Life Estate Foreclosure

[hoonu]

First off... this is in Florida. To make a long story short... My step grandmother has a Life Estate in a home my grandfather had left behind. Myself and my mother are the remainder-man owners on the property/home. During probate my step grandmother was the executor of the estate and mortgaged the home she the life estate before my mother and myself had been granted our remainder-man. She has since defaulted in her loan and I learned yesterday that it was in Foreclosure and the paperwork had been filed last Friday. Mind you... I went by the house and spoke to her and she said everything was fine in regards to the mortgage. It came as no surprise as she had tried to mortgage and sell everything during probate to screw other family members out of the estate.

My question is this, what is the next step for this foreclosure? I do not want to loose the home but I would like for her to loose her life estate in the property. I tried calling the bank and they would not give me any information in regards to the loan since I am not on the note. The lawyer filing the foreclosure told me the same. Luckily a legal aid at the lawyer's office gave me some info and told me the next step was for her to get served with a court appearance. After that... the court appearance would be next followed by an auction for the home. Where do I fall in this whole mess? It seems to me that they are not going to include me at all since I'm not on the note. I spoke to a lawyer down there and he said that I would have to pay off the mortgage ($40,000) but not to do so until she lost her life estate. But when will she actually loose the life estate and will I have an opportunity to save my home? I ultimately want to sell the home for commercial purposes since the area has been pretty much rezoned commercial and rezoning the land shouldn't be difficult. The lawyer I spoke to said that it was a complicated mess and he would have to consult his coworker about a strategy. However... he is requesting a $5000 retainer for his services which I don't have since I'm still a student and will be attending law school my self in the near future. My problem is... what is he going to do for me that I couldn't do myself? I mean... I'm lost on where to go from here.

Any ideas? Thanks

[tranquility]

A lawyer will know where to go from here.

You've got a mess. A mess that is not going to be easy to clean up. I'd think the first issue is probate. Step-gradmother (SG) mortgaged the property when it was in the estate. She was the executor. Did she have the right? How was she able to sign off on the mortgage?

If she signed off on the mortgage personally with her life estate, the foreclosure will only be against her rights in the life estate. You need do nothing as your rights won't change on the death of the SG. You should check the deed to find out if this is true.

If she signed off on the morgtage as the executor, it depends. In CA (I don't know the law in the state you don't mention.), the executor could not encumber the property without court approval. If SG did, she would have breached her fiduciary duty and may be liable for damages. You would need to intervene in the foreclosure action and file suit against SG for her breach. The bank and your aunt may have a problem if there is not a court order to encumber the property. (Again, assuming CA. Look up the probate code in your own state.) If there is an order, the estate received a benefit from the money and you should find out what that was to see if it was used properly and within the fiduciary's duties and responsibilities.

In the first case, where SG took the loan in her own name, you can purchase the life estate from the bank after they forclose and the ownership rights will merge and you will have a fee simple absolute. In the second, you may get damages from SG or the bank, but not necessicarilly the life estate.

Now, to reiterate my comment at the beginning, do you understand everything I wrote? Do you know how to do everything I wrote? Do you now see why a lawyer is important? This is going to be hard--get a professonal to help you.

[hoonu]

Originally Posted by tranquility

A lawyer will know where to go from here.

You've got a mess. A mess that is not going to be easy to clean up. I'd think the first issue is probate. Step-gradmother (SG) mortgaged the property when it was in the estate. She was the executor. Did she have the right? How was she able to sign off on the mortgage?

If she signed off on the mortgage personally with her life estate, the foreclosure will only be against her rights in the life estate. You need do nothing as your rights won't change on the death of the SG. You should check the deed to find out if this is true.

If she signed off on the morgtage as the executor, it depends. In CA (I don't know the law in the state you don't mention.), the executor could not encumber the property without court approval. If SG did, she would have breached her fiduciary duty and may be liable for damages. You would need to intervene in the foreclosure action and file suit against SG for her breach. The bank and your aunt may have a problem if there is not a court order to encumber the property. (Again, assuming CA. Look up the probate code in your own state.) If there is an order, the estate received a benefit from the money and you should find out what that was to see if it was used properly and within the fiduciary's duties and responsibilities.

In the first case, where SG took the loan in her own name, you can purchase the life estate from the bank after they forclose and the ownership rights will merge and you will have a fee simple absolute. In the second, you may get damages from SG or the bank, but not necessicarilly the life estate.

Now, to reiterate my comment at the beginning, do you understand everything I wrote? Do you know how to do everything I wrote? Do you now see why a lawyer is important? This is going to be hard--get a professonal to help you.

Its in Florida as indicated above.

In my grandfather's will, he stated that she could sell, mortgage, etc... as the executor to protect the estate. She did so with this property and another. We lost the other. She took this loan before the Personal Distributive Deed was given to my uncle and mother. My uncle QC to my grandmother... she QC it to me. If they foreclose on her life estate rights... does the house get lost with the rights? Am I responsible for the amount on the loan being that I'm the remainderman. It is to my understanding if the loan is to be reinstated, I would have to sign off on it... is this true? If I refuse to sign off... does she loose her rights to the life estate?

Thanks again for your help.

[tranquility]

All the documents would need be reviewed to express an opinion. But, a person can only encumber what he owns. If he owns a life estate, that's all that can be encumbered. The underlying future interests would not be affected.

[ssms]

I don't know if you will check this since it has been a while since you posted, however I am very interested in how things turned out for you. I am in a similar situation. My mother passed and left property to me in her will, but made it a life estate for the executor with me as remainder interest. Before the QC deed was filed, the executor got a mortgage on the property. The title company messed up and thought the title was clear. It took me $5,000 in attorney's fees to get the executor to give me a QC for the property and the mortgage was not addressed. Now she is defaulting on the loan. My attorney said I had remainder interest when my mother passed regardless if there was a QC or not since it was stated in the will. I am not responsible for the loan since I did not sign the note. The mortgage co can only foreclose on the life estate. It hasn't gotten that far yet. He thinks the mortgage co will contact me when they run a title search and see I am the remainder owner. I am going to contact the mortgage co and make sure they are aware of this and give them a copy of the deed. I am not willing to pay the $20k additional equity she pulled out of the house. Please if you see this posting, let me know what the end result was in your situation. Did you ever get legal advice and what was it? I also live in Florida. Thank you.