Foreclosures, Mortgages & Boundary Line Adjustments.. oh my!
Here is a perfect example of why you should ensure all parties are on board for any legal or real estate transaction. If you have any questions about what you’re trying to accomplish, talk to an expert.
Property owner owned two adjoining lots. Each lot was separately mortgaged. Owner completed a boundary line adjustment through the county, effecting an equal land trade between the two lots, but never notified either mortgage holder of the BLA. Subsequently, one mortgage holder foreclosed and took title to one of the lots. What was the effect of that foreclosure on the BLA?
The BLA is still effective, meaning that it is still recorded and the county still acknowledges each parcel as having the property boundaries established by the BLA. However, the foreclosing lender could only foreclose on the property covered by the legal description set forth on the deed of trust, in other words, the property boundaries that existed prior to the BLA.
As a result, the foreclosing lender now owns the parcel that was foreclosed and a portion of the adjoining parcel, the portion that was connected to the adjoining parcel through the BLA. However, the bank does not own the portion of the foreclosed parcel that was added to the foreclosed parcel by the BLA. In other words, based on ownership of the properties, it is as though the BLA never occurred. However, based on county records, the BLA did occur so the foreclosing lender now owns a portion of property owner’s other parcel and property owner owns a portion of the lender’s foreclosed parcel. Simply put, this is a title mess.
The boundary descriptions can be corrected, probably after lender sells to a new buyer. The correction will either take the form of unwinding the BLA or through a transfer of quit claim deeds between the new adjoining owners to make the fee simple titles reflect the county records. Neither process will be difficult, other than logistically. Property owner should be advised to seek legal counsel or the assistance of a surveyor in determining how to proceed.
This situation could have been avoided, possibly, by approaching both lenders prior to property owner going into default on either mortgage, and asking the mortgage holders to modify their deeds of trust to acknowledge the new legal descriptions. There is no guarantee that either lender would have cooperated but gaining their cooperation would have been the only way to avoid the outcome that has resulted.
The preceding is an opinion from Annie Fitzsimmons, the attorney who answers questions for the Washington Association of REALTORS® Legal Hotline. For additional questions or information, please contact Jen at (206) 293-1005 or send me an email to firstname.lastname@example.org.