Real Cases in Real Estate By Andrea Lee Negroni, Esq. – September 4, 2014 Update

Anticipated award of a divorcing couple’s Vermont vacation home was not enough to support the wife’s claim of homestead.  The Vermont Supreme Court held in March that a homestead interest in real estate requires both occupancy and title. A wife who was divorcing her husband moved into a vacation home owned solely by him, and attempted to void his refinance mortgage on the property, based on a Vermont statute barring conveyance of a homestead without joinder of the owner’s spouse. The couple was married in 2002 when the husband bought the vacation home. He was the only borrower -- his wife did not sign either the note or the mortgage. She moved into the property in 2007 and filed for divorce in 2008. While the divorce was pending, the husband refinanced the mortgage without his wife’s participation, despite a family court order forbidding either spouse from mortgaging any marital property.

The mortgage lender started foreclosure on the property in 2011, to which the wife objected, because her husband’s mortgaged the property without her consent and in violation of the family court order. The trial court declared the refinance mortgage unenforceable against the wife, finding that she had an equitable interest in the property. This decision was overturned by the Vermont Supreme Court, which observed that the wife had only one of the two required conditions for homestead – she had occupancy, but not title. She wanted, and perhaps expected, to be awarded the home in the property settlement, but when her husband refinanced his mortgage, she had only an “expectancy” of title, not title itself.  In Vermont, equitable title is “enforceable-contract-driven,” and the wife had no enforceable contract giving her the right to acquire formal legal title. Equitable title “indicates a beneficial interest in property and … gives the holder the right to acquire formal legal title.” The less certain the right to the property, the less likely is the claim of equitable title. Since the family court had not yet distributed the couple’s marital property and both spouses sought the vacation home, the wife had no equitable title and therefore no valid claim of homestead.

Brattleboro Savings and Loan Ass'n v. Hardie, 94 A.3d 1132 (Vt. 2014), [enhanced version available to lexis.com subscribers].

Real Cases in Real Estate is a periodic update on real estate law, with legal principles illustrated and explained by lawsuits from around the country. The topics are wide-ranging for appeal to a broad spectrum of readers including lawyers, homeowners, investors and the general public. Andrea Lee Negroni, a Washington DC attorney and legal writer with 25 years of experience in financial services and mortgage law, contributes the case summaries.

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