Thursday, November 24, 2011

Tenancy by the entirety

There seems to be a misconception that holding title to real estate as tenants by the entirety is a magic bullet that makes judgments go away. Not the case. All it accomplishes is to protect you from creditors foreclosing judgments against your real estate, while you live there, and while you are still married.

The example that comes up frequently is this. Married couple own their residence as tenants by the entirety. A judgment is entered against the husband only, and a memorandum of judgment is recorded. If they, for example, owned the property as tenants in common, that judgment creditor would be able to foreclose the judgment lien. But since they own the property as tenants by the entirety, this cannot happen. When the couple decides to sell the house, they will need to take care of the lien. Many people are under the mistaken impression that tenancy by the entirety makes the lien disappear. The lien is still there, it just cannot be enforced against the real estate. So when they sell the house, it will no longer be their residence, and the tenancy by the entirety protection will cease to exist. And boom, as soon as the deed to the buyers is recorded, the lien is now enforceable, and it is ahead of any mortgage lien the buyers might have.

More information on tenancy by the entirety is here.

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