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Thomas McJD
Thomas McJD, Lawyer
Category: Real Estate Law
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Experience:  Real Estate Attorney
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My wife and I own our home in joint tenancy in Colorado. I

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My wife and I own our home in joint tenancy in Colorado. I own an LLC and even though the LLC provides protection, I want to have something set up in the event anyone ever sued my business and also still tried to come after my personal assets for some reason. I want to see if I can fill out, sign and notarize a quit claim deed without recording and just keep it in our safe deposit box in the event something like this ever happened so that my wife would be the sole owner of the property? In other words, does it have to be recorded to be legal (I have heard from realtors and other non-attorneys that it doesn't have to be recorded to be legal). Also, there is a mortgage on the property - does this matter at all if my only reason for putting the deed in place is what I have described above and since it won't be recorded anyway? Lastly, do my wife and I both have to sign as grantors and my wife also sign as grantee, or do I only need to sign as grantor since I would be the one relinquishing ownership interest in the property?

TMcJD :

Hi, I will be happy to assist you, and it is my goal to make you a very satisfied customer! This may take a few minutes, so thanks for your patience.

TMcJD :

A legal transfer is effective as soon as the deed is signed. However, that doesn't mean that someone else couldn't still place a lien on the property for any liability that you incur. That is because record ownership according to the public real estate records would still show you as an owner. If they obtained a judgment against you, they could file a judgment lien against the property and it would prevail over the deed even if you later record the deed. This is because a specific rule concerning order of recording the deed would control. it would have been recorded after the lien. As such, although from a very technical standpoint the signing and delivering the deed to your wife has the legal effect of transferring the property, without recording the deed, you have very little protection.

TMcJD :

Since recording the deed is the only good way to accomplish a transfer that potentially protects the property from any liability you incur individually, then the mortgage issue is moot. If the deed is recorded, the transfer of property technically violates the due on sale/transfer clause of most mortgages so that the lender could call the note due immediately. Of course, if the deed is not recorded, they would never know -- but, again, that really doesn't provide a level of protection any better than what you have with the LLC alone.

TMcJD :

Although a transfers from one spouse to the other generally does not require that both spouses sign, I always have both spouses sign the deed in such case just to settle the matter without any doubts.

Customer:

Thank you - that definitely makes sense. So, having the document notarized as of a specific date (even if it predates any lien) would not make any difference if it is not recorded?

TMcJD :

No, because recording is the magic event that provides the world record notice of transfer. If they don't know, they can still go after the property even if it turns out that it was transferred many years earlier.

Customer:

OK - is it possible to record a quit claim if a mortgage is involved and does the mortgage company need to be notified?

TMcJD :

Well, as noted, if you record the deed, then arguably there is a transfer of interest that triggers the due on sale/transfer clause in the mortgage. So if they find out, they may claim you have to pay off the mortgage immediately. However, on the other side, arguably it's only a transfer between spouses and not to a third party, so it doesn't trigger the clause since still at least one person on the mortgage owns the property. Plus, if you don't tell - they don't know unless they search the records (which they would likely never do). If payments are maintained, they would never call the note due (in most cases) since they have a performing loan -- why would they want to complicate things. But just know it's a risk. You could ask for permission to do the spouse to spouse transfer and see what they say.

Customer:

OK Thanks. This was very helpful.

Thomas McJD and other Real Estate Law Specialists are ready to help you
Customer: replied 3 years ago.
As a follow up to this, I understand that not recording the notarized quit claim deed provides little protection, but does it offer any protection? In other words, is it better than nothing or is it not even worth the paper it's written on unless recorded?
Unfortunately, it's really not worth anything and not worth doing. Your LLC protection is the best.

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