South Carolina news has been flooded with stories of the Murdaughs in recent months. The outcome of the murder trial for Richard Alexander Murdaugh, Sr., commonly referred to as Alex Murdaugh (“Alex”), will certainly affect the future of the family property. Margaret B. Murdaugh (“Maggie”) is the titled owner of Moselle. One may be asking, how did she come to take the title, and do the circumstances of her ownership have any relevance?
The Murdaugh Estate, dubbed “Moselle” by the family, straddles Colleton County and Hampton County. The property is comprised of eight tracts of land totaling more than 1,700 acres. According to tax records, the Murdaughs adopted Moselle as their primary home sometime in 2020.[1] In 2016, Alex transferred Moselle to Maggie for the consideration of “$5.00 and love and affection.” This consideration amount is referred to as a nominal purchase price.
It is not unusual to see a transfer between family members citing a nominal purchase price. These transfers are typically indicative of a property being gifted to a family member or close friend or as means of asset protection within families. While transferring property to a spouse or other family member may be one way to protect assets from creditors, this strategy can be problematic in a few ways.
Prior to transferring Moselle to Maggie, Alex took out multiple mortgages from Palmetto State Bank secured by the property. The mortgages contain a “Due on Sale or Encumbrance” clause indicating that the lender may demand the entire balance of the loan be paid when any part of the property is sold or transferred. However, this specific transfer is afforded protection from the “Due on Sale” clause by a federal law called the Garn-St Germain Depository Institutions Act of 1982. This Act prohibits lenders from exercising their rights under due-on-sale clauses in nine circumstances, one being the transfer of ownership to the spouse. Per this exception permitted in the Act, the mortgagee, Palmetto State Bank, could not have accelerated the mortgages on Moselle solely based on the 2016 transfer from Alex to Maggie.
It is important to note that South Carolina Code prohibits the transfer of assets, including the conveyance of land, to defraud creditors. This transfer may have a court wondering if Alex was attempting to avoid his creditors and protect Moselle from judgments. This law is rooted in the Statute of Elizabeth to protect both current creditors and potential judgment creditors. A transfer made in anticipation of litigation can be invalidated if the court determines that the Grantor’s intent was to hide assets from creditors. Should Alex be convicted in the current trial, it will be up to the court to determine whether the 2016 transfer of Moselle was fraudulent or valid.
Conclusion
Moselle is a vast property with a history of complex real estate transactions. The title to Moselle reflects Margaret B. Murdaugh as its owner, however, the title was statutorily passed to her heirs at the time of her death, which would include her spouse and children. Depending on the outcome of the pending trials and litigation against Alex Murdaugh for alleged criminal and financial wrongdoing, the ownership of Moselle may continue to be complicated and remain in limbo until the outcome of those legal actions is determined.
Transferring Property Subject to a Mortgage: Garn-St Germain
You may be considering transferring the title to your real property but aren’t sure if you are allowed if you still have a mortgage. Many South Carolina mortgages include “due on sale” clauses hindering property transfers without the lender’s consent. These clauses say that the entire balance on your mortgage becomes due if you sell or transfer the property securing the mortgage loan. The Garn-St Germain Depository Institutions Act of 1982 affords some protections to property owners that may otherwise be subject to the due-on-sale provisions in their mortgage.
In 1982, Congress enacted the Garn-St Germain Depository Institutions Act it prohibited lenders from exercising their due-on-sale clauses in nine specific situations.
For loans secured by residential[2] real estate, the lender may not force a sale upon transfers in the following circumstances:
- The creation of a subordinate lien (such as a second mortgage);
- The creation of a loan for household appliances;
- A transfer on the death of a joint tenant;
- Leases of three years or less not containing an option to purchase;
- A transfer to a relative resulting from the death of a borrower;
- A transfer to the spouse or children of the borrower;
- A transfer to a spouse resulting from a decree of a dissolution of marriage, legal separation agreement, or from an incidental property settlement agreement;
- A transfer into an inter vivos trust in which the borrower is and remains a beneficiary; or
- Any other transfer or disposition described in regulations prescribed by the Federal Home Loan Bank Board.
If you’re considering transferring an interest in the property with a mortgage, Finkel Law Firm LLC can advise you of your rights. Please do not hesitate to contact Danielle Bennett at 843-577-5460 to schedule a consultation.
[1] South Carolina allows residents to apply for a reduced tax rate on their primary home, incentivizing owners to update their primary residence designation with the county tax office when they move.
[2] 12 U.S.C. § 1701j-3(d)(8). “With respect to a real property loan secured by a lien on residential real property containing less than five dwelling units . . .”