You asked for an opinion about what constitutes equitable ownership in the six states
in Region V, for purposes of the application of the home exclusion in POMS SI 01130.100. All six states in Region V recognize equitable ownership interests in property.
For example, in each of the six states, an equitable ownership interest may arise
from the execution of a valid installment contract for the purchase of real property.
In addition, all six states in Region V recognize a life estate, which is the most
common type of equitable ownership. Each state generally requires any interest in
land, including a life estate, to be conveyed in a written document. In some cases,
state courts may reform a deed or other written instrument due to mistake and/or fraud.
However, all six states also recognize one or more exceptions that allow the conveyance
of an equitable ownership interest by oral contract.
DISCUSSION
To qualify for SSI benefits, an individual’s income and resources must fall below
the statutorily mandated limit. See 42 U.S.C. § 1382(a); 20 C.F.R. § 416.202(c), (d); see also POMS SI 00501.001(B)(1). In determining the resources of an individual, the Agency excludes the individual’s
home. See 42 U.S.C. § 1382b(a)(1); 20 C.F.R. §§ 416.1210(a), 416.1212(b); see also POMS SI 01130.100(B). A home is defined as “any property in which an individual (and spouse, if any)
has an ownership interest and which serves as the individual’s principal place of
residence,” including the shelter in which he or she lives, the land on which the
shelter is located, and related outbuildings. 20 C.F.R. § 416.1212(a); see POMS SI 01130.100(A)(1).
Agency policy acknowledges that an individual who is not the legal owner of his or
her home may nevertheless have an equitable ownership interest in the home where permitted by state law. POMS SI 01110.515(C)(3), SI 01130.100(C)(4). Equitable ownership is defined as a form of ownership that exists without
legal title to property. POMS SI 01110.515(A)(2)(b). In particular, SSA policy provides that an individual “may acquire an equitable
ownership interest in his or her home through personal considerations or by performing
certain activities such as: making mortgage payments or paying property taxes; making
or paying for additions to a shelter; or making improvements to a shelter.” POMS SI 01110.515(C)(3).
The most common type of equitable ownership involves life estates. “A life estate
confers upon one or more persons (grantees) certain rights in a property for his/her/their
lifetimes or the life of some other person.” POMS SI 01110.515(A)(2)(a), SI 01140.110(A)(6). A life estate is a form of legal ownership that is usually created through
a deed or will or by operation of law. POMS SI 01110.515(A)(2)(a). However, the owner of a life estate does not have title to the property.
POMS SI 01140.110(A)(6).
All six states in Region V recognize equitable ownership interests in real property.
In particular, as discussed below, in each of the six states, a n equitable ownership
interest may arise from the execution of a valid installment contract[1] for the purchase of real property, at which time the purchaser or vendee becomes
the equitable owner. Therefore, an individual may establish equitable ownership of
a property by providing a copy of the installment contract showing that he or she
is the purchaser or vendee.
With respect to life estates, as discussed below, each of the six states in Region
V follows some version of the Statute of Frauds, which requires a conveyance or sale
of any interest in land to be in writing. In some instances, a state court may reform
the deed or other writing to include a life estate that was originally omitted due
to mistake and/or fraud. Thus, an individual may establish a life estate by providing
a deed, will, or other legal document evidencing the life estate (including a court
order reforming the original document to include the life estate). However, each state
has one or more exceptions to the Statute of Frauds that allow the conveyance of an
equitable ownership interest in real property by oral contract.
Illinois
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Equitable Ownership Interest Created by Installment Contract
Under Illinois’ doctrine of equitable conversion, an individual becomes an equitable
owner upon entering into a valid and enforceable contract to purchase realty, despite
the fact that the seller continues to hold the legal title. Grochocinski v. Schlossberg, 402 B.R. 825, 839 (N.D. Ill. Mar. 11, 2009) (citing In re Lefkas Gen. Partners, 112 F.3d 896, 901 (7th Cir. 1997)). This includes installment contracts. SeeCarollo v. Irwin, 959 N.E.2d 77, 84 (Ill. Ct. App. 2011).
Under Illinois law, if a grantor wishes to convey an estate that is less than fee
simple (such as a life estate), the grantor must express that intention in the deed;
otherwise, it will be presumed that the grantor intended to convey a fee simple estate.
765 Ill. Comp. Stat. 5/13. In addition, under the Illinois Frauds Act, a person generally
may not bring an action to enforce a contract for the sale of land or any interest
in or concerning land (including a life estate) unless the contract is in writing
and signed by the person against whom the action is brought. 740 Ill. Comp. Stat.
80/2. Therefore, a life estate in Illinois generally must be in writing to be enforceable.
Illinois courts may, under certain circumstances, reform a written instrument based
on oral evidence. For example, in Darst v. Lang, 10 N.E.2d 659, 661 (Ill. 1937), the court reformed a deed conveying a gift of property
from parents to their daughter to include a life estate under the doctrine of mutual
mistake. The court also noted that alternatively, the deed could be reformed to include
the life estate based on fraud. Id. A written instrument “may also be reformed upon proof of a mistake by one party to
the contract when the other party knows of the mistake and fails to inform the other
party or conceals the truth from him.” Ballard v. Granby, 412 N.E.2d 1067, 1069 (Ill. App. Ct. 1980).
EXCEPTION: In Illinois, oral contracts for the conveyance of real property may be
excepted from the Statute of Frauds under the doctrine of partial performance. Culbertson v. Carruthers, 383 N.E.2d 618, 623 (Ill. App. Ct. 1978). “ There are three requisites for the application
of the doctrine of partial performance: (1) the performance must be in reasonable
reliance on the contract, (2) the remedy of restitution must be inadequate, and (3)
the performance must be one which in some degree evidences the existence of a contract
and is not readily explainable on any other ground.” Brunette v. Vulcan Materials Co ., 256 N.E.2d 44, 47 ( Ill. App. Ct. 1970) (citation omitted). We recommend that
any matter involving an allegation of equitable ownership based on partial performance
of an oral contract be referred for an OGC opinion.
Indiana
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Equitable Ownership Interest Created by Installment Contract
In Indiana, where there is an installment contract for the sale of real estate, “the
vendee becomes the equitable owner thereof; the vendor simply holding the title as
security for the purchase money. The vendee, being the equitable owner, secures all
the benefits and assumes all the risks of ownership.” Knapp v. Ellyson
Realty Co., 211 Ind. 180, 183 (1937). Said risks include the risk of loss, absent any language
to the contrary in the contract. Ridenour v.
France, 442 N.E.2d 716, 717 (Ind. Ct. App. 1982).
Under the Indiana Statute of Frauds, a conveyance of land or any interest in land
(including a life estate), except for a bona fide lease for a term not exceeding three
years, must be in writing. Ind. Code Ann. § 31-21-1-1, 31-21-1-13. If a grantor intends
to convey a life estate, the grantor must express that intention in the deed; otherwise,
Indiana courts will presume that the grantor intended to convey a fee simple estate.
Ind. Code Ann. § 32-21-1-16; seeLong
v. Horton, 133 N.E.2d 568, 571-73 (Ind. Ct. App. 1956). Additionally, a person generally may
not bring an action involving any contract for the sale of land, unless the agreement
is in writing and signed by the person against whom the action is brought. Ind. Code
Ann. § 32-21-1-1(b)(4). Indiana courts may, however, reform a written instrument when,
because of mutual mistake or mistake of one of the parties accompanied by the fraud
of the other, the written instrument fails to express the parties’ agreement correctly.
Baker v. Pyatt, 9 N.E. 112, 114-18 (Ind. 1886); Harvey v. Hand, 95 N.E. 1020, 1022 (Ind. Ct. App. 1911).
EXCEPTION: In Indiana, oral contracts may be excepted from the Statute of Frauds under
the doctrine of partial performance. Marathon Oil Co. v. Collins,
744 N.E.2d 474, 478 (Ind. Ct. App. 2001). To qualify for the partial performance exception,
Indiana courts require clear and definite proof of a combination of circumstances,
such as possession of the property; payment or partial payment of the purchase price;
and “valuable and lasting” improvements made to the land based on the oral contract.
Id. at 478-79. We recommend that any matter involving an allegation of equitable ownership
based on partial performance of an oral contract be referred for an OGC opinion.
Michigan
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Equitable Ownership Interest Created by Installment Contract
“Under Michigan law, the sale of real property under [an installment] contract operates
as an equitable conversion.” Batton-Jajuga v. Farm Bureau Gen’l
Ins. Co. of Mich., 913 N.W.2d 351, 358 (Mich. Ct. App. 2017) (quotations and citation omitted). Accordingly,
when an installment contract becomes effective, the buyer/vendee becomes the equitable
owner, acquiring equitable title despite not yet acquiring the legal title. Id.
Under the Michigan Statute of Frauds, no estate or interest in land, other than a
lease of one year or less, may be created, granted, declared, assigned, or surrendered
except by operation of law, or by a deed or other conveyance in writing. Mich. Comp.
Laws § 566.106. In addition, every contract for the sale of any land or any interest
in land must be in writing and signed by the seller. Mich. Comp. Laws § 566.108. A
life estate is an interest in land and therefore must be established by a written
conveyance. In re Estate of Williams , No. 262203, 2005 WL 3304119, *2 (Mich. Ct. App. Dec. 6, 2005). Michigan courts
have also reformed a contract or deed under the doctrine of mutual mistake, or when
there is mistake on the part of a plaintiff and fraud on the part of a defendant.
Schwaderer v.
Huron-Clinton Metropolitan Authority , 45 N.W.2d 279, 283-84 (Mich. 1951) (collecting cases).
EXCEPTION: In Michigan, “partial performance of an oral contract to convey an interest
in land may remove that contract from the operation of the statute of frauds.” Zaborsky v. Kutyla, 185 N.W.2d 586, 587 (Mich. App. Ct. 1971). Consequently, partial performance may
establish that a life estate exists, despite not being in writing. SeeEstate of
Williams, 2005 WL 3304119 at *3. The factors for establishing partial performance include:
possession, improvements in regard to the property, and payment of money pursuant
to the contract. Zaborski, 185 N.W.2d at 587. The acts must unequivocally refer to, and result from, the oral
agreement. Groening v. McCambridge, 275 N.W. 795, 796 (Mich. 1937). We recommend that any matter involving an allegation
of equitable ownership based on partial performance of an oral contract be referred
for an OGC opinion.
Minnesota
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Equitable Ownership Interest Created by Installment Contract
In Minnesota, “[t]he vendee in a contract to convey real estate, who has paid a part
of the purchase price of the land and entered into possession thereof . . . is the
equitable owner of the land, and has an interest therein which he may convey, which
is descendible to his heir, and which, if not his homestead, may be subject to the
lien of a judgment against him.” Stearns v. Kennedy, 94 Minn. 439, 442 (1905). Thus, an individual purchasing a property through an installment
contract has an equitable ownership interest in the property.
The Minnesota Statute of Frauds provides that “[n]o estate or interest in lands .
. . shall hereafter be created, granted, assigned, surrendered, or declared, unless
by act or operation of law, or by deed or conveyance in writing.” Minn. Stat. § 513.04.
In addition, every contract for the sale of any land or any interest in land must
be in writing and signed by the seller. Minn. Stat. § 513.05. A life estate is an
interest in land and therefore must be in writing.
Minnesota courts have recognized that a written instrument regarding real property
may be reformed when there was a mutual mistake of the parties, or a unilateral mistake
accompanied by fraud or inequitable conduct by the other party. Theros v. Phillips, 256 N.W.2d 852, 857 (Minn. 1977); Karger v. Wangerin, 40 N.W.2d 846, 850 (Minn. 1950). For example, in Olson v. Olson, No. 97-1978, 1998 WL 170111, *1-2 (Minn. Ct. App. June 17, 1998), the Minnesota
Court of Appeals upheld a trial court’s reformation of a deed based on mutual mistake
where a father transferred land to his children but the parties neglected to include
a life estate for the father in the deed.
EXCEPTION: In Minnesota, an oral contract concerning the conveyance of real property
may be taken out of the Statute of Frauds by partial performance. Crossroads Church of Prior Lake MN v. County of Dakota, 800 N.W.2d 608, 614 (Minn. 2011). Generally, partial performance may be established
by taking possession of the land and making valuable improvements or paying part of
the purchase price. Id . “The underlying principle is that, when one of the contracting parties has relied
on an oral agreement to such an extent that it would be a fraud on the part of the
other contracting party to void the agreement, equity will make that agreement an
exception to the statute of frauds.” Id . (citation omitted). We recommend that any matter involving an allegation of equitable
ownership based on partial performance of an oral contract be referred for an OGC
opinion.
Ohio
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Equitable Ownership Interest Created by Installment Contract
In Ohio, a vendee in a land installment contract stands as an equitable owner of the
property. Blue Ash Bldg. & Loan Co. v. Hahn, 484 N.E.2d 186, 189-90 (Ohio Ct. App. 1984). “An equitable owner is recognized in
equity as the owner of the property because ‘the real and beneficial use and title
belong to him, although the bare legal title is invested in another.’” Shrock v.
Mullet, No. 18 JE 0018, 2019 WL 2767002, *7 (Ohio Ct. App. June 28, 2019) (quoting Levin v. Carney, 161 Ohio St. 513, 518 (1954)).
Under the Ohio Statute of Frauds, an estate or interest in land (including a life
estate) may only be assigned or granted by deed or note in writing and signed by the
party granting or assigning it, or by act and operation of law. Ohio Rev. Code § 1335.04.
In addition, no action shall be brought against an individual upon a contract or sale
of land or interest in or concerning it (including a life estate) unless the agreement
upon which such action is brought is in writing and signed by the party to be charged.
Ohio Rev. Code § 1335.05. Consequently, a life estate in Ohio generally must be in
writing to be enforceable. Ohio courts may also reform a written agreement such as
a deed when it fails to reflect the intent of the parties as the result of a mutual
mistake or fraud. Lukacevic v. Daniels , 128 N.E.3d 845, 850-51 (Ohio Ct. App. Jan. 10. 2019) (citations omitted).
EXCEPTIONS: In Ohio, an oral contract concerning an interest in real property may
be brought outside the Statute of Frauds under the doctrines of partial performance
and promissory estoppel. Brown v. Brown, No. 04CA000018, 2005 WL 914490, *3 (Ohio Ct. App. Apr. 14, 2005). “An agreement is removable from operation of the Statutes of Frauds by virtue of partial
performance only where the party relying on the agreement changes his position to
his detriment thereby making it impractical or impossible to return the parties to
their original status. An agreement is removable from operation of the Statutes of
Frauds by virtue of the doctrine of promissory estoppel only when there has been a
misrepresentation of compliance with the Statutes of Frauds or a promise to make a
writing of an oral agreement.” Saydell v. Geppetto’s Pizza & Ribs Franchise Sys.,
Inc., 652 N.D.2d 218, 224 (Ohio Ct. App. 1994) (citations omitted).We recommend that any
allegation of equitable ownership based on an oral agreement involving either partial
performance or promissory estoppel be referred for an OGC opinion.
Wisconsin
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Equitable Ownership Interest Created by Installment Contract
In Wisconsin, “[b]y execution of a land contract, the vendee becomes the owner of
the land in equity, while the vendor retains legal title to secure the balance due
on the purchase price.” Kallenbach v. Lake Publications, Inc., 142 N.W.2d 212, 214 (Wis. 1966). Thus, an individual purchasing a property through
an installment contract has an equitable ownership interest in the property.
Under Wisconsin law, any transaction of any interest in land (including a life estate)
must be evidenced by a conveyance that: (a) identifies the parties; (b) identifies
the land; (c) identifies the interest conveyed, and any material term, condition,
reservation, exception or contingency upon which the interest is to arise, continue,
or be extinguished, limited or encumbered; (d) is signed by or on behalf of each of
the grantors; and (e) is signed by or on behalf of all parties, if a lease or contract
to convey. Wis. Stat. Ann. § 706.02.[2] Thus, if a party wishes to enforce a contract affecting real property, “the contract
must be in writing, set forth all the essential terms with particularity, and be signed
by all parties to the transaction.” Prezioso v.
Aerts, 858 N.W.2d 386, 392 (Wis. Ct. App. 2014). Accordingly, a life estate generally must
be in writing to be valid. Wisconsin courts may also reform a written agreement that
was entered into by mutual mistake or by mistake on the part of one party and fraud
by the other party. Bailey v. Hovde, 213 N.W.2d 69, 73 (Wis. 1973).
EXCEPTIONS: Wisconsin law provides that a transaction of any interest in land not
meeting the requirements of Wis. Stat. § 706.02 may nonetheless be enforceable under
the following doctrines of equity: (1) reformation of a deficient conveyance; (2)
unjust enrichment; and (3) equitable estoppel. See Wis. Stat. Ann. § 706.04. We recommend that any allegation of equitable ownership
based on an oral agreement that involves any of the above doctrines of equity be referred
for an OGC opinion.
CONCLUSION
In each of the states within Region V, equitable ownership may be established by virtue
of an installment contract for the purchase of real property. Additionally, each state
recognizes a life estate as a type of equitable ownership. A life estate generally
must be created in a written document, typically a deed. However, in each of the six
states, a court may reform a written document to include a life estate based on mistake
and/or fraud.
Moreover, each state recognizes one or more exceptions to the general rule that an
interest in land (such as a life estate) must be conveyed in writing, with the most
common exception being partial performance. Where an individual claims an equitable
ownership interest under an oral contract based on partial performance or one of the
other doctrines of equity identified above, we recommend the matter be referred for
an OGC opinion.