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In Re Yi

2008 WL 352864 (U.S. Bkrtcy. Ct. D. N.J. 2008) (Unpublished)

TENANCIES BY THE ENTIRETY — Creating a tenancy by the entirety does not require written consent from a spouse, but written consent is required from one spouse to the other if the second spouse is to convey both parties’ interest in the property and terminate the tenancy by the entirety.

Two landlords, who were a married couple that ran a business, purchased a property and held it as a tenancy in the entirety. The couple orally agreed to a six-month lease with a group of tenants, followed by the right to renew the lease for two additional years. The husband filed for bankruptcy protection, and subsequent to the husband’s declaration of bankruptcy, the tenants brought an action against the couple and the couple’s business on claims that they, as landlords, breached an oral agreement to transfer title to them. The landlords sought summary judgment against the tenants’ claims for equitable title and for an equitable lien on the property on the grounds that the oral agreement was unenforceable because his wife never gave written consent. The tenants responded that there were factual issues that needed to be examined regarding the landlords’ intention to convey the property and that the oral agreement was allowable by law. They asserted that according to the agreement, the property was to be conveyed to them in exchange for assumption of the landlord’s mortgage and for forgiveness of a substantial debt owed to them by the landlords. They also asserted that they were unaware that the husband had declared bankruptcy and they even made a number of mortgage payments and improvements to the property after the bankruptcy. They claimed that they withheld further action to collect their debt based on the husband’s representations that he was going to transfer the property to them. The tenants also claimed that they discovered an attempt by the landlords to obtain a mortgage on the property at which point they initiated the action against the landlords.

The Court pointed out that the statute creating tenancies by the entireties did not require written consent from a spouse, but that written consent was required from one spouse for the other spouse to convey their own interest in a property and terminate the tenancy by the entireties. It found that there was no such attempt by either spouse and that the law did not apply to circumstances in which an oral agreement may have been entered into to convey a property as a tenancy in the entirety. The Court also pointed out that oral agreements for transfer or real estate were no longer automatically prohibited by the statute of frauds and that an interest in real estate was transferable if an agreement to sell was proven by clear and convincing evidence. It also rejected the landlords’ argument that the bankruptcy trustee’s failure to assume or reject the agreement with the tenants terminated the agreement, noting that the existence of the agreement was in dispute which rendered any determination on the trustee’s handling of the matter premature. Thus, the Court denied the landlord’s request for dismissal of the tenants’ claims for equitable title and an equitable lien.

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