Reminder for Divorcing Parties

Steve Zablocki, Senior Underwriting Counsel

In a divorce, the judgment terminates the marriage and incorporates the stipulations and orders between the parties. The judgment or the marital settlement agreement (MSA) contains who will receive what and when out of the marital asset pool.

When reviewing the MSA and judgment, please be mindful of the intent of the parties. Normally, the order will grant the property to one of the parties. This order by itself does not usually transfer record title. Rather, the order may in fact require a subsequent quit claim deed from one party to the other.

The order may recite that the property sold, and one spouse is to receive a certain payment out of the proceeds. Is the court creating a right to a lien by requiring an equalization payment? The answer is an unsatisfying “maybe.”

There is law that suggests that a lien born out of divorce court must be recorded, this by itself does not stop an aggrieved spouse from looking back at the title company and making demands for payment.

If you see a court order for one spouse paying the other, treat it as a lien. The amount should be raised as an exception, a payoff obtained, and the amount disclosed on the closing statement. If they paid it off, then the onus is on the seller to come up with the appropriate documentation. We should not be left having to deal with an aggrieved ex-spouse.