REAL ESTATE IN A CHANGING WORLD. Nancy Short Ferguson Chicago Title Greensboro, NC

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1 REAL ESTATE IN A CHANGING WORLD Nancy Short Ferguson Chicago Title Greensboro, NC

2 INTERRELATIONS Domestic Law Elder & Estate Planning Law Business Law

3 DOMESTIC LAW

4 TITLE SEARCHES ARE CRITICAL Determine all interests Identify all property

5 ALL INTERESTS Individual, tenancy-by entireties or entity Lien creditors (deeds of trust, judgments, taxes) Co-owners (family members, co-investors or even former spouses

6 ALL PROPERTY Separate Jointly held with spouse Jointly held with others (like family members) Inherited interests Held for business Held for investment

7 TENANCY-BY-THE- ENTIRETIES Same time Same instrument No straw man necessary since 10/1/69 - G.S (b)(3)

8 TENANCY BY THE ENTIRETIES -- NOT!!! Conveyance to parties prior to marriage Conveyance to only one spouse Conveyance under G.S (b) Voluntary partition deed without specific affirmation and signature of co-tenant spouse, G.S

9 TENANCY-BY-THE- ENTIRETIES: Not all-protective Becomes tenancy in common IMMEDIATELY on divorce Death of one spouse RICO (G.S. 75D-8(a)) Slayer Statute (G.S. Chapter 31A) United States v. Craft

10 U.S. vs. Craft 535 U.S. 274 (2002) Federal Tax Liens against one spouse CAN attach to Entireties Property

11 Bulletin , Notice Not assert FTL against interests of BFP s or lienholders if their interests created pre-4/17/02, incl. former spouse Spouse in divorce after 4/17/02 is NOT a BFP

12 Bulletin , Notice Presumed 1/2 interest to which FTL attaches If taxpayer spouse dies, nontaxpayer spouse inherits free of FTL If non-taxpayer spouse dies, taxpayer spouse s interest is totally subject to FTL

13 Bulletin , Notice Court can sell the entire interest to satisfy the FTL!! (Just gives $$ back to nontaxpayer spouse for their presumed 1/2 share)

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15 LITIGATING/CONVEYANCE: Search title Lis Pendens THE 7 STEPS Court Order to Convey Court Order of Actual Conveyance Joinder of creditors of relinquishing spouse Docket final judgment with CSC Record certified copy of final judgment with ROD

16 Court Order - Rule 70 judgment directs a party to execute a conveyance party fails to comply within the time specified judge may direct the act to be done If NC property, judge may enter a judgment divesting title of party and vesting it in others

17 CAUTION: Requires CURRENT VESTING LANGUAGE - Not just order to convey

18 Spouse must join in any conveyance / mortgage (even of separate property) unless: Ante- or Pre-nuptial Agreement Property Settlement Agreement or Agreement Between Spouses Purchase Money Joint conveyance to third party Divorce from Bed and Board Slayer Statute

19 Antenuptial or PreNuptial Agreements Full disclosure Voluntary Not unconscionable Clear and complete waiver Signed by both Support waiver only if will not be reliant on public assistance

20 Antenuptial or PreNuptial Agreements Original or Memorandaum recorded in the Registry of county where property located

21 Separation (&/or Property Settlement) Agreements G.S & G.S

22 Property Settlement Agreements Provide property settlement survives Full disclosure Consideration Not unconscionable Clear and complete waiver language Original or Memorandaum recorded in the Registry of county where property located

23 Agreements between Spouses (G.S ) Full disclosure Consideration Not unconscionable Clear and complete waiver language Original or Memorandaum recorded in the Registry of county where property located

24 Final Divorce Severs T/E Ends Marital Rights Equitable Distribution (G.S ) Lis Pendens Marital property may be in only one name

25 PURCHASE MONEY Conveyance to only one spouse Mortgage solely for purchase, not future advance, construction, equity line Simultaneous recording Risky because no clear statutory authority

26 Buyer Judgments Structure ownership - other options (to prevent lien of a purchaser from attaching) Advise buyer of effects on ability to use property Federal Debt Collection Procedures Act of 1990 (28 U.S.C. 3201(b) -- priority over PM Loans for construction or equity lines -- bifurcated by Dalton Moran Shook case

27 Other Marital Issues Joint Conveyance Divorce from Bed and Board Slayer Statute

28 ELDER or ESTATE- PLANNING LAW

29 DECEDENT S ESTATE Vesting of title at death of decedent in: Tenancy-by-the-entireties vests in spouse Devisees under will (G.S ) Intestate heirs (G.S. 28A-15-2(b)) Spousal disclaimer period (G.S. 31B-2) Executor -- power of sale or title or both Creditors (incl. Medicaid) and taxing authorities

30 DECEDENT S ESTATES Caveats by natural objects of the decedent s bounty -- 3 years from probate Contracts to sell signed by decedent prior to death -- G.S. 28A-17-9 Judgment and tax liens of devisees/intestate heirs attach to their undivided interest -- Washburn

31 DECEDENT S ESTATES Combined Petition for Possession, Custody and Control and Petition to Sell to Make Assets to Pay Debts Affidavits of disinterested parties with history of family and relationships for old estates or estates not administered

32 Open Estate Affidavit & Indemnity Agreement or Intestate Heirs Affidavit

33 TRUSTS Current trustees Purpose of trust -- still ongoing Passive vs. active trust (Statute of Uses, G.S. 41-7) Special case: trustee and beneficiary of deed of trust are same Trust agreement -- for authority to deal with real property G.S or G.S. 36A-136(8) (requires Clerk s order)

34 TRUSTS (cont d) NO self-dealing unless specifically authorized in trust -- incl. mortgage on trust property for individual debt -- 36A-64 et seq. Judgments against beneficiaries of trust can attach to trust property if supplemental proceedings (G.S (4))!

35 NAKED or BLIND TRUSTS -- G.S Grant to trustee only No beneficiary or specific trust identified No record instrument stating powers full power to convey or otherwise dispose of the real estate NOTE: If passive trust, converts to fee so spouse s and creditors potential interests must be addressed

36 POWERS OF ATTORNEY & ATTORNEYS-IN-FACT Principal Alive and Well (Exhibit A) Many lenders will not approve closing Why can t principal attend in person? Incompetent principal -- durable POA POA must be recorded in county registry in which property located at or prior to closing

37 POWERS OF ATTORNEY -- Powers of the AIF POA must give specific authority to deal with real estate No gifts unless specifically provided in POA or broad POA powers and gift to charitable organization continuing a personal history of such gifts No gifts or transactions to AIF unless specifically authorized in POA (incl. mortgaging property for loan to AIF)

38 POWERS OF ATTORNEY Powers of AIF Does not give AIF the authority to act for the Principal in the Principal s fiduciary capacity -- such as where principal is officer of corporation or is AIF for a third party Recorded termination required Statutory notary forms Military POA s and acknowledgments 10 U.S.C. 1044a

39 GUARDIANSHIPS Special Proceeding -- G.S. 35A-1301 et seq Superior Court Judge approval for minors Adult spouse of minor -- joinder or waiver by minor spouse of contingent statutory marital rights only Competent spouse convey separate property with joinder of guardian of incompetent spouse waiving marital rights only

40 MINORS (cont d) Contracts voidable until 3 years after later -- become competent or reach age 18 Uniform Custodial Trust Act (Chapter 33B) under $100,000 specific conveyance to the custodian Uniform Transfers to Minors Act (Chapter 33A if under $10,000 specific conveyance to trustee

41 BUSINESS LAW

42 PARTIES Identify Current legal names Record names Indexing Joinder of others Competency Capacity Approvals Creditors (incl. IRS) Potential claims of others (AIF, fiduciary, principal, offers, SH s)

43 Corps, LLC s, LP s Notary Public Standards Minimum Standards for Indexing Real Property Instruments UCC s

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48 Indexing G.S , G.S & G.S (b) and (b1). Legible signatures Plus initials in typed names Plus typed name (if at variance with signature) DOT - grantor & trustee only Partnership & partners

49 G.S (h) No instrument shall be deemed registered until it has been indexed as provided in this section.

50 OTHER USEFUL WEB SITES statelibrary.dcr.state.nc.us/ncslho me.htm

51 ENTITIES ALWAYS review the organizational documents for authority Articles for CORP, LLC, LP must be filed with Secretary of State (or equivalent) of their home state Annual Reports current officers/managers -- legal reliance current address good standing

52 ENTITIES (cont d) Name changes, mergers must be recorded with Registries where property located Self-Dealing is BAD! Property titled in the entity is not subject to claims of creditors or spouses of individual owners (though the individual s stock or partnership interest may be)

53 ENTITIES Dissolutions Title remains vested in entity For current transaction, either: Deeds must be consistent with winding up OR Entity must bring reports, fees, taxes current

54 CORPORATIONS Articles of Sec/State Mortgage or sale in ordinary course of business Board without shareholder approval Sale otherwise than in the usual and regular course of business Shareholder approval based on bylaws

55 CORPORATIONS (cont d) Acknowledgments - G.S , and Merger or name change -- Register of Deeds Secretary of State

56 LLC s (Limited Liability Companies) Arts of Org w/ Sec/State Managers (which may include officers or directions, depending on the Operating Agreement) Annual Report -- legal reliance on authority Act apparently for carrying on in the usual way the business of the LLC by a single manager

57 LLC s (cont d) [s]ell, transfer, or otherwise dispose of all or substantially all of the assets of the limited liability company prior to the dissolution of the limited liability company, -- unanimous vote of managers Merger or name change -- Register of Deeds Secretary of State

58 GENERAL PARTNERSHIP Partnership name vs. in names of individuals Assumed Name Certificate G.S Not apparently for the carrying on in the usual way of the business of the partnership requires joinder of all general partners & 59-40

59 LIMITED PARTNERSHIP Cert of LP w/ Sec/State Limited partnership in name Merger or name change -- Register of Deeds Secretary of State Not apparently for the carrying on in the usual way of the business of the partnership requires joinder of all general partners (a)

60 BUSINESS TRUSTS G.S et seq. Memorandum of Trust required G.S Trustees sign conveyances if title in trustees names Officers sign conveyances if title in common name of Business Trust

61 HYPOTHECATED SECURITY: Pledging property of one for the debt of another Spouse Family member Related or wholly-owned business

62 HYPOTHECATED SECURITY (cont d) 1. Is Note properly identified? Enderle 2. Consideration from debtor to owner? Are unsecured creditors of owner prejudiced?

63 THE WHOLE PICTURE Business package, not just real estate Personal property & fixtures Leases, franchises and other business relationships Conveyance or mortgage of entity ownership: Mezzanine financing

64 Questions?

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