Occasionally sellers of real property, or borrowers in refinance transactions, are confused upon being informed their spouse is required to sign certain documents at closing. It’s not uncommon for closing attorneys to receive inquiries wondering “why do they need to sign? They’ve never had anything to do with this property!” While it’s certainly possible to purchase and hold property individually, a married person generally needs to involve their spouse in some manner when selling or refinancing North Carolina real estate.
The concept of marital rights in real property descended from English common law principles designed to benefit the surviving spouse of a deceased property owner, and various North Carolina statutes have been enacted to formally define such rights. These marital rights cannot be exercised during the lifetime of the spouse who owns real property, but can be asserted by the widow/widower once the owning spouse passes away. Having both spouses execute certain documents (e.g., a Deed when selling property) ensures the party holding marital rights cannot later attempt to exercise those rights after real estate is transferred to a third-party.
As with most rules, exceptions exist which may eliminate the need for both parties to sign certain documents. Below is a list of common scenarios our office encounters in transactions involving North Carolina real estate, and the general requirements for each circumstance:
- Both spouses owning property – Both parties must sign documents in purchase, sale, or refinance transactions.
- A married person buying property individually – The owner needs to sign, but their spouse may not be required to sign documents at closing. North Carolina has a specific statute allowing a married buyer of real estate to sign their purchase-money Deed of Trust without requiring the signature of the buyer’s spouse. It’s worth noting this rule only applies to a purchase-money loan, and does not apply in refinances or sales. Additionally some lenders and title insurance companies require that both spouses execute documents for purchase-money loans, regardless of whether one spouse or both spouses will hold title interests.
- A married person selling or refinancing property – The owner needs to sign documents to convey title, and the owner’s spouse needs to sign documents to convey marital rights.
- A separated person selling or refinancing property – Unless severed by a properly drafted agreement, marital rights exist until a court enters an order for absolute divorce. Simply being “separated” from a spouse does not, by itself, terminate marital rights. The owner needs to sign documents to convey title, and the owner’s spouse needs to either (1) sign to convey marital rights, or (2) sign a properly drafted and recorded document to sever marital rights, commonly known as a Free Trader Agreement (see below).
- A “Free Trader” owning property individually – In general terms, a Free Trader is a married person whose spouse has already waived or severed marital rights. This can be accomplished by a prenuptial agreement, postnuptial agreement, separation agreement, or a Deed between the parties reciting statutory language necessary to waive marital rights. The instrument that severs marital rights should be recorded in the Office of the Register of Deeds in the county where the real estate is situated. Provided spousal rights were properly addressed, a Free Trader can conduct real property transactions without involving their spouse.
If you have questions about marital rights in North Carolina real estate, or whether your spouse will be required to sign documents at closing, contact an attorney at Black, Slaughter & Black, P.A., to assist you further.