Articles and Publications

Failure to read a form may result in homelessness

July 13, 2020

Related PeopleArnold E. Karolewski

Practice AreasReal Estate

A husband and wife owned a home, their marital domicile. They heard a commercial on the radio informing listeners that internet thieves are stealing homes by forging and creating false ownership documents and that the way to protect unwary homeowners is to utilize their services, which include transferring ownership to a trust.

Illinois law allows a married couple to own their marital domicile as tenants-by-the-entirety and if such home is owned by tenants-by-the-entirety, it cannot be sold by creditors of one spouse to satisfy the obligation of said spouse. Such a protection also applies to a marital domicile wherein title is vested in a land trust and the beneficial interest of the land trust is vested in the married couple as tenants-by-the-entirety.

The wife owned a business making disposable, non-plastic straws. The wife obtained a business loan in the amount of $50,000.00 and the promissory note was signed only by the wife. To secure the repayment of the business loan, the lender required a lien on the business assets and a mortgage on the home. To cause the land trustee to sign the mortgage, husband and wife signed a one-page Letter of Direction form.

Unfortunately, the straws produced by the wife’s business began to disintegrate after two minutes in a drink, the business failed and the lender began a foreclosure action on the home. The husband argued that the lender could not foreclose on the home because the beneficial interest was owned by husband and wife as tenants-by-the-entirety and, accordingly, was protected by Illinois law. The court ruled in favor of the lender. The husband and wife were evicted from their home together with the defective straws. The court found that the execution of the Letter of Direction by the husband constituted a waiver of the protections offered by the Illinois statute.

This problem could have been avoided at the time the trust was created. Additionally, there was a second opportunity to address the issue when the Letter of Direction to execute was signed.

The next time you are presented with a simple one paragraph document or one that is 20 pages, we suggest that you forward it to a Chuhak & Tecson attorney for review. That simple act may save you, someday, from becoming homeless.

Client alert authored by Arnold E. Karolewski (312 855 4320), Principal.

This Chuhak & Tecson, P.C. communication is intended only to provide information regarding developments in the law and information of general interest. It is not intended to constitute advice regarding legal problems and should not be relied upon as such.