A deed of release serves to lift a restriction or
claim, letting the owner buy or hold the property without the burden. This
might come into play when:
(1) A deed of trust
comes off the title and the homeowner now owns the house free and clear.
(2) Or it could refer to clearing a
title of an obsolete restriction.
(3) It could also refer to the deed
of release or fiduciary deed in Massachusetts.
In this article, we take a look at all three scenarios, and
what homeowners should know about them.
Part One: Releasing a Deed of Trust
In some states it’s common practice to use a deed of trust in
place of a mortgage. The deed of trust sets forth the loan’s terms. If the
borrower defaults on the loan, the deed of trust enables the trustee to sell
the house without having to go through a full-blown judicial foreclosure
process.
So, in contrast to a straight mortgage agreement that only
involves a lender and a borrower, with the deed of trust, a trustee
holds the house title as collateral until the borrower fully prepays
the debt, or makes the final loan payoff. After the very last payment, a full
deed of release is used to take the lien off the borrower’s home. The lender
transfers (grants) the title to the owner (grantee) through a deed of
reconveyance, also recorded to enter the home’s chain of title. (If the
homeowner is refinancing the home, the first loan is similarly released upon
payoff.)
The lender’s attorney has the documents signed, notarized,
and recorded, thus removing the deed of trust (lien), in the county where the
house is situated. Release and full title, as well as any funds left over in
the escrow account, are conveyed to the homeowner, who now owns the home free
and clear.
Title Status Checklist
For the owner who pays off a straight mortgage, after payoff
the lender records a release of the mortgage. After making the last payment, a
homeowner should expect the lender to release the mortgage lien and send a copy
of the payoff statement to the borrower within about a month. The mortgage
servicer can offer a timeline so a borrower will know when to expect important
payoff documents, including the final statement, evidencing the full and final
payoff. (The mortgage servicer’s contact information is on the monthly
statements or the site through which the borrower pays.)
For an owner who signed a deed of trust, the lender records
a deed of release.
In either case the borrower should check to see that the lender
has filed proof of the final payoff and release in the property’s county.
Otherwise, the borrower may need to file it. And once the release is file in
the public record, it is a good idea for a borrower to call the title company and
other insurers to double-check that the companies show the home’s title cleared
of the lien.
The final loan documents are important papers that should be
carefully stored
with home-related documents, so the homeowner is prepared when the
time comes to sell or convey the home to its next owner.
☛ Read more on Deeds.com
about the steps to take after your mortgage payoff.
Homeowners can always visit their county recorder of deeds’
offices to obtain copies of filings associated with the property. Additionally,
at any stage, a homeowner should be able to look through the county records
online for any transactions, claims, and restrictions affecting the property —
and the surrounding homes.
Checking the county records is a good habit. It enables the
owner to find anything that looks out of place, be sure releases are accounted
for, and know that property taxes are up to date, now that the owner is paying
them directly instead of through the mortgage escrow account.
Pro tip: Some people have attempted to get released from paid-off mortgages to clear their titles, but find out the mortgage holders went out of business before recording the release. if your lender shut its doors during the financial crisis, contact the FDIC for support in obtaining a lien release.
Part Two: Release From Restrictive Covenants
If you’ve accepted a deed subject to restrictive covenants, those
publicly recorded restrictions prevent you from doing certain things with your property
— displaying signs, perhaps, or doing certain types of business, or even
painting your door in a certain hue. And unless a real estate covenant has a
stated end date, it runs with the land. In other words, it lasts indefinitely,
binding every future owner.
Typical examples of restrictive covenants include the Covenants,
Conditions and Restrictions (CC&Rs) issued to condo buyers. The usual justification
for the restrictions involves preservation of surrounding property values,
community aesthetics, or the historic value of the buildings.
Some owners go to court to challenge restrictive covenants
that become oppressive, that are routinely violated by many properties without
enforcement, or that become otherwise obsolete. Thus, if a subject-to
clause is unduly burdensome or if it’s hard to understand or follow, the owner
might decide to seek a release of restrictions in the deed.
In some situations, adjacent homeowners or others who might
be able to enforce the deed restrictions assist by supplying signed releases. A
release addendum might subsequently be recorded with the deed, under the
county’s rules for such documents.
The most effective document is a notarized termination and
release of a restrictive covenant. A typical example affirms that the
county does not require the covenant, that the homeowner seeks a release, and
that the county has agreed to it. The document should also set forth the issues
that make the restriction obsolete. Unreasonable, ambiguous, illegal, or unconstitutional
deed restrictions are unenforceable.
Part Three: The Massachusetts Release Deed
If you’re in Massachusetts, you might have heard of the fiduciary
deed or release deed. This is the third of three common Massachusetts
real estate deeds. The first two, you might have guessed, are the warranty
deed and the quitclaim.
The release deed works in the right circumstances to
relinquish a possible interest in the property. That’s all. A Massachusetts
release deed does not offer any guarantees. It does not even assert
that its grantor holds any valid interest in the property. It simply
relinquishes the title or whatever claim the grantor releases on the deed. In
this way, it can clear up clouds or ambiguities on a title, and the property can
be insured.
Whatever Form It Takes…
And whatever its purpose or locations, a deed of release has
one goal: to release past obligations. The forms and requirements for deeds of
release are state-specific, though, and the procedures to follow can vary
widely among counties. For case-specific advice and assistance, consult with a
real estate attorney in your state. Best wishes in your journey to free and
clear homeownership!
Supporting References
M.G.L.C. 183 § 17.
Consumer Financial Protection Bureau: What’s the Difference Between a Mortgage Lender and a Servicer?
Stewart Title Guaranty Company: Deed of Release Form (MO).
Barry L. Miller, The Closing Agent: Termination of Homeowner’s Covenants and Restrictions.
Ilyce Glink and Samuel J. Tamkin, The Washington Post: The Paperwork You Should Receive When Your Mortgage Has Been Paid in Full (June 25, 2018).
Photo credits: Pasja100 and geralt via Pixabay, and Christian Stahl via Unsplash.
