Property company went bankrupt - left with no deed

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Property company went bankrupt - left with no deed

Brandon C.
Investor · Knoxville, TN · Member since 2013 · 32 posts · 3 votes
I've been reading the forums for a while, but never posted. My in-laws told me about a situation they are going through and this was the first place I thought to post to seek advice. I just heard about this this morning before work, so I don't have all the details but here's the situation. About 10-12 years ago, my in-laws bought a small plot of land in rural Tenn at some campground. They don't remember what they paid, but they think it was around $2500. They financed it over 2-3 years. Just as they paid it off, the property group went bankrupt. They paid the lot off, but the company never sent them a title. About 6-7 years ago, they decided they were going to try to sell the property since they rarely use it. When they called the office, that's when they found out about the previous company going bankrupt. The new company has no information on the lots and said they were unable to provide a deed. Tax on the property is like $6 a year - yes, 6 bucks! They have always paid that. About 3 years ago, they called again to try to get a deed or something. Again, the new company said they couldn't help and that it wasn't their problem. My in-laws said they weren't going to pay the $125 a year assessment fee if they couldn't provide evidence of ownership of the property. Fast forward to today. The property group sent a letter saying that if my in-laws didn't pay the assessment fees for the past 3 years wihtin the next 10 days that the property would be foreclosed on. If they didn't want to pay it, they could surrender the property to this company. My MIL said they could have the property, but the company told her that she needed to contact an attorney and get a quiet deed before they could do that. My MIL asked "How can you foreclose on property that you have no evidence that I own." Their response was that she had been paying taxes on it. Any suggestions on what my in-laws should do? They were going to get with a lawyer and get a quiet deed and be done with it. I told them to wait, because I don't want them to pay a bunch of attorney fees if they don't have to. This is the first time I've dealt with anything like this. Would appreciate any advice you have!
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  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    13y

    Have your inlaws checked public records? Their ownership should have been recorded.

    They definitely need an attorney.

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  • Brandon C.
    OP
    Investor · Knoxville, TN · Member since 2013 · 32 posts · 3 votes
    13y

    Hi Jon,

    That was the first thing I checked this morning. Tennessee has a great property data website and yes, they are listed as owners of the property along with a Parcel #.

    Do you think a quiet deed is what they need? I'm always hesitant to take advice from the fox when he's in charge of the hen house. =)

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  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    13y

    So, why are they asking some company for the deed? If its recorded, they can get the deed out of public records. A piece of paper in unimportant. The public records are what matters.

    If they want to give it back to this company, they would create a new deed handing over ownership. But, since its officially theirs, they may be able to sell it. If this is some sort of undeveloped HOA, though, there may be difficulties in doing that.

    I think you may mean "quit claim deed". That's a weak deed that can be used to hand over ownership. Or perhaps you mean a "quiet title lawsuit". That a process to clean up ownership when its muddled.

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  • Dion DePaoliPro Member
    Real Estate Broker · Northwest Indiana, IN · Member since 2011 · 2k+ posts · 2k+ votes
    13y

    I agree with Jon, you will need an attorney.

    As you assist them with getting their evidence in order. Things to look for and understand better:

    1. The contract which conveyed the lot to them is needed. Was this a land contract/contract for deed or a purchase and sale contract? They purchased a lot in a campground. There are different models in the real world on how the operators convey those lots. Some are merely leased and some are sold. The story you tell, makes it sound like a sale. That sale can take place at the point of sale or in the future through an installment contract like a contract for deed.

    2. In your story, you state at the end of paying off the financing, they were supposed to get Title to the property. This could just be laymen talk. When you get property, you get the title at the point of sale. Only if this was a Land Contract/Contract for Deed would the title to the subject property not convey until the completion of the finance arrangement. Land contracts (or contract for deed, same instrument), are fairly common in these campgrounds as a method of finance since the lots are usually smaller sale prices and it is tough to get financing from a third party for them.

    3. There is more to the story of the previous owner's bankruptcy. A company does not just file for bankruptcy and get to loose all of its files. A thorough investigation into the company that filed bankruptcy and all of its files, etc were looked at as a function of the BK action. Additionally, if the previous park owners surrendered the property through BK action, it would have to have been sold. A new owner running in with no due diligence on how these lots were conveyed would be huge liability. Essentially, it didn't happen that way, somebody knows, somewhere. So then, is it malice or ignorance on the part of the new grounds owners? Not sure, but a bad taste in the mouth for sure.

    4. The action you are referring to is called "Quiet Title" not deed.

    5. There is a slippery slope in the attitude your in-laws approached the idea of the new company saying they don't want to pay Association Fees if they Association doesn't have paperwork. The ability to use the property speaks to possession of the property. The utility of the property is always governed by the deed restrictions enforced by the Association. Their attempt to 'hostage negotiate' the title to the property would not really produce results. The action would have to be legal in nature, the path of which is unclear and is rooted in how they purchased the property either through standard sale or through an installment contract like contract for deed.

    6. It is interesting the new company told your MIL to get Quiet Title in order to convey the property to them. If they have a capacity to foreclose, your IL's wouldn't need to get title, the suit will clear that up. The attorney can discuss this with you. Don't abandon the pursuit, if it is or merit, the option to gain unencumbered title to the property and selling it to recoup the purchase price and costs. It seems confusing, but it might not be that bad.

    7. The "your paying taxes on it" statement is in ignorance. Paying taxes is not in and of itself evidence of ownership nor unencumbered ownership. Don't let anyone get any more involved in that statement. It is a waste of time and energy.

    8. Understand there might be a level of separation between the new owner and the manager running the grounds. This could also speak to the ignorance on the issues at hand and could also give support on why the people your in-laws are speaking with don't have proper paperwork. The attorney will cut through that.

    9. Don't fall victim to running a fire drill on the 10 days. A foreclosure proceeding does take at the least a little time and proper notices. Be prudent, but don't panic, get with a real estate attorney and explore resolutions that are in line with the outcome in the best interests of your IL's.

    Good Luck.

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    13y

    Jon is correct. If the county says they own it, they own it. The "deed" is recorded in the county offices, it's not like a car where you need a physical "title" you keep in a file. Read the deed, online, and see of it was General/Special Warranty Deed, Quit Claim Deed, whatever.

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  • Brandon C.
    OP
    Investor · Knoxville, TN · Member since 2013 · 32 posts · 3 votes
    13y

    Ok, that helps. I think they would have trouble selling it. How do they create a deed to hand over to the property group? Does that require a lawyer or is it something I can put together for them?

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  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    13y

    A deed is just a piece of paper that conveys ownership. It gets recorded with the county, which is what really matters. It is certainly possible for anyone to create a deed. But, given what you have written, I STRONGLY suggest you use an attorney. You could try a title company, though. They may have a template form you can fill out and then have the title company record.

    If they just want to give this away, I'd think the recipient would be willing to put out a little effort to make this happen.

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  • Jerry W.Pro Member
    Moderator
    Investor · Thermopolis, WY · Member since 2012 · 4k+ posts · 4k+ votes
    13y

    Brandon Currey have your relatives get an attorney to look at it. PERIOD. You dont go to the barber when you have a heart attack. The attorney will know the law of that state, can research title at the courthouse, and can tell you if the park can charge fees. If they don't want to get an attorney , tell them to do nothing and then not complain if things turn out horrible.

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