Fraudulent Conveyances

[Guest 85rx-7gsl-se]

Does anyone know if a transferee may personal liability for the receipt of property than was fraudulently conveyed to them? I know the transfer is generally subject to recission but I am unsure of the liability a recipient of such property may face...

[Guest db99wj]

Does anyone know if a transferee may personal liability for the receipt of property than was fraudulently conveyed to them? I know the transfer is generally subject to recission but I am unsure of the liability a recipient of such property may face...

What type of property?

In Real Estate, most transactions, especially when financing is concerned, a title search and title insurance is required, especially in residential. Most commercial properties do to unless it is a cash deal, even then I think many or most have it. The title search is suppose to protect the buyer by checking into the history of the property in order to uncover any claims to ownership to the property, from actual mortgages down to liens. The title insurance policy on the property then protects and defends the ownership rights down the road if a claim is made against the new owner.

[MikePapa1]

If it's goods and you are a bona fide purchaser in good faith, then no. Otherwise, after rescission, you'd only be liable for any waste that occurred while you had the property.

[Guest 85rx-7gsl-se]

Well the situation I was envisioning is a real property transactionn amongst family members that is a claimed cash sale. The question is would the transferee face any civil and/or criminal liability beyond being required to return the property and possibly pay for any loss of value they caused to occur?

I was just talking with someone the other day about that type of situation and there thoughts were more along the lines you would face liability similar to the receipt of stolen property. I didnt think that such harsh penalties could result from a mere fraudulent conveyance.

[Guest db99wj]

IANAL, but I don't see that it would be a "stolen property" situation if it was a mutually agreed upon transaction. There should be some type of "contract" to convey the property over. The "seller" would have to sign the warranty deed and the buyer would have to sign as well, this transaction would have to be notarized and should be recorded. Anything short of that, you are getting into a he said, she said type situation and probably wouldn't end well for the "buyer" due to the lack of documentation to prove that the property was conveyed. The above mentioned title search/insurance really protects against people or entities outside of the transaction and assumes a willing seller and a willing buyer. Willing not being that they looked forward to it but agreed upon the terms. They weren't forced in other words. Most that sell in lieu of foreclosure don't want to sell, but they have to so they "agree" on selling.

[Guest 85rx-7gsl-se]

I think there may be some confusion here. When I say fraudulent conveyance I am referring to a 3rd party creditor who disputes the transaction as merely an attempt to defraud the creditor of access to the real property to cover the transferor's debt. Therefore the question is would the creditor's course of action be limited to just recission of the transaction so that they could reach the real property? Or could a civil or criminal action be brought against the transferee as well?

We are talking about a case where the recipient of the property is not so much concerned they will have to give the property back to the transferor (since they never really paid full consideration for it)...

Edited December 20, 2010 by 85rx-7gsl-se

[Guest db99wj]

I think there may be some confusion here. When I say fraudulent conveyance I am referring to a 3rd party creditor who disputes the transaction as merely an attempt to defraud the creditor of access the the real property to cover the transferor's debt. Therefore the question is would the creditor's course of action be limited to just recission of the transaction so that they could reach the real property? Or could a civil or criminal action be brought against the transferee as well?

Just so that I do understand, the third party, say an electrical contractor, lays a claim against the property owner, new or old, and sues for what is "owed" to them.

I don't think any of this would be grounds for criminal charges, but civilly they could sue both parties and let a judge decide who and what if any is owed to the 3rd party. The rescission, which I haven't read one of those in a long while, I think, I might be wrong, only relates to the buyer and their ability to "cool off" and walk away within the rescission period. If the material defect is found during the rescission period, I believe that the buyer, if unknowing of the situation, is suppose to be made "whole" as they were before they entered into the agreement. However, if after rescission, I'm not sure what would happen. I would think a round robin of civil suites could and would be filed and let the courts decide. IF the lien was recorded, then I would say it is the sellers problem before and during rescission, and the buyers problem after rescission. The buyer does have a responsibility to make sure that they are receiving clear title, it is also the responsibility of the seller to convey clear title, unless otherwise disclosed. However, with all that said, this really is getting into really deep areas of real estate law and I am no expert in law.

[Guest 85rx-7gsl-se]

Yeah it is kinda an odd area. I know enough from school about getting the transaction reversed and the property drawn back into a bankruptcy estate but not sure what could happen to the person who actually received the property that was drawn back in. Would they be held as helping perpetrate a fraud?

[Guest db99wj]

Getting into areas that I have no idea. My thought is no, unless the person who actually received it, knew about it beforehand.

[monkeylizard]

That's sort of where my thinking was going too. I didn't think someone could be guilty of fraud if they're an unknowing victim of the fraud. As for the liability transfering to the new owner, yeah, I think it would if the liability was a real mortgage/lien on the property. Title insurance would cover that though unless the title search showed the lien and the transaction was completed anyway. That would seem to imply that the receiver knowingly took posession of the property AND the liabilities. If the seller had a verbal agreement with the 3rd party, and nothing else, I'd say the 3rd party is getting screwed out of their money on this one unless the 3rd party could prove the receiver knew about the verbal contract.