Q: I own a condo in DC with 9 years left on the mortgage. I am the only person on the deed, and my son rents the condo from me. I have been thinking that I should add my wife to the deed so that if anything happens to me, she would own the property. In what form should she be added; and if I predecease her, could she be challenged by the mortgage company to qualify to continue the existing mortgage? Someone also mentioned to me that I might set up a Quit Claim Deed. What are the advantages if any? Rod.
A: I think that’s a good idea, but you don’t want a Quit Claim deed. You and your wife should have a deed where you both hold title as Tenants by the Entirety. That is the way most married couples hold title.
There may be some tax implications, however. If you gift your wife – or anyone for that matter – an interest in property, the tax basis of the giftor becomes the tax basis of the recipient of the gift. So if you bought the house for $100,000, even if it is now worth a lot more, by putting your wife on title with you, her tax basis would be $50,000. Major improvements will increase basis.
I don’t think you have to worry about this, however, unless your wife plans to sell in the near future. Presumably, if and when you both die, your son will inherit the house. He will be able to take advantage of another tax law, namely the “stepped up basis”. That means the value of the house on the date of death becomes the tax basis for the person who inherits.
I know this is confusing but I always want readers to be fully informed before taking any action. If you have questions – and because I cannot and will not give specific tax or legal advice – always discuss your situation with an attorney or a financial advisor.
Will the lender give your wife any trouble? I suggest you go to the web and search on “the Garn Act”; that’s an act of Congress that specifically addresses your situation – and many others involving the “due on sale” clause in most mortgage (deeds of trust) documents.
Bottom line: under the facts you have presented, your wife will not have any problems with the lender. So long as the mortgage is paid, they are happy.
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Q: I have been doing battle with my condo over who is responsible in fixing the ceiling over my dinning roof. For the past three years there has been a leak from the roof over my dinning room. At first I noticed a small spot after a downpour. I called management and they sent a repair person over to assess the issue. He stated there was problem with the vent and we were not the only ones. He said he would fix it, which was a relief as I had just remodeled the whole interior. The following year the spot became larger. I then brought it to their attention at which point I was told that it was my responsibility. I called my insurance company. They came and said they could fix it, but would need to run tests for asbestos and mold which would run approximately $1500 before anything could be done. I can’t remember exactly how much I would be responsible for but it was substantial. I decided to just leave it as most people wouldn’t notice. The following year the ceiling got worse and the popcorn in one area melted and came down onto the counter area and the floor. I patched it as I know I wouldn’t get any help from the condo. I wrote them a letter asking if they were ever going to fix the roof. Their response: we have done what they could. This year I noticed that the spot is even bigger. I took a sample of the popcorn to have it analyzed and was found to contain asbestos. The spot now is turning to a light brown color and is bubbling and beginning to sag a little. I’ve asked them through letters from me and my attorney to please help me. I even got up on the roof and took pictures of the vent to show where I thought the leak was coming from which is right over my dinning room. They responded with a letter saying that in the legal documents I was responsible for any interior issue. So, even if I took on this responsibility, I have no assurance that this same leak would come back. My hands are tied, I’m stuck……what would you instruct someone to do in this case short of going to court. I’m not sure at this point, but I would assume there is a clause in the legal documents that if I win in court the lawyers fees would not be paid and those fees would be more than the fix. I’ve sent two letters to them from my attorney which they just blow it off. Please, I need your advice. Scott.
A: Scott: I don’t mean to sound rude or to ignore your concerns – which clearly are legitimate. But you have an attorney who has written letters; he/she should be giving you advice, including on the issue of legal fees.
Accordingly, since you have asked me for advice, it is very simple. Get another attorney who has knowledge of community association law.
However, since there is asbestos somewhere in or around your unit, the board and management must be put on notice of this potential hazard. If they ignore this issue also, it is at their own risk.