Q: My husband and I recently separated and he has agreed to transfer to me the property we jointly own in the District of Columbia. We have signed a legal document known as a "separation agreement," and one of the provisions of that agreement requires that both of us give up our dower rights.
To complete the transfer of the property, I am refinancing the house and my new lender is insisting that my husband sign the deed of trust. Why is this necessary? Should I wait until the divorce is final?
A: The doctrine of dower is one of the oldest rights found in our legal history. Dower traditionally has protected a married woman by giving her an interest in property that her husband owns during the marriage. Thus, if the husband wanted to deed or will the property to someone else, the wife would have a claim to it during her lifetime.
In the District, a dower is extended to protect either the wife or the husband. Because of this dower right, a married man or woman has the right to own property in his or her own name; but lenders always will insist that the other spouse sign the deed of trust.
The reasoning is this: When a lender makes a mortgage loan, the buyer must sign the deed of trust, conveying the property to a trustee to hold in the event of a default. If the buyer is unable to make payments, the trustee then will be directed by the mortgage lender to foreclose on the property through a public auction.
In effect, the trustee holds legal title to the property -- in trust, however, for the lender. If the trustee must sell the property at auction, the trustee must be able to convey all outstanding interests in the property. Insofar as the dower interest can defeat a sale, the mortgage lender is properly requiring that your husband sign the deed of trust, thereby transferring to the trustee his dower interest.
You should make it clear to your husband that signing the deed of trust does not obligate him in any way to the mortgage lender. He is not required to sign the promissory note, and equally important, he will have no ownership interest in the property.
You have raised an interesting question regarding the legal effect of a separation agreement. It is true that you and your husband have agreed to waive any dower right. However, the title companies in this area have taken the position that since the dower right is created by statute, it is a very important right that cannot be dismissed lightly.
Finally, I cannot recommend that you wait until your divorce becomes permanent before transferring title. In the District, if you are divorced you will have to pay a 2 percent transfer and recordation tax to convey the property from your former husband to you. If you are married -- albeit separated -- no recordation or transfer tax is assessed.
However, a new federal law has been enacted that significantly affects the tax situation of such a transfer. I suggest you contact your tax adviser before you complete the transfer.