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Is An Existing Life Lease On A House Secure From The Property Owner’s Creditors And Probate?

By pay online Posted in: payment

Assume Jane obtained a life lease on a house from Dave a few years ago when Dave was in a healthy financial situation. Dave owns the house free and clear. There is no lien on the house. It has not been pledged as collateral for any loan. Dave does not live in the house.
1. What if Dave loses his job and goes through bankruptcy? Do his creditors have a reasonable chance of cancelling Jane’s life lease so as to force the sale of the house in order to recover payment of Dave’s debts?
or
2. Assume Dave passes away and, during his last year of life, had run up large unsecured debts. During probate, can Dave’s creditors (or the executor) likely cause Jane’s life lease to be canceled so that the house can be sold to pay off creditors?
- Assume this is in Pennsylvania.
- Assume Dave and Jane are not related.

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  1. bcnu Says

    Homework?
    First, consider the difference between possession and ownership. Jane has lifetime possession but has no ownership. Dave has ownership but no right of possession as long as Jane is living.
    Dave’s ownership is freely transferable, subject to Jane’s possession. Dave can sell the house. Jane still has possession. Creditors can seize title to the house. Jane still has possession. Dave’s creditors can sell the house (Dave’s deed) and use the proceeds toward Dave’s debts. Jane still has possession, just makes payments to a different owner once Dave has died or otherwise lost title to the property.
    That’s one reason many states require leases for more than, say, 7 years to be recorded at the registry of deeds; the lessor has a legal and equitable claim to possession of the property under the terms of the lease.
    Sure, there could be lease terms that would allow Dave or his creditor to evict Jane, but that would be supposing facts not presented in your scenario. Similarly, what if somebody burns down the house? Would Jane have the right to live in the house if it is ever rebuilt? Who knows?

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