Can encumbrances affect a property’s assessed value?
Yes, sometimes they can. A property may be subject to so many restrictions as to have no real value. Common area in a residential or commercial development is a potential example. The argument would be that any value associated with the common area should be included in the value of individual lots or condominium units. See, e.g., Waterville Estates Association v. Town of Campton 122 N.H. 506 (1982), in which the New Hampshire Supreme Court ruled that condominium common area encumbered by an extensive array of easements had little or no value, even where some of the easements were implied.
Who can foreclose?
Since the burst of the housing bubble in 2008, foreclosures have become a common sight on the real estate market. This begs the question: who can foreclose on real estate? It is largely accepted that the holder of a mortgage may foreclose on a property for non-payment, but can this right of foreclosure extend to other parties as well?
The recent case Bergeron v. New York Community Bank (Rockingham No. 2014-185) sheds lights onto the New Hampshire Supreme Court’s view of the foreclosure process. In this case, the Court held an agent acting for a note holder may properly institute foreclosure proceedings under RSA 479:25. Bergeron, 2014-185, 6. This is significant because, in practice, foreclosure proceedings may be instituted by a party unknown to the mortgagor/mortgagee at the time the property is initially conveyed.
In the same case, the Court also addressed the long-recognized principal in the state that notes and mortgages are not severable. Traditionally, “… an assignment of a mortgage, without an assignment of the debt, passes nothing.” Bergeron, 2014-185, 4, citing Smith v. Moore, 11 N.H. 55, 62 (1840). However, the Bergeron Court emphasized the parties’ intent with respect to the mortgage thereto is determined by the language of the contract unless there is ambiguity. Bergeron, 2014-185, 4. When a mortgage is unambiguous, it may, in fact, convey the note to one party and the mortgage to another; further, the clear language of the terms may allow either, or both, parties to assign their interests at some future unknown date to a third party. Bergeron, 2014-185, 5.
Generally, these holdings are significant not only because they illustrate the development of the law in this field, but because it affirms foreclosure actions may be initiated by parties that were not a part of the original transfer of the property.
Why you should consider a revocable trust
There are several benefits to transferring assets to a revocable trust. This article will focus on three: assets in revocable trusts may transfer free of probate; assets pass according to the wishes of the settlor rather than according to the default statutory scheme of inheritance; and revocable trusts can offer extra flexibility in the case there is every a situation of incapacity.
Most people are familiar with wills, which are documents that state where your assets will go following death. However, in New Hampshire, unless you have a very nominal estate, property passing via wills must go through the probate process. Probate can be a lengthy and expensive process, often requiring payments of court costs, appraisals, and attorneys’ fees, all of which can greatly reduce the total amount of the estate that will pass to the beneficiaries. Assets in revocable trusts do not pass through probate, which means that upon the death of the settlor, the assets are distributed among the designated beneficiaries according to the trust instrument without the time or cost associated with court oversight.
Secondly, revocable trusts allow settlors the ability to control who inherits from the estate. In New Hampshire, when a person dies without a trust or a will, state statute controls how the assets are divided, and typically split the estate among the closest blood relatives. Trusts allow settlors to designate non-relatives as beneficiaries of their estates, as well as disinherit relatives that otherwise would be able to claim a part of the estate, and to control the amount or proportion of the estate each intended beneficiary will receive.
Finally, revocable trusts can be particularly useful in cases of anticipated incapacity. Imagine owning a large asset, such as a piece of real estate, jointly with another person. What if that other person should somehow become incapacitated during the time of your joint ownership? Unless you have other legal documents in place, it may become very difficult to sell or transfer that asset during their incapacity, because they are unable to sign the legal documents authorizing the sale or transfer. In contrast, assets held in a trust can be easily transferred according to the terms of the trust. In the case of incapacity, the well-written trust will determine the process of transferring the asset, sidestepping the need for the now-incapacitated individual to authorize the transfer.
This article touches on three benefits of revocable trusts, but there are many other benefits of revocable trusts. While revocable trusts take time upfront to set up, they provide a sense of security and predictability to those settlors hoping to make the transfer of their assets upon their death smooth for their loved ones.
Also of note….
Paul Alfano will make a presentation on tax abatements at an upcoming program entitled “Municipal Law 2015” presented by the NH Bar Association. The program will take place on October 16, 2015 in Concord… http://www.paula89.sg-host.com/?p=1037