NORTH CAROLINA REAL PROPERTY DISTINCTIONS PROFESSOR JOSEPH BLOCHER DUKE LAW SCHOOL

Transcription

1 NORTH CAROLINA REAL PROPERTY DISTINCTIONS PROFESSOR JOSEPH BLOCHER DUKE LAW SCHOOL CHAPTER 1: OWNERSHIP A. Present Estates 1. Fee Simple Abslute An interest f indefinite duratin 2. Defeasible Fees a. Fee simple determinable Limited by specific duratinal language such as: While During Always has an accmpanying pssibility f NC: It is nt enugh t just say that the land is suppsed t be used fr particular purpses, but must use the specific phrases that indicate duratin. Example 1: Prfessr cnveys Blch Acre t Jamie, "s lng as the prperty is used as a schl." This cnveyance creates a fee simple determinable. Example 2: Prfessr cnveys Blch Acre t Jamie, "fr use as a schl." This cnveyance des nt create a fee simple determinable. b. Fee simple subject t cnditin subsequent Always has an accmpanying Nt autmatic NC: Can be transferred Pssibilities f reverter, rights f entry, and executry interests are all future interests. In NC, if any f them depends n an event affecting the use f land, it must vest within 60 years. Example 3: Prfessr cnveys Blch Acre t Aarn, prviding that Aarn build a bar called Bar Review. The requirement t build Bar Review impacts the future f the land and must ccur within 60 years. Example 4: Prfessr cnveys Blch Acre t Aarn, n the cnditin that Aarn buys a rund fr the patrns f a bar dwn the street. The cnditin t

2 buy a rund des nt impact the future f the land, and therefre des nt need t be accmplished within 60 years. In additin, executry interests, but nt pssibilities f reverter, r rights f entry, are subject t the USRAP. 3. Life Estates Can cmplicate future estates Example 5: Mlly has life estate in her family's huse. Wally has a future interest in the family hme. Mlly wants t burn dwn the huse; Wally will likely bject because it affects his future interest in the prperty. 4. Dctrine f Waste The type f future estate and the type f waste determine whether and hw the dctrine can be used. In Nrth Carlina: A persn hlding a remainder r reversinary interest can btain Evictin If damages are assessed and nt paid, they can be tripled and pssessin granted as well. A persn hlding a cntingent remainder may be able t btain an injunctin. NC: A life tenant whse failure t results in the prperty being sld is liable t the hlder f a remainder r reversinary interest fr any damages suffered. If the remainderman pays taxes, the remainderman can recver the taxes frm the life tenant. If prperty held in life tenancy is purchased at a sale, the future interest in the prperty is nt eliminated, s lng as the hlder f the future interest pays her share f the purchase price within B. Future Interests 1. Remedies The Rule in Shelly's Case and Dctrine f Wrthier Title are traditinal rules that prevent r limit the creatin f cntingent remainders in the heirs f the grantee r grantr Themis Bar Review, LLC NC Real Prperty Distinctins

3 Ablished in Nrth Carlina. 2. Rule Against Perpetuities Nrth Carlina has adpted the Unifrm Statutry Rule Against Perpetuities An interest fails the rule if it: 1. Fails the traditinal rule; and 2. Des nt vest r terminate within 90 years f creatin. This gives the interest a secnd chance if it fails the traditinal rule. Des nt apply t: Charity-t-charity transfers; and Certain ther interests that have their wn time restrictins: 1. Reversinary interests (60 years) 2. tied t use f land (60 years) 3. Optins in grss and rights f first refusal (30 years) 4. Leases cmmencing in future (30 years) 5. Nnvested easements in grss (30 years) Trusts created r administered in Nrth Carlina are exempt frm the USRAP Except which may nt suspend the pwer f alienatin f trust prperty fr a perid f mre than a life (r lives) in being plus 21 years. C. Cncurrent Estates 1. Tenancy in Cmmn Nrth Carlina fllws the majrity rules. 2. Jint Tenancy Has fur unities: pssessin, interest, time, and title In Nrth Carlina, a jint tenancy can exist even if the jint tenants have unequal interests, if that is specified in the cnveyance. Can be severed by sale by ne party Example 6: Ry and Mike wn land in jint tenancy. Ry sells his interest in the land t Mark, severing and destrying the jint tenancy. Mark and Mike are tenants in cmmn. Example 7: Instead f selling, Ry gets a mrtgage. This des nt sever the jint tenancy unless a cntrary interest is expressed. NC Real Prperty Distinctins 2016 Themis Bar Review, LLC 3

4 The granting f a mrtgage t a jint tenant des nt the jint tenancy, unless a cntrary interest is expressed, even thugh NC is a title thery state. Example 8: Instead f selling, Ry kills Mike. Nrth Carlina law is structured s that a jint tenant des nt have the right f survivrship by killing anther jint tenant. The law treats the slayer as thugh he died just befre the c-tenant. The victim s estate immediately gets the victim s share. Editr's Nte 1: The lecturer misstates the rule regarding the slayer s share. The victim s share, nt the slayer s, passes immediately t the victim s estate. The slayer s share is held by the slayer during the slayer s lifetime, and then passes t the decedent s estate upn the slayer s death. If the slayer and victim are tenants by the entirety (e.g., married), the victim s estate immediately receives ne half f the prperty, and then gets slayer s share when the slayer dies. If three r mre persns, including the slayer and the victim, hld prperty with right f survivrship as the victim s share is cnverted t a and passes t his estate. The remaining c-tenants, including the slayer, cntinue t hld their shares with rights f survivrship. If the slayer becmes the final survivr, the slayer s share passes t the upn the slayer s death. In n case des the slayer get t benefit frm the slaying. 3. Tenancy by the Entirety a. Creatin and Operatin A jint tenancy, with a right f survivrship, held by a married cuple A fifth unity the unity f persn A cnveyance t a married cuple is presumed t create a tenancy by the entirety. A tenancy by the entirety can be created in Nrth Carlina using a straw cnveyance t satisfy the unities f and A cnveyance t a married cuple creates a presumptin f tenancy by the entirety A spuse that wns prperty in her name can cnvey the prperty directly t herself and her spuse withut the use f a third party. Such a cnveyance is presumed t create a and the dnee spuse need nt jin fr it t be effective Themis Bar Review, LLC NC Real Prperty Distinctins

5 If land is cnveyed t a married cuple and anther party, the married cuple is treated as a fr dividing shares. Example 9: Chris and Kat are married and have a daughter, Daisy. Prfessr cnveys land t Chris, Kat, and Daisy: "t Chris and Kat t be held as a tenancy by the entirety, and t Daisy as a jint tenant." Chris and Kat wn ne-half interest in the prperty, and Daisy wns the ther half-interest. A creditr lien btained against ne spuse des nt attach t prperty held in tenancy by the entirety. Except a federal tax lien One spuse cannt encumber r transfer the prperty held in tenancy by the entirety thrugh a mrtgage, r lease. Except a A tenancy by the entirety can be terminated by death f ne spuse r abslute divrce, but nt by divrce frm bed and bard. Tenancy by the entirety usually nly cvers real prperty. But if real prperty is invluntarily cnverted t persnal prperty, fr example by cndemnatin, the prceeds can be held in a tenancy by the entirety. b. Rights and Obligatins Partitin Nrth Carlina favrs partitin in kind ver partitin by sale. Curts prefer t split land int separate parts, rather than selling the land and splitting the mney. T btain a partitin by sale, a persn must shw by a that a partitin in kind wuld cause substantial injury t interested persns. D. Special Real Prperty Issues NC fair husing law nly exempts wners wh persnally lease prperty (mre stringent than federal Fair Husing Act) NC Real Prperty Distinctins 2016 Themis Bar Review, LLC 5

6 CHAPTER 2: LANDLORD AND TENANT A. Types f Tenancies Tenancy fr years Peridic tenancy Tenancy at will B. Creatin In Nrth Carlina, all leases exceeding three years (lnger than the typical ne year) and any lease fr purpses f are subject t the Statute f Frauds. The agreement must be: In writing; and Signed by the relevant party (i.e., against whm it is t be enfrced, such as the landlrd). The writing must include: Party s names Descriptin f the prperty Term f the lease Rent r ther cnsideratin When a tenant takes pssessin f the premises under a lease purprting t create a but vilates the Statute f Frauds: It is invalid If the landlrd accepts payment f the rent, a peridic tenancy is created and the perid is determined by the interval between C. Terminatin A tenancy fr years autmatically ends when the term des. Smetimes the parties prvide fr an ptin t renew. If the tenant stays in pssessin and pays the rent specified in the ptin, it s evidence f the tenant s intent t exercise the ptin. If the new rent is than the riginal rent and the landlrd accepts it, then a new tenancy fr years is created. If the tenant cntinues t pay the riginal rent and des nt give ntice f intent t exercise the ptin, then the landlrd s acceptance nly creates a tenancy. A lease prvisin prviding fr perpetual renewals is nt subject t RAP. Hwever, the law disfavrs this- it must be created using unequivcal language. In Nrth Carlina, even a lease that is required t be in writing may be rescinded by agreement f bth parties Themis Bar Review, LLC NC Real Prperty Distinctins

7 T terminate a peridic tenancy, ral r written ntice must be given, the time f which is set by the length f the perid. Fr year-t-year tenancies: ne mnth Fr mnth-t-mnth tenancies: seven days Fr week-t-week tenancies: tw days Fr a manufactured hme: 60 days Nrth Carlina fllws the majrity rule that a tenancy at will can be terminated by either the r the withut advance ntice. D. Duties f Tenant 1. Landlrd s Remedies fr Tenant s Breach a. Failure t pay rent Unless therwise agreed, a f the lease is implied if a tenant fails t pay 10 days after the landlrd has demanded all past due rent. But tenant can stp a prceeding t recver pssessin prir t judgment by paying the rent and landlrd s csts. b. Abandnment A landlrd must mitigate damages frm a tenant s abandnment f a lease. Mitigatin duty can be waived fr cmmercial leases. c. Hldver Tenant If Tenant stays in pssessin after expiratin f lease and landlrd accepts rent: If the riginal term was a year r mre, a rebuttable presumptin is created that the new tenancy is fr. If the riginal term was less than a year, then the new term is set by the interval between rental payments. If Tenant stays in pssessin after expiratin f lease (hldver tenant) and the landlrd des nt accept rent: Landlrd can use summary ejectment prceedings. Streamlined prcedure where a curt clerk issues a summns requiring the tenant t appear within seven days. Remedy is limited t ejectment, and damages f nt mre than Tenant can appeal t district curt after paying the clerk any past due rent. NC Real Prperty Distinctins 2016 Themis Bar Review, LLC 7

8 E. Duties f Landlrd 1. Warranty f Habitability The Residential Rental Agreement Act (RRAA) gverns rental agreements in Nrth Carlina Tenant can enfrce the RRAA thrugh civil actin fr breach f warranty r negligence. Remedies available t tenants include: Rent abatement up t amunt actually paid Special and cnsequential damages if landlrd s breach cnstitutes r is accmpanied by trtius cnduct Tenant can seek damages even after withhlding rent, but can t withhld rent until a curt says s. The RRAA applies t residential rental agreements, but nt t: Dwellings prvided free f charge; Vacatin rentals (cvered by VRA); r Transient ccupancy in a htel, mtel, r similar ldging. Lng-term ccupancy may be an exceptin. The Vacatin Rental Act impses rules n the rental f vacatin places fr fewer than 90 days. The VRA requires that the vacatin rental agreement be in writing and accepted by the tenant by: Signing the agreement; Paying mney t the landlrd r brker after receiving a cpy f the agreement; r after receiving a cpy f the agreement. Differences frm RRAA: Landlrd must give tenant fur hurs' ntice t quit premises Ntice can be ral Evictin prceedings must be held between 12 and 48 hurs after ntice f filing f prceeding Emergency evacuatin frm prperty Landlrd des nt have t refund rent if ffered insurance 2. Cvenant f Quiet Enjyment Landlrd cannt evict in retaliatin fr a prtected event (e.g., reprting a cde vilatin). That s what is knwn as retaliatry evictin, and a tenant can raise it as a defense, if ne r Themis Bar Review, LLC NC Real Prperty Distinctins

9 mre f the fllwing happened within f the attempted summary ejectin: Gd faith cmplaint r request fr repairs regarding an RRAA vilatin by the landlrd Gd faith cmplaint t a gvernment agency abut landlrd vilatin f a relevant regulatin Issuance f a frmal cmplaint t the landlrd by a gvernment agency Gd faith attempt t assert rights granted by the lease r by law Gd faith attempt t becme invlved with a tenants rights rganizatin Any waiver f this defense by a tenant r a member f her husehld is. Landlrd can argue: Tenant is being evicted fr failure t pay rent r fr breach f lease. Tenant has held ver after lease ended. Tenant engaged in willful r negligent cnduct. Cmpliance with RRAA might require displacing the tenant's husehld. Landlrd is acting in gd faith and delivered ntice f evictin befre ccurrence f the prtected activity. Landlrd is seeking t use unit as wn abde r make that will take unit ff market fr at least six mnths. 3. Trt Liabilities Tenant can sue fr. Tenant can als sue fr unfair r deceptive practices if: The residential premises were Landlrd knew; Landlrd failed t crrect the defects; and Landlrd cntinued t demand payments. F. Assignment and Subletting Unless therwise agreed, a lease can be assigned r sublet. Statute f Frauds applies Sublessee cannt exercise ptin t renew. Nrth Carlina des nt require attrnment tenant recgnitin f new landlrd Landlrd can deny subletting based n cnsideratins, such as persnal taste and cnvenience. If landlrd des cnsent, she can still deny subsequent assignment NC Real Prperty Distinctins 2016 Themis Bar Review, LLC 9

10 CHAPTER 3: THE LAND SALES CONTRACT, TITLES A. Frmatin 1. Statute f Frauds A land sale cntract must: Be in writing Be signed by the Cntain all f the essential terms If the buyer, rather than the seller, is seeking t enfrce the cntract, then the price need nt be in writing, and can be established by parl evidence. is presumed. If the writings indicate that the sale is n credit, failure t state the terms can be fatal t the sale. The signature can be by an The basis f that authrity can be established using parl evidence. 2. Exceptins t the Statute f Frauds Nrth Carlina des nt have an exemptin fr part perfrmance. Statute f Frauds applies even if parties have perfrmed part f the cntract. Hwever a party may be estpped frm asserting the Statute f Frauds as a defense if that party has under the cntract. Example 10: Nicle has accepted mney frm Steve fr a land transfer, withut a written cntract. She cannt assert the Statute f Frauds as a reasn t nt cnvey the land t Steve. B. Perfrmance 1. Implied Cvenant f Marketable Title Under Nrth Carlina s Marketable Title Recrding Act if a persn can shw a chain f recrd title fr 30 years, all cnflicting claims based n title transactins prir t that perid are extinguished. There are exceptins fr deeds f trust, and cvenants restricting prperty t residential use nly. 2. Implied Warranty f Fitness r Suitability Des nt extend t defects f which the purchaser had actual ntice r that are, r shuld be, visible t a n inspectin f the dwelling. The standard is whether there is a failure t meet the prevailing standard f wrkmanlike quality Themis Bar Review, LLC NC Real Prperty Distinctins

11 In Nrth Carlina, applies t the sale f dwellings The test fr determining whether a dwelling has been recently cnstructed is ne f reasnableness, s there is n bright line rule. Sme factrs cnsidered are: The age f the building The use t which the building has been put The maintenance f the building The nature f the The expectatins f the parties In Nrth Carlina (as in mst states) the warranty can nly be waived by clear, unambiguus language. 3. Duty t Disclse Defects (All Hmes) a. Seller f Residential Prperty A seller f residential real prperty cnsisting f n mre than fur units must disclse certain characteristics and cnditins f which that wner has actual knwledge. Water supply Sewage Structural cmpnents (rf, chimney, etc.) Termite infestatin Restrictive cvenants Disclse must be prir t ptin, ffer t sell, r exchange. If late, purchaser can cancel within three days. N duty t disclse (but cannt lie): If the previus ccupant died r had a serius illness in the prperty; r If a persn cnvicted f a crime fr which registratin is required ccupies, ccupied, r resides near the prperty. C. Equitable Cnversatin The Unifrm Vendr and Purchaser Risk Act Keeps the risk f lss with the seller while a sale is pending, until the buyer takes pssessin r title is transferred Applies when any part f the prperty is D. Optins and Rights f First Refusal If a lease with ptin t buy cvers prperty that will be buyer s primary residence and includes ne and fur units, special rules apply akin t thse gverning installment land cntract. NC Real Prperty Distinctins 2016 Themis Bar Review, LLC 11

12 An ptin in grss r a preemptive right must be exercised within 30 years f creatin r else it becmes invalid. Optins r rights immune t this limitatin are thse: Fr, gas, and minerals Created prir t Oct. 1, 1995 Held by lessee E. Titles 1. Adverse Pssessin a. Limitatins n State Land Nrth Carlina allws adverse pssessin claims t run against the state, except fr n: Public rads Streets Lanes Alleys Squares Public ways f any kind Public trust rights t use and access the state s and b. Cntinuus Clr f title and state wnership dictates the time perid. Clr f title ccurs with a writing that prfesses t transfer land but is defective. The required perids fr adverse pssessin are: Fr state-wned land, under clr f title: 21 years Fr state-wned land, withut clr f title: Fr nn-state-wned land, under clr f title: 7 years Fr nn-state-wned land, withut clr f title: T qualify as clr f title, a writing must cntain a legally adequate descriptin f the prperty, and the adverse pssessr must enter in Under the betterment statute, a gd-faith pssessr wh enters under clr f title but fails t establish adverse pssessin may nnetheless be entitled t recver value f made t the prperty. Example 11: Michelle creates a beautiful sculpture n land that actually belngs t her neighbr. The errr is discvered after five years. Under the betterment statute, Michelle may be able t recver sme f the cst f this "betterment" f the neighbr's land Themis Bar Review, LLC NC Real Prperty Distinctins

13 In Nrth Carlina, recgnized disabilities fr adverse pssessin purpses are: Infancy (under 18 years) Incmpetency Imprisnment is nt a recgnized disability. Once a disability is remved, a persn has three years t bring an c. Exclusive In Nrth Carlina, a c-tenant cannt adversely pssess prperty withut uster, which can be either actual r cnstructive. uster means physically blcking the ther tenant changing lcks, etc. Cnstructive uster means pssessin fr 20 years withut a claim by the ther tenant (such as demand fr rents, prfits, r pssessin). Nrth Carlina strngly disfavrs claims between parents and children. A parent r child cannt adverse pssess prperty against the ther withut a clear, definite, and unequivcal assertin f exclusive wnership. d. Scpe f Pssessin 1) Cnstructive Adverse Pssessin If a persn claims under clr f title but nly pssesses a reasnable prtin f the prperty described, adverse pssessin may give them title t the whle prperty. Example 12: Prfessr has a faulty deed that cnveys a ten-acre lt. Prfessr pssesses nly five acres f the ten. Cnstructive adverse pssessin will give Prfessr all ten acres. When tw peple claim t cnstructively adversely pssess the same piece f prperty, the disputed area is knwn as the lappage. In that situatin, the fllwing rules apply: If neither party has ver the lappage, the party with the better title gets it. If ne claimant is in actual pssessin f sme r all f the lappage, he gets it. If bth claimants are in actual pssessin f sme f the lappage, the claimant with the superir title gets all f the lappage nt pssessed by the ther. NC Real Prperty Distinctins 2016 Themis Bar Review, LLC 13

14 Example 13: Nick and Jessica bth received faulty titles t the same ten-acre piece f land. Jessica's title is better than Nick s. Neither Nick nr Jessica have ccupied any part f the prperty. Jessica gets all f the prperty. Example 14: Nick and Jessica bth received faulty titles t the same ten-acre piece f land. Jessica's title is better than Nicks. Nick has ccupied tw acres f the ten, but Jessica has nt ccupied any f it. Nick gets all f the prperty. Example 15: Nick and Jessica bth received faulty titles t the same ten-acre piece f land. Jessica's title is better than Nicks. Nick has ccupied tw acres f the ten, but Jessica has ccupied a different tw acres. Nick will get the tw acres that he pssesses, but Jessica will get the remaining eight acres. 2. Delivery and Recrding f Deed a. Intent t Transfer Nrth Carlina law requires that the grantr part with pssessin f the fr a transfer f title t ccur. Parl evidence may be used t establish that an apparently abslute deed is actually subject t a cnditin. b. Deed Parl evidence can be intrduced t shw that a deed is latently, but nt patently, ambiguus. A deed des nt have t be witnessed r acknwledged t be valid, but if it s nt, then the fact that it is recrded will nt. c. Recrding Act A recrded deed will nt give ntice if the deed is nt witnessed r acknwledged. A gift f real prperty must be recrded within If nt recrded, the deed is vid and reverts t the grantr. The gift is cnsidered cmplete when the deed is executed and delivered. Leases f land fr less than d nt need t be recrded. Recrding the lease prtects against a subsequent ral lease by giving a superir claim t the wner f the recrded lease. Timber n mrtgaged land: if a mrtgage is prperly recrded, then the mrtgagee gets pririty ver a subsequent purchaser f the timber n the land, regardless f wh severed the timber. An instrument must have an acknwledgement r attestatin t be recrded Themis Bar Review, LLC NC Real Prperty Distinctins

15 Acknwledgement: frmal declaratin befre an authrized public fficial Attestatin: a acting as a witness If it includes these, but is faulty, the instrument des nt give ntice. Nrth Carlina has a race statute. The first recrder wins, whether r nt they have knwledge f any prir cnflicting interest. Only cvers grantees wh have fr an interest in real prperty. Paid value includes the discharge f a debt. Mrtagee is cnsidered t be legal wner, but mrtgagr gets pssessin until default An imprperly indexed instrument gives ntice if it is sufficient t put a careful and prudent examiner n ntice. 3. Chain-f-Title Prblems a. Estppel by Deed Example 16: Slick Nick purprts t cnvey land t Jessica with a standard deed. Jessica pays Slick Nick an apprpriate price. But Slick Nick des nt have title t the land he is cnveying. He later gains title t the land, but refuses t recgnize Jessica's claim. Estppel by deed autmatically transfers the title t Jessica. Recgnized in Nrth Carlina, unless the cnveyance was by quitclaim deed r nt made fr valuable cnsideratin. A general warranty deed cntains three cvenants, nne f which run with the land. 4. Restraints n Alienatin Nrth Carlina s hmestead exemptin allws hmewners t exempt up t $ f the value f real prperty that the debtr r a dependent uses as a residence, fr as lng they cntinue t d s. This exemptin will nt prtect against all creditrs r debts, thugh: Thse specified therwise in federal law Taxes r bnds Liens held by labrers r mechanics fr wrk dne n the prperty Cntractual bligatins fr purchase f prperty Statutry liens n that particular prperty Child supprt, alimny, r prperty distributin in divrce Civil rders t pay criminal restitutin NC Real Prperty Distinctins 2016 Themis Bar Review, LLC 15

16 CHAPTER 4: MORTGAGES AND SECURITY INTERESTS A. Mrtgages Nrth Carlina fllws a mdified title thery (minrity rule) The mrtgagee (lender) is the legal wner f the mrtgaged prperty, but the mrtgagr (brrwer) has a right t pssess the prperty unless and until he B. Mrtgage Alternatives In Nrth Carlina, mst security arrangements are dne with a. The brrwer gives the title t a third party trustee (such as the bank's lawyer) as security fr the payment fr the lan. The trustee will return it t the brrwer when the The trustee will sell it fr the bank if the debt is nt paid. Can als pursue an installment land cntract, under which the seller keeps title until buyer makes final payment. Buyer has n right t pssessin unless parties agree therwise. If buyer is in pssessin and breaches, can be remved thrugh a judicial freclsure sale, and may face damages. Seller can sue fr damages, specific perfrmance, rescind the cntract, sue fr quiet title If the seller regains pssessin, he is liable fr rents cllected if he seeks t freclse Buyer has a right f redemptin, which can t be waived prir t default. If an installment land cntract is fr the buyer s residence, terms must include parties, prperty descriptin, price, interest rate, and mre, and must be recrded by the seller within five business days. Buyer can cancel the cntract within three days f the later f the executin r delivery f cntract, and seek return payments f made t seller (minus fair market value f prperty and any damages t seller) Can nly be frfeited if the buyer breached an express bligatin and the cntract prvides that such breach is cause fr frfeiture. T discver a disguised mrtgage, curts lk fr: Cntinued existence f a debtr-creditr relatinship Grantr s distress at time f sale Cntinued f prperty by grantr (brrwer) Whether repurchase price is equivalent t bligatin f buyer, rather than t fair market value Themis Bar Review, LLC NC Real Prperty Distinctins

17 C. Transfer 1. By the mrtgagr In Nrth Carlina, the lender s release r impairment discharges the brrwer's liability BUT nly t the extent f the value f the prperty released, based n the prperty's value either at time f release r at time f the actin n the bligatin is cmmenced, whichever is higher. If brrwer wants t transfer prperty t smene else, the bank can demand the whle bligatin be paid. Unlike federal law, Nrth Carlina law enfrces due-n-sale clauses even if the mrtgaged prperty is. D. Pre-Freclsure Rights and Duties A mrtgagr must nt cmmit waste. Waste includes the nnpayment f real prperty taxes. If the mrtgagee pays the real prperty taxes, it btains a high-pririty lien n the prperty. A mrtgagr (brrwer) in pssessin is entitled t and prfits, even if in default. A mrtgagee (bank) in pssessin may apply any rents and prfits tward the mrtgage bligatin. E. Freclsure 1. Freclsure Methds Mrtgagee must pursue freclsure sale within 10 years upn taking pssessin after default. a. Judicially Supervised Sales A judicial freclsure is als knwn as a freclsure by The curt appints smene t auctin the prperty, such as the sheriff. Ntice must include: Date, time, and place f sale Prperty descriptin Terms f sale The ntice must be published in a lcal paper at least nce a week fr tw cnsecutive weeks, with final date at least 10 days befre sale. Sale must generally be between 10:00 and 4:00, usually at a curthuse. Purpse f ntice is t ensure cmpetitive bids Within after the sale, a reprt must be filed with the clerk f curt. NC Real Prperty Distinctins 2016 Themis Bar Review, LLC 17

18 Within 10 days f the filed reprt, a persn can put in an upset bid. An upset bid is at least r 5% mre than the current bid, whichever is greater. Upset bidder must pst that amunt as a bnd. The upset bid ges thrugh the same prcess. This cntinues until 10 days elapse after the last upset bid. The sale becmes final when it is r cnfirmed by the clerk f curt in the case f a sheriff-cnducted sale. b. Privately Supervised Sales A privately supervised sale is als knwn as a pwer f sale freclsure. Usually faster and cheaper than judicially supervised sales Ntice f the pre-sale hearing must be served n each required party at least 10 days prir t the hearing. If publicatin by ntice is permitted, it must be psted n the prperty at least prir t the hearing. Required parties include anyne that wes mney n the prperty debt and any wner f recrd. If a required persn des nt receive adequate ntice, they cannt be pursued in a pst-sale actin fr If the prperty is a principal residence, the clerk must als cnfirm: At least 45 days prir t ntice f hearing, written ntice was sent t the mrtgagr (brrwer) f t avid freclsure. The mrtgagee (lender) tried t reslve the matter vluntarily with the debtr. The clerk may delay the sale fr 60 days if such measures have a reasnable likelihd f reslving the delinquency withut freclsure. The clerk must give the mrtgagr permissin t g ahead with the sale if the clerk finds the fllwing six things: 1. Valid debt 2. Default 3. Right t freclse 4. Ntice t thse entitled 5. N bar frm hme lan rules 6. N bar frm service member rule Themis Bar Review, LLC NC Real Prperty Distinctins

19 A mrtgagr can challenge these findings within 10 days by appeal t the judge f the relevant district r superir curt, wh will review the matter de nv. If a mrtgagr (brrwer) has been in active military service, the pre-sale hearing can t happen within 90 days f the end f that service. Anyne with an equitable interest in the prperty can file an actin in Superir Curt t enjin the sale, n the grund that the purchase price is t lw and will result in Nrth Carlina des nt recgnize strict freclsure. 2. Pririty f Interests Must be cnsidered if the sale f the prperty des nt satisfy the lan n the prperty In Nrth Carlina, a n real prperty has a higher pririty than any ther kind f lien. A future advance mrtgage (line f credit) will be given pririty ver subsequent mrtgages, regardless f ntice, s lng as the mrtgage agreement prvides these three things: Prperty secures future advances Maximum principal that may be secured The perid (cannt be mre than 30 years) during which advances can be made Nrth Carlina law permits the mrtgagee (lender) t seek a if the freclsure prceeds dn t cver the bligatin, except: On a purchase mney mrtgage When there is a lack f ntice When the reasnable value exceeds purchase price F. Discharge If nthing is filed ne way r the ther, then the mrtgage autmatically expires 15 years after the stated maturity date r if n date is stated 35 years after it was first recrded. Under Nrth Carlina law, a mrtgagr (brrwer) has a right t prepay withut unless the nte says therwise. A mrtgagee (lender) cannt impse a penalty n lans f $150k r less. Cntrary t majrity practice, under Nrth Carlina law, even if the mrtgagee s and mrtgagr s interests end up held by the same persn, des nt ccur unless the parties intended it t. NC Real Prperty Distinctins 2016 Themis Bar Review, LLC 19

20 CHAPTER 5: DISPUTES ABOUT THE USE OF LAND A. Easements 1. Easement by Necessity and Implicatin May be recgnized even if the persn claiming the easement has a permissive right f way t a public rad, if that right f way is nt legally enfrceable. A cartway easement permits a persn t seek a judicial establishment f a acrss anther persn s land in rder t d things like cut and remve timber, mine minerals, r maintain a cemetery, etc. If the easement is granted, the wner f the burdened estate is entitled t An easement by implicatin created by grant must be reasnably necessary t the dminant land s use and enjyment. An easement by implicatin created by reservatin must be strictly necessary. Nrth Carlina permits an wner t hld an easement in his wn land. 2. Easement by Prescriptin Fur elements in Nrth Carlina: 1. Adverse, hstile, r under claim f right (but presumed t be permissive) 2. (gives ntice t recrd wner) 3. Cntinuus and uninterrupted use fr 20 years 4. Substantial identity f the easement fr 20 years If the persn seeking the prescriptive easement has clr f title, the time perids are reduced t B. Cvenants Running With the Land In Nrth Carlina, the standard fr changed circumstances is extremely high. The change must be such a radical r change r substantial subversin as practically t destry the essential bjects and purpses f the agreement. The change must happen t the restricted area, nt t the surrunding area. Such as a change in C. Gvernment Regulatin f Land 1. Eminent Dmain Recgnized in Nrth Carlina Pwer is held by the state, but it has been shared with: State agencies Themis Bar Review, LLC NC Real Prperty Distinctins

21 Lcal gvernments Private entities with a public purpse (such as and If a whle parcel is taken, just cmpensatin is at the time the judicial prceeding is initiated. If nly part is taken: If a private entity r lcal gvernment is taking, just cmpensatin is the greater f: Fair market value f whle parcel, minus fair market value f prtin nt taken; r Fair market value f If a state agency is taking, just cmpensatin is fair market value f the whle parcel befre taking, minus fair market value f whle parcel after taking, cnsidering any special r general benefit that results. D. Water Rights Navigable waters are subject t the public trust dctrine. Held in trust fr the public and its rights are nt subject t adverse pssessin Surface water drainage is subject t the reasnable use rule. Balancing test that permits a persn t reasnably use her land, even if this f surface water, unless her harmful interference is and causes substantial damage t anther persn E. Mst Ntable Distinctins in Nrth Carlina Nrth Carlina has USRAP, nt the cmmn law Rule Against Perpetuities. Nrth Carlina uses a race recrding act, rather than the mre cmmn ntice and race-ntice varieties. Sme pssibilities f reverter and rights f entry have 60-year duratins. Jint tenants can have unequal interests. Nrth Carlina relies n Unifrm Vendr-Purchaser Act rather than dctrine f equitable cnversin during the executry perid. During the executry perid f a sale, the risk f lss stays with the seller. Statute f Frauds applies nly t leases f mre than three years (typical rule is ne year). Part perfrmance des nt satisfy Statute f Frauds. Unless a lease says therwise, landlrds can deny subleases and assignments based n subjective cnsideratins, nt just cmmercially reasnable nes. [END OF HANDOUT] NC Real Prperty Distinctins 2016 Themis Bar Review, LLC 21

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