortgage or debt on real property while providing the opposing party the opportunity to re-enter the contractual obligation prior to foreclosure if the party now responsible for the payment begins to default. The Special Warranty Deed must be recorded in the deed records of the county where the property is located and “delivered” to the party being given the property interest in order to be an effective conveyance.
The party conveying the property (Grantor) is doing so with the stipulation that the party receiving the property (Grantee) takes the property subject to the original purchase money lien. The consideration is indicated as the division of property in the divorce action. The property description must accurately describe the land being conveyed. If the deed fails to provide a means of determining with reasonable certainty the land conveyed, the deed will be void.
A “Special” Warranty Deed is used when the Grantor wants to limit potential liability to those claims “by, through or under” the Grantor, but not through the entire chain of title from its inception. While this type of exchange is quite common in Texas, it is not without its risks. While one party is technically responsible for all payments for the existing debt going forward, the creditor typically still retains rights against both parties for repayment of the debt.
Additionally, joint credit ratings will still typically be impacted by payment or non-payment of this debt until a full and final refinancing agreement is executed by one of the parties. The issues this may raise are significant to both parties and should be discussed fully with an attorney prior to deciding on what direction best insulates your interests.
As I mentioned previously, these matters may become quite complex very quickly and typically have huge financial impact on both parties, as such, consulting with an attorney on such matters is always the best advice I can provide.
Samuel M. Sanchez an Associate Attorney in the Fort Worth, Texas, office of Cordell & Cordell where his primary practice is exclusively in the area of domestic relations. Mr. Sanchez is licensed in the state of Texas where he is a certified mediator, interview/interrogation specialist, and is appointed by Gov. Perry to the Board of Regents for Midwestern University. Mr. Sanchez received his Bachelor of Arts from Texas Tech University, and received his Juris Doctor from Wesleyan Law School in Fort Worth, Texas.
