Marital Rights:

Clarification on the Requirements

for a Spouse’s Signature

The Missouri Land Title Institute

Presented by:

David Townsend

Farmers National Title
Marital Rights:

Clarification on the Requirements

for a Spouse’s Signature

WHAT THESE MATERIALS ARE NOT:

They are not intended to explain what marital rights are. It is enough to accept that “marital rights” exist in Missouri and that the failure to effectively deal with the existence of such rights in connection with a real estate transaction can result in an unmarketable title.

They are not intended to advocate the use of marital waivers or consents. In fact, the use of such documents is a customer convenience only. It is always acceptable to require that both spouses execute all deeds, deeds of trust, easements, leases, plats, installment contracts and such other documents as may directly affect the title to an interest in real estate.

They do not represent universal truths when it comes to underwriting standards established by title insurance companies. Underwriting positions may – and probably do – vary from underwriter to underwriter. This is particularly true in regard to homestead issues. Positions may vary based on the circumstances of the specific transaction also.Always confirm with the specific underwriter before launching into a course of action.
Marital Rights:

Clarification on the Requirements

for a Spouse’s Signature

A Quick Overview

There are only two types of spouses:

titled spouses and non-titled spouses.

Allspouses (titled and non-titled) must sign something in real estate transactions.

Titled Spouses: cannot waive their ownership interest, but instead must sign all instruments affecting the title OR convert themselves into non-titled spouses.

Non-titled Spouses: may waive marital rights and/or consent to transactions by the other spouse alone OR can join on instruments affecting the title, but they must sign something

EXCEPTION:purchase money deeds of trust where title is to be taken by one spouse alone under a purchase contract identifying that spouse as the only purchaser may be executed by the purchasing spouse alone and the non-buying spouse need not sign anything; provided, however, purchase money deeds of trust with future advance provisions should not be treated as “purchase money” and the non-buying spouse will either have to sign a waiver or join on the deed of trust.

One of the more frequent questions that comes into the underwriting offices is when must a spouse sign a document and what document must the spouse[1] sign? There appears to be a great deal of confusion on this issue, much of which may be spawned by lenders who attempt to apply title rules from other states to Missouri. The goal of these materials is to provide an outline for future reference as to what a spouse must sign and when must they sign it.

Before dealing with what the guidelines are, it is important to clear up a few misconceptions that frequently arise:

(1) Missouri is not a community property state. “Community property” does not exist here, and the requirement that a spouse sign neither creates community property nor acknowledges in any way that the property is community property. Nor do community property issues affect the necessity of requiring a spouse’s signature. The fact that the property would not be community property under the law of California or New Mexico or Nevada or Texas or any other state has nothing to do with whether a spouse in Missouri must sign a document.

(2) Ante-Nuptial[2] or Pre-Nuptial Agreements or Post-Nuptial Agreements authorizing either spouse to deal with real property without the consent or joinder of the other spouse are not accepted by most major underwriters for purposes of overcoming a requirement that a spouse join on a deed or mortgage or deed of trust or other document. Such agreements are often times successfully challenged for over-reaching, duress, non-disclosure or fraud, and rarely, if ever, are the parties willing to record them and make them part of the public record. This is a risk management decision made by underwriters and in no way means the title companies are of the opinion that any specific pre-nuptial or post-nuptial agreement is, in fact, unenforceable.[3]

(3) Any interest in real property is subject to the guidelines regarding spouses’ signatures. Deeds or deeds of trust are all generally recognized as creating an issue as to marital status and the potential need for a spouse’s signature, but so too do easements, leases, installment contracts/contracts for deed and any other conveyance or grant of an interest in real property.[4]Modifications to deeds of trust – including modifications to purchase money deeds of trust – could be subject to marital rights and require the signature of the non-titled spouse.[5] Plats are also subject to the need for a non-titled spouse’s signature. In some states (Kansas for example[6]), by statute, a seller’s spouse must join on a real estate sales contract affecting the homestead to make the same enforceable. Neither an action for damages for breach of contract nor a suit for specific performance is allowed without the spouse’s signature. While no similar statute exists in Missouri, as a practical matter, if the spouse has not joined on the contract, he/she has not contractually obligated him/herself to cooperate; the selling spouse cannot perform under the contract and deliver a marketable (merchantable) title if the non-signing spouse refuses to cooperate and sign necessary documents[7]; and while the buyer may have a breach of contract action for damages against the selling spouse, the buyer cannot obtain specific performance of the contract (in so far as a title free and clear of the non-signing spouse’s marital rights are concerned) because the buyer may has no recourse against the non-signing spouse since no privity of contract exists. (But see the potential exceptions to this in Note 7).

(4) Spouses who are not also owners of an interest in the real property cannot subject that property to non-consensual liens. Therefore judgment liens or state and federal tax[8] liens against the non-titled spouse alone do not attach to property (or any interest therein) owned by the other spouse in his or her name alone. This is true even if the non-titled spouse is signing a deed or deed of trust or a lease or an easement or any other document affecting the title. Executing a document as a spouse of the owner does not create any ownership rights in the non-titled spouse to which such a lien could attach. The interest of a non-titled spouse is considered to be an “inchoate” right, which is not legally capable of being subjected to non-consensual liens.

PRACTICE TIP:

It is sometimes said that the title searcher need not “run” the name of the non-titled spouse for judgments and liens since none that are discovered need be shown in any event. While to a great extent that statement is true, a prudent searcher will at least check probate records for the non-titled spouse. In the event the non-titled spouse has been adjudicated incompetent, his or her signature on a waiver/consent/or the actual document would not be binding on him/her in the event the validity of the signature were ever called into issue.

(5) Missouri is a “homestead” states and has a homestead statute which is not generally well known. The concept exists in Missouri nonetheless.[9]RSMo 513.475.2 As a general rule, when the inquiry is made as to whether Missouri is a homestead state, the real question being asked is: “Does a spouse need to sign?” The answer is invariably “yes,” although what the spouse has to sign may vary.

Titled Spouses

Two broad categories of spouses exist: spouses that are in title (i.e., spouses who are owners of an interest in the property) and spouses who are not in title (i.e., have no ownership interest). The guidelines regarding the former category (spouses who are in title) are easy: The titled spouse must sign…always...every time…no exceptions[10]. As an “owner” they must convey their ownership interest or mortgage it or grant an easement over it or lease it to someone else, etc. They cannot consent to the other spouse doing it alone[11]. They cannot “waive” their ownership rights. There appears to be trend among lenders who are loaning to one spouse alone to suggest/require a marital waiver from the non-borrowing, titled spouse. Such an option is NEVER acceptable under Missouri’s marital rights laws. While it may not be necessary for the non-borrowing, titled spouse to execute the loan application or the note or any other loan documents (this is a lender decision, not at title decision), the non-borrowing spouse who is in title must execute the deed of trust/mortgage before it is insurable[12].

A titled spouse can be converted to a non-titled spouse. All that is required is that both spouses join on a deed (a quit claim is fine) conveying the property to one spouse alone (who would be described on the deed as “a married person”). This is true whether the property is held as tenants in common, joint tenants with right of survivorship or tenants by the entireties. However, title agents should be strongly cautioned against recommending this course of action to customers. There are far-reaching consequences (inheritance rights and lien protection safeguards under tenancy by the entireties) to removing one spouse from ownership in favor of the other. While lender instructions may be followed in connection with taking a spouse out of title, the customer should be advised that this is a lender requirement and not a title requirement. Obtaining a written acknowledgment of this fact from both spouses is advisable.

PRACTICE TIP:

Do not forget that once a spouse is removed from title, judgments and state tax liens which might have been passed in the examination stage based on tenancy by the entireties will immediately attach. Depending on internal office practices, that may require a new exam or at least a re-assessment of liens shown in the search packet in light of the new status of title.

Having removed one spouse from title, however, does not terminate the marital relationship between the two spouses and is not, therefore, in and of itself, enough to dispose of the spouse’s signature issue.[13] The situation is now one of a non-titled spouse and what a non-titled spouse must sign.

Non-Titled Spouses

A non-titled spouse enjoys what are known as inchoate rights in Missouri merely by virtue of being married to a person who owns an interest in Missouri real property. These inchoate rights consist of “marital rights”[14] and potential homestead interests. “Marital rights” exist as to any Missourireal property owned by the other spouse, whether acquired before or after the marriage, and whether acquired by inheritance or gift or purchase or otherwise. Do not be confused by assertions that under the Dissolution of Marriage Act[15] the property would not be considered “marital property.”“Marital property” and “marital rights” are not synonymous terms and represent distinct and separate rights to which a spouse might be entitled. It does not matter where the titled spouse has established residency: so long as the real estate is in Missouri -- regardless of where the owner is – the concept of marital rights applies. Nor does it matter where the non-titled spouse resides. Nor is it necessary that the non-titled spouse have ever resided in Missouri. The non-titled spouse need not be a U. S. citizen and need not reside – now or ever— anywhere in the United States.

With inchoate marital rights and homestead[16] rights, the issue is one of joinder or consent by the non-titled spouse. The signature of both spouses on the same document always establishes such joinder or consent. Therefore, requiring the spouse, if any, of the seller/borrower to execute the deed or mortgage/deed of trust is always an acceptable practice. Consent can be established in other ways, however. The most common is the practice of accepting a “Marital Waiver” or “Marital Consent” from the non-titled spouse[17]. This is an acceptable practice.[18] However, the requirement is generally that the waiver or consent be given with each transaction: blanket waivers designed to cover any situation, now or in the future, are generally not acceptable.[19] The waiver or consent must be an original, in writing, executed by the non-titled spouse, and duly acknowledged and recorded. It should be recorded immediately before the document to which consent is being given. Recording immediately after the document to which consent is being given is also acceptable, however. A subsequent consent or waiver given after the fact to correct a defect in the title resulting from the failure of the non-titled spouse to execute a document is also an acceptable practice.

PRACTICE TIP:

When preparing a marital waiver, the cover page should show the titled spouse as the “Grantor” (even though the titled spouse is clearly NOT the grantor) to assure the document is correctly indexed in the grantor/grantee index. The buyer or lender could appropriately appear as “Grantee.”

Purchase Money Deeds of Trust

One other situation which arises repeatedly in connection with marital rights questions is the purchase money deed of trust. In Missouri only that part of the loan being used to acquire the property (or pay closing costs) qualifies as “purchase money.”[20] As a result, where John is borrowing $50,000.00 to buy the property and another $50,000.00 to make a room addition, and the lender is making one, $100,000.00 loan, the deed of trust does not qualify as 100% purchase money in Missouri. It is not possible to segregate the purchase money portion of the loan balance from the remainder of the loan by issuing a policy only in an amount equal to the purchase money portion of the loan balance. If not 100% purchase money financing, the deed of trust is NOT a purchase money deed of trust for purposes of a spouses’ signature and purchase money loans. The deed of trust is also not a “purchase money” security instrument where the loan is being made to pay off a pre-existing installment contract or contract for deed. The new loan is a refinance, and the refinance of a purchase money loan is not a purchase money deed of trust or mortgage.

There may be more than one purchase money loan, however. So long as the combined amounts of all loans made to cover the purchase price and closing costs (but no more) does not exceed the purchase price (and closing costs) all such deeds of trust would qualify as purchase money deeds of trust. Most common are the seller carry-back deed of trust and the 80/20 loan program some lenders have adopted to provide 100% financing. However, where the lender is making a purchase money loan for 80% of the purchase price, with the buyer bringing 20% down to closing, and there is a second home equity loan for 20% of the purchase price, with cash back to the buyer, the second deed of trust is NOT purchase money. (See below for more discussion on the problem with future advance deeds of trust in a purchase money situation).

Where both spouses are purchasing the property and will both be identified as grantees on the deed, both spouses must execute the purchase money deed of trust. Each must mortgage his or her respective ownership rights. A waiver or consent from either, regardless of whom the lender considers to be the borrower, is unacceptable in lieu of both signing the deed of trust. Where, however, only one spouse is taking title, the other spouse may be treated as a non-titled spouse, and may execute a consent or waiver. Or, the spouse who will not be receiving title may be disregarded, and there need be no requirement that that spouse execute any documents in connection with the purchase money transaction.[21] This is because the purchase money lien is deemed to have attached to the title at the exact same instant as the titled spouse acquired the title; all other interests, including the spouse’s marital rights, attach the instant thereafter and are therefore junior and subordinate to the interests of the lender.[22]

It is possible to convert a “buying” spouse into a “non-buying” spouse. Since the real estate purchase agreement not only identifies the parties to the transaction, but also sets out their respective rights, where the husband and wife are both identified as buyers, any deed prepared pursuant to the contract should identify both as grantees. That would mean that both must execute the deed of trust even if it is a purchase money loan. In order to avoid the necessity of placing both spouses on the deed as grantees, it would be necessary to obtain an addendum to the contract, executed by all the parties, but most importantly by the spouse who will now not be shown as a grantee on the deed, reflecting clearly that only one spouse will be receiving title. Again as with removing a spouse from title, title agents are strongly cautioned against suggesting this course of action to customers and to make it clear that any such action is not a title requirement.