Husband and Wife own marital home together.
Husband and Wife are both borrowers on the mortgage of the marital home.
Now Husband and Wife are divorcing.
As part of their divorce settlement, Wife transfers her interest in the marital home to Husband.
And Husband agrees, among other things, to refinance the mortgage on the marital home or to sell the home and to pay off the mortgage …within two years.
Fast forward two years.
Of course, Husband has neither refinanced the mortgage on, nor sold what was the marital home. What he did do was transfer the marital home to a trust.
Where does that leave Wife?
Well, if the settlement agreement was adopted into a final judgment as is typical, Husband has both breached the agreement and violated or defaulted under the final judgment or decree of divorce.
So Wife does have solid options. But they require her to take Husband to court.
Wife should prevail in court. But this is probably not where Wife wanted to be two years after her divorce was final.
The pity here is that this particular scenario was so very easily avoided.
There was absolutely no reason for Wife to relinquish her interest in the property at that time. Period. No ifs, ands or buts.
Ideally, both Husband’s and Wife’s transactions would have been completed prior to entry of final judgment. That really is best.
But the ideal situation from a legal standpoint is not always practical, or does not always meet the couple’s personal agendas or timelines.
But even Plan B would have been far better for Wife than what she did.
Plan B is that Wife could have given Husband a deed of her interest at the time of his refinance (or joined in a deed to a third party at the time of their sale to a third party).
If the delay of Wife’s deed became a real sticking point for some unusual reason, there is still another, better option for Wife than giving Husband her deed prematurely:
Instead, Wife could have executed her deed early and placed the deed in escrow with an attorney or other reputable escrow agent (such as a title company, real estate brokerage, etc.), to remain in that third party’s possession unless and until Husband performed his obligations.
Upon Husband’s default, the escrow terms could have required that the deed be returned to Wife. Wife holds onto her leverage.
Although a bit more complex, use of an escrow agent could have paved the way to an even better option – for Wife.
Husband and Wife could have jointly executed a deed to an unspecified third party, to be held in escrow for up to two years, until Husband’s successful refinance or agreed upon sale to a third party.
After two years, if Husband defaulted in his obligations, the escrow terms could have required that the deed be released at the closing of a sale arranged by Wife.
This would have eliminated the need for Wife to go to court to force a sale of the property if Husband failed to refinance or sell after two years.
Read more in this Washington Post article: Breaking up a mortgage after a divorce can be tricky.