Archive for February, 2010

by: Robert A. Ballinger, Attorney at Law, Director of Operations, Kings River Title and Abstract

Arkansas, as well as a few other states, recognizes a peculiar type of marital rights to property called dower and curtesy. Dower is a wife’s interest in her husband’s property, and curtesy is a husband’s interest in his wife’s property. Today, these rights are essentially the same; just different terms to define the gender involved. These rights are designed to protect the spouse in the event of intestacy (the condition of the estate of a person who dies owning property without having made a valid will or other binding declaration). Interests based on dower and curtesy are inchoate (a right contingent on an event) until the death of a spouse.

Dower or curtesy exists in all real and personal property that is seized (owned with the right to possess) during the marriage. This is taken literally. If the property is brought into the marriage, it is owned during marriage and these rights are in effect. If the property is transferred during the marriage, it was still owned during marriage and these rights are in effect.

The extent of dower and curtesy right depends on whether there are descendants or not. In the situation with real property, if there are descendants, the amount of the dower is a 1/3 life estate. This would mean that the surviving spouse will receive one-third of the income generated from the land during his or her life. At the death of the surviving spouse, he or she owns nothing to pass on to someone else. If there are no descendants, the dower is 1/2 fee simple. Fee simple is the most common way real estate is owned in Arkansas, and is ordinarily the most complete ownership interest that can be had in real property, but the decedent’s creditors may reduce this share if the remainder of the estate is not sufficient to pay all debts.

Therefore, when buying real estate in Arkansas, one of the most important questions to ask the seller is “are you married?” If the seller’s spouse does not sign the conveyance, buyer could rescind for failure to provide marketable title. Dower and curtesy interest can be terminated through time, but only after seven years pass from date the interest becomes choate, which is most often the death of spouse. The best way to take care of this is to get the spouse’s signature on the deed.

See, Arkansas Code:

28-11-305. Personalty.

If a person dies leaving a surviving spouse and a child or children, the surviving spouse shall be entitled, as part of dower or curtesy in his or her own right, to one-third (1/3) part of the personal estate whereof the deceased spouse died seized or possessed.

28-11-307. Dower or curtesy when no children.

(a)(1) If a person dies leaving a surviving spouse and no children, the surviving spouse shall be endowed in fee simple of one-half (1/2) of the real estate of which the deceased person died seized when the estate is a new acquisition and not an ancestral estate and of one-half (1/2) of the personal estate, absolutely, and in his or her own right, as against collateral heirs.

(2) However, as against creditors, the surviving spouse shall be invested with one-third (1/3) of the real estate in fee simple if a new acquisition, and not ancestral, and of one-third (1/3) of the personal property absolutely.

(b) If the real estate of the deceased person is an ancestral estate, the surviving spouse shall be endowed in a life estate of one-half (1/2) of the estate as against collateral heirs and one-third (1/3) as against creditors.

18-12-402. Dower or curtesy; relinquishment

A married person may relinquish dower or curtesy in any of the real estate of a spouse by joining with the spouse in the deed of conveyance thereof, or by a separate instrument executed to spouse’s grantee or anyone claiming title under the spouse, and acknowledging it in the manner prescribed by law.

By: Robert A. Ballinger, Attorney at Law, Director of Operations, King River Title and Abstract

Arkansas’ statute of frauds, ARK. CODE ANN. § 4-59-101(a)(4), requires that any contract for the sale of land, or any interest concerning such land, be in writing and signed by the party to be charged. ARK. CODE ANN. § 4-59-101(a)(4). To meet the requirements of a valid contract for the sale of real estate within ARK. CODE ANN. § 4-59-101(a)(4), the written agreement must include the essential terms and conditions of the sale. Tate v. Clark, 203 Ark. 231, 156 S.W.2d 218 (1941); Van Dyke v. Glover, 326 Ark. 736, 934 S.W.2d 204 (1996). Arkansas’ general rule with respect to the statute of frauds also has been stated another way:

Unless the essential terms of the sale can be ascertained from the writing itself, or by reference in it to something else, the writing is not in compliance with the statute; and if the writing be thus defective, it cannot be supplied by parol proof, for that would at once introduce all the mischiefs which the statute was intended to prevent.

Van Dyke, 326 Ark. at 742-743, 934 S.W.2d at 208 (1996), citing Sorrells v. Bailey Cattle Co., 268 Ark. 800, 811-12, 595 S.W.2d 950 (1980), (quoting Williams v. Morris, 95 U.S. 444, 24 L.Ed. 360 (1877)).

Arkansas law mandates that a contract for the sale of land “sufficiently describe the land to be sold.” Van Dyke, 326 Ark. at 742-743, 934 S.W.2d at 208 (1996); Boensch v. Cornett, 267 Ark. 671, 590 S.W.2d 55 (1979). This required description of land must be as definite and certain as that required to be found in a deed of conveyance. Sorrells v. Sorrells, 268 Ark. 800, 809-810, 595 S.W.2d 950, 954 (1980). With respect to the land description requirements for a deed, the Court in Sorrells quoted favorably from Tiffany, Real Property, 3rd Ed. which stated “if a conveyance does not describe the land with such particularity as to render identification possible, the conveyance is a nugatory.” Sorrells, supra; See also Boensch v. Cornett, 267 Ark. 671, 590 S.W.2d 55 (1979). If the document does not identify the land as “being in any county or even in the state. It does not furnish a key by which the land might be certainly identified . . . .” Turrentine v. Thompson, 193 Ark. 253 (1963). Even if the property could be identified by oral testimony, a contract for the sale of land comes within the statute of frauds, ARK. CODE ANN. § 4-59-101, and must therefore be in writing to be enforceable.

A document which is in violation of Arkansas’ statute of frauds is unenforceable and void. Sorrells, 268 Ark. at 818. In Sorrells, the real estate contract did not contain a description that detailed the county or state of property to be purchased. The court stated that the instruments could not be incorporated into one agreement to furnish a description of the land because neither described the land with such particularity as to make identification possible; therefore, the contracts did not satisfy the statute of frauds. The court held that the transaction was void and awarded the purchasers the amount of money paid on the contract. Id.

By: Robert A. Ballinger, Attorney at Law, Director of Operations, King River Title and Abstract

In the fourteenth and fifteenth centuries, a specific set of common-law principles applicable to mortgages developed in England. These principles treated the mortgagor especially harshly. For example, if a mortgagor failed to make the required payment on its due date, known as law day, the mortgagor forfeited all ownership interest in the property. In other words, the mortgagor lost all equity in the property. The rule allowing forfeiture at law day was absolute until the courts of equity intervened. Equity courts allowed mortgagors to tender the amount owed and retain, or redeem, the property, even after law day, if the mortgagor failed to pay because of fraud, misrepresentation, accident, or duress. Eventually, equity courts granted this relief so routinely that the mortgagor had a right to redeem the property within a reasonable time after law day by paying both the principal and interest. This right of redemption became recognized as an equitable estate in the land.

The mortgagor’s equity of redemption “is one of the oldest and most important concepts in mortgage law.” However, the development of this equity of redemption created difficulties for the mortgagee, who could never be sure that the mortgagor would not exercise the equity of redemption long after law day. In response, equity courts developed the mortgagee’s right to foreclose on the property. Upon the mortgagee’s request, the equity court could issue a decree requiring the debtor to pay the debt, interest, and costs within a fixed time period. If the mortgagor failed to pay, the mortgagor forever lost the equity of redemption in the property.

This procedure is known as strict foreclosure because the property reverts to the mortgagee without sale and the mortgagor loses all equity. Today, most states permit strict foreclosure only in special circumstances, but a few allow it in normal foreclosure proceedings. In the United States, most foreclosures involve a public sale of the property.

Prior to 1987 there were two procedures for foreclosure in Arkansas. The first was a judicial foreclosure, which is a sale by a court in equity. The second was a power of sale foreclosure, which gave mortgagee the right to have mortgaged property sold at private sale without court involvement. Of these two methods the vast majority of Arkansas’ foreclosures were judicial. This was because of substantial advantages to the mortgagee associated with judicial foreclosures. The power of sale foreclosure was rarely used because it offered no method for waiver of the statutory right of redemption. It also lacked the assurance of good title associate with judicial foreclosure. Deficiency judgments were also not possible under Arkansas’ power of sale foreclosure, and under the power of sale foreclosure a mortgagee was not allowed to be a purchaser at the foreclosure sale. Finally, under power of sale foreclosure there was an appraisal requirement not associated with judicial foreclosures.

On February 18, 1987, The Statutory Foreclosure Act became effective in Arkansas. In 1989 the act was amended do to inconsistencies in the language of the statutory foreclosure procedures. And then in 1999, the statute was once again amended so that sales would be “considered final, and all rights of the grantor or mortgagor, be terminated, immediately upon the conclusion of the public foreclosure auction.” Finally, in 2003, the act was amended to restrict “foreign entities not authorized to do business in the State of Arkansas” from “availing themselves to the provisions of the Statutory Foreclosure Act of 1987….”

The purpose of the Statutory Foreclosure Act was to establish a non-judicial procedure to “provide an efficient and fair procedure for the liquidation of defaulted mortgage loans to the benefit of both the homeowner and the mortgage lender.” Arkansas’ General Assembly also indicated they created this Act because “the present laws regarding foreclosures are awkward, requiring appraisals before the sale and giving the homeowner a one year statutory right of redemption that may not be waived.”

by Robert A. Ballinger, Attorney at Law

The CLA (construction loan agreement) is often likened to a road map or a blueprint. It should contain all the terms and conditions of the construction loan necessary to bring the project to fruition while simultaneously protecting the bank’s interests. A good construction loan agreement clearly spells out the terms and conditions under which the bank will fund construction, as well as the terms and conditions that, if not met by the borrower, entitle the bank to halt funding and implement certain remedies. The goal of the agreement is to set the guidelines that must be met in order to achieve the successful lien-free completion of the construction of the subject project.
Paramount to accomplishing that goal is having the borrower and lender agree on the definitions of terms found throughout the construction loan agreement. Without the terms clearly defined up front, differences of opinion between borrower and lender may arise during the construction period. Figuring out those differences midstream may cause delays and the project may suffer, which is something no one wants to happen.
Also, a key component to the CLA is the construction period, normally defined as the period of time between the commencement date and the completion date.
Finally, the Use of Proceeds form, or Sources and Uses of Funds statement, is an important part of construction loan underwriting that should be included in the construction loan agreement. The purpose of the Use of Proceeds form in underwriting is to identify the total costs of a project, calculate acceptable loan-to-cost parameters, and determine the sufficiency and sources of the borrower’s equity.