2015 Keys from the Castle: Bracing for Impact. Today s Agenda. Chicago Title Continuing Paralegal Education October 2015

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1 2015 Keys from the Castle: Bracing for Impact Chicago Title Continuing Paralegal Education October 2015 Today s Agenda Legislation Claims BREAK TILA-RESPA Integrated Disclosure Mechanics Liens LiensNC & Forms Parties: Entities, Spouses, AIF s & more!

2 NC General Assembly / Legislation ation/legislation.html Landlord/Tenant in Foreclosure on Single Family Residence S.L , HB174 Notice of foreclosure to Tenant Tenant can remain in possession for shorter of lease term or 1 year, unless buyer will occupy as their primary residence, but only if: Tenant not related to defaulted borrower Lease in writing, not terminable at will for FMV rental Landlord/Tenant in Foreclosure on Single Family Residence S.L , HB day notice to Tenant to vacate, if buyer will occupy home OR if Tenant s lease was not written or was terminable at will Tenant can terminate lease if default not cured N/A to option under GS 47G 1(4) N/A if imminently dangerous condition GS 42 42(a)(8) 2

3 Residential Options & Contracts S.L , HB174 Money damages and summary ejectment (by magistrate) allowed on default on residential lease/option GS Ch. 47G Residential contract for deed under GS 47H Subject to GS 47E disclosure Deleted requirement to list deed of trust & liens Not deceptive trade practice Foreclosure Rescue Scam GS & GS S.L , HB174 Mortgage default no longer required Applies to Lease/Option or Contract for Deed not complying with GS 47G or GS 47H Requires appraisal no more than 120 days before transfer be provided to transferor (homeowner) at least 7 days prior to transfer Public Trust Lands S.L , H346 Counties can adopt ordinances and restrictions to maintain public beaches and keep open for public use. Wildlife Resources: comment on permit applications prosecute civil and criminal actions for violations to assure access to public trust lands 3

4 Registers of Deeds: Multiple Party Indexing Fee SL ; SB332 $2.00 per name additional indexing fee, over first 20 distinct parties GS (a) NOTE: This will typically affect large lender POA s, Association Amendments, for example. Register of Deeds UCC Filing fee clarification SL ; SB386 Financing Statement Fees: $38 for first 2 pages $45 for first 10 pages, $2/pg. thereafter Information request $38 N/A to satisfaction of fixture filing or financing statement only in mortgage or deed of trust. (NOTE: Sec of State still has $30 discounted e filing fee.) GS (a)(13) False filing Register of Deeds SL ; SB83 If Register of Deeds suspects false filing against property of public officer, public employee or their immediate family ROD can refuse to file, ROD can instead file a Notice of Denied Lien or Encumbrance Filing, effective when filed Filer can initiate Special Proceeding within 10 days to Superior Court; otherwise null & void Hearing on 5 days notice to interested parties Judge s order relates back to original filing GS (b). 4

5 False filing Clerk SL ; SB83 If Clerk suspects false filing against property of public officer, public employee or their immediate family Clerk can refuse to file, Clerk can instead decide to file only if a judge of the judicial district with subject matter jurisdiction issues order to file Only effective upon docketing by Clerk. GS (c) False filing Court Order Clerk or Register of Deeds SL ; SB83 Upon court order that filing was false, they will enter on the record the following: "THE CLAIM ASSERTED IN THIS DOCUMENT IS FALSE AND IS NOT PROVIDED FOR BY THE GENERAL LAWS OF THIS STATE." Fraudulent Marriage Records SL ; SB311 Document purporting to impact official record of marriage under GS 51 15, Not a marriage license, return or amendment or correction of marriage license Notation: THIS DOCUMENT IS NOT AN OFFICIAL MARRIAGE DOCUMENT 5

6 Builders Inventory Exemption SL , HB 168, SB 321 Residential Real Property Held for sale by builder Intended to be sold as buyer s residence Increase in value from subdivision of, improvements other than buildings, or construction of new SF residence or duplex excluded from property taxation by the builder. Up to 3 years from builder first listing Builder must apply annually. Builders Inventory Exemption SL , HB 168, SB 321 Commercial Real Property Intended to be sold upon improvement Increase in value from subdivision or improvement by builder Excluded from tax value by builder Up to 5 years from first listing Terminates at building permit OR sale Must reapply annually Protect Private Property S.L ; HB405 Liability if intentionally gain access to nonpublic areas and engage in act exceeding their authority, including an act that substantially interferes with the ownership or possession of real property. Equitable relief Compensatory damages Costs & Fees (incl. attorney fees) $5,000/day exemplary damages Joint & several liability GS Ch. 99A, Effec. 1/1/2016 6

7 Condominiums SL ; HB513 Transfer of Declarants rights under GS 47C Consistent with changes to Planned Community Act Mortgage Satisfaction SL ; HB513 Clarifies that satisfaction of deed of trust lien on real property does not automatically mean satisfaction of underlying obligation(s) Zoning no Protest Petitions SL ; HB201 Protest Petition provisions of GS 160A 385 were replaced with Citizen Comments 7

8 Subdivision Ordinances SL ; HB 721 Allows performance guarantees (surety bonds, letter of credit or other equivalent security) of 125% of reasonably estimated cost of completion of required improvement as a precondition for plat approval GS 160A 372 & GS 153A 331 City or County cannot withhold permit on other property Closing Streets & Alleys SL ; HB836 City may reserve improvements or easements in streets closed including utility, drainage, pedestrian, landscaping, conservation or other easement in the Order of Closing. GS 160A 299, Effec. 6/22/15 (Rest of bill involves election reform, limiting city alcoholic beverage referenda & Voter ID laws.) Uniform Fraudulent Transfer / Voidable Transactions Act SL ; SB123 Adopting changes from the Uniform Law Commission and changing the name (above) 8

9 Mecklenburg County 2011 Tax Revaluation curative SL 2015, S159 SL had allowed retroactive revaluations curative would: 1. Allow taxpayers to pay shortages over 36 months 2. For properties sold between 2011 and the post 2013 revaluation: Refund overages paid Waive lien on property for years in prior taxpayer s name (i.e. current owner is a person other than current owner as of January 1 of that year) Estate Planning, Uniform Trust Code & Guardianships S.L ; SB336 Living Probate Will established before death, GS 28A Art. 2B Uniform Powers of Appointment, GS Ch. 31D Blanket exercise clause Gift in default clause Non transferable Presumed unlimited authority Capture doctrine on ineffective appointment Disposition if unappointed Tenancy by Entireties Trust S.L ; SB336 Tenancy by entireties property conveyed to joint trust or equal trusts of the spouses: Held & disposed of per trust Immune from creditors of only one spouse if: H&W remain married & current beneficiaries Real property continues in TBE trust(s) Non creditor spouse is survivor GS , Rev. effec. 8/11/15 9

10 Tidbits NC will tax income for discharge of debt on principal residence SL , 1.3, GS (d) Cities cannot regulate building design elements for 1 to 2 family dwellings exterior materials, color, roof, porch, nonstructural architectural ornamentation window, doors, room layout. SL , SB25 Lenders who e file liens on DMV titles must e file releases within 7 days, starting 7/1/16. SL2015, S370 & SL2015, S119 Still watching. H436: Unauthorized Practice So called LegalZoom bill H870 Manufactured Home Title & Lien cancellation bill S575 NC/SC Boundary H375 & S643 corrective affidavit Responsibility for Paved & Unpaved Roads Study Committee SL , 29.17E & S119, 90.5 TILA-RESPA INTEGRATED DISCLOSURES: Loan Estimate Closing Disclosure 10

11 Resources CFPB website: regulatory-implementation/tilarespa/ ALTA: Resources: TILA- RESPA Integrated Disclosures Resources: NC Chicago Title Legal -- Bulls Bulletins Articles & Forms: Closing New Closing Disclosure cles.asp#category147 Brochures for realtors, lenders & clients Lender letters Videos & power points Charts & Checklists Resources NC Closing Attorney Best Practices Task Force TRID page 11

12 Key Closing Process Changes Loan Estimate (originations beg. 10/3/2015) Within 3 days of application EARLIER collaboration with lenders and realtors EARLIER walk-throughs Portals for entering data Lender & Closing attorney only! When do you use TRID Most consumer mortgages, EXCEPT: Home-equity lines of credit Reverse mortgages Mortgages secured by a mobile home or dwelling not attached to land No-interest second mortgage made for down payment assistance, energy efficiency or foreclosure avoidance Company Platform Website The Portals Real EC Closing Insight Simplifile Collaboration ELynx Expedite DocMagic SmartCLOSE Ellie Mae Encompass BeesPath ClosingBridge Citibank FPSDirect FNC TRIDtracker 12

13 Tolerance/Variance Zero Tolerance (0% bucket) Creditor / mortgage broker charges Affiliates of creditor or mortgage broker Charges for which consumer cannot shop Transfer taxes 10% Tolerance (aggregate) ( On-list 10% bucket) Recording fees Charges non-affiliated provider Charges consumer can shop & chooses from lender list Tolerance/Variance Unrestricted (Off-list: no limit bucket) Owner s title insurance Prepaid interest Property insurance premium Escrow/impound/reserve Consumer shops and chooses their own provider (not on lender s list) In a Nutshell 13

14 Key Changes Closing Disclosure Delivered 3 days before closing 3 things trigger re-disclosure: Change loan type Increase APR over 1/8% Add prepayment penalty Closing Delays for lender approval of other changes Settlement Statement with client signature / approval to disburse Post-closing corrections Closing Disclosure Time Chart 14

15 Calculation and Disclosure of Title Insurance Premiums in Simultaneous Issue Transactions under the TILA RESPA Integrated Disclosure Rule ( Rule ) Effective October 3, 2015 CHICAGO TITLE Know before you close Chicago Title does not guarantee, and assumes no responsibility for, the accuracy, timeliness, correctness, or completeness of the information. Always seek the advice of competent counsel with any questions you may have regarding any legal issue. Know before you close. Loan Estimate ( LE ) Replaces current Good Faith Estimate and initial Truth in Lending for most residential loans Title Insurance and Settlement Charges should be included on page 2 The description of each fee related to title insurance or settlement (escrow) must be preceded by Title and be listed alphabetically The Lender s Title Policy charge must appear under the Loan Costs section The Owner s Title Policy charge must appear under the Other Costs section and include (optional) if paid by the borrower. CHICAGO TITLE Know before you close. 15

16 Closing Disclosure ( CD ) Replaces current HUD 1 Settlement Statement and revised Truth in Lending for most residential loans Title Insurance and Settlement Charges should be included on page 2 The description of each fee related to title insurance or settlement (escrow) must be preceded by Title and list alphabetically The Lender s Title Policy charge must appear under the Loan Costs section The Owner s Title Policy charge must appear under the Other Costs section and include (optional) if designated Borrower Paid. CHICAGO TITLE Know before you close. Disclosure of Lender s and Owner s Title Insurance Charges in Simultaneous Issue Transactions Per the Rule The Rule is very specific on how the charge for the Owner s Title Policy and Lender s Title Policy must be disclosed on the LE and CD in simultaneous issue transactions. (This method of disclosing charges is not optional.) The amount disclosed for the lender s title insurance policy pursuant to (f)(2) or (3) is the amount of the premium without any adjustment that might be made for the simultaneous purchase of an owner s title insurance policy. The owner s title insurance premium is calculated by taking the full owner s title insurance premium, adding the simultaneous issuance premium for the lender s coverage, and then deducting the full premium for lender s coverage. CHICAGO TITLE Know before you close. Reason for the Rule s Method of Disclosure The Rule states that if the buyer is paying for the Owner s Policy, the lender must disclose the charge for the Owner s Policy as optional on the LE. If at closing the buyer purchases an Owner s Policy, the charge must be disclosed as optional on the CD. In most states (by regulation or rate filing) the Owner s Policy is priced as the full priced policy in a simultaneous issue transaction. If an Owner s Policy is not issued, the charge for the Loan Policy will not be discounted. The intended purpose under the Rule for disclosing the charge for the Loan Policy at full rate (not a reduced rate as when simultaneously issued) is to more clearly show a buyer the charge for the Loan Policy he is required to purchase and the incremental additional charge for the Owner s Policy he may elect to purchase. Disclosing in this manner should prevent any tolerance violations if the buyer opts not to purchase the Owner s Policy at closing. CHICAGO TITLE Know before you close. 16

17 Comparison of Disclosures on the LE Under this method of disclosure, if the buyer opts not to purchase the Owner s Policy, the amount disclosed for the Loan Policy accurately represents what is due. Under this method of disclosure, the buyer might incorrectly expect to save $ by not purchasing the Owner s Policy. CHICAGO TITLE Know before you close. The Formula Lender s Title Insurance Full Loan Policy charge as if no Owner s Policy was being simultaneously issued = Loan Policy Charge/Disclosure Amount Will be shown as Title Charges Loan Policy Disclosure Amount on information provided by Chicago Title Owner s Title Insurance Owner s Policy charge (per filed rates) + Charge for Loan Policy simultaneously issued (per filed rates) Full Loan Policy charge as if no Owner s Policy was being simultaneously issued (the Loan Policy Disclosure Amount) = Owner s Policy Charge/Disclosure Amount Will be shown as Title Charges Owner s Policy Disclosure Amount on information provided by Chicago Title CHICAGO TITLE Know before you close. Chicago Title s Invoice and CFPB TRID Disclosures Chicago Title will provide customers with: charges per rates for title insurance in North Carolina filed with the Department of Insurance AND the disclosure amount(s) needed for proper completion of the Loan Estimate and/or Closing Disclosure under the Rule Excerpt from TILA RESPA Integrated Disclosures FAQs on May 26, 2015: The sum of the disclosed amount of owner s and lender s title as disclosed on the TRID forms should equal the sum of any state mandated disclosures. CHICAGO TITLE Know before you close. 17

18 Example Filed Rate Charges Purchase Transaction Owner s Policy/Sales Price $400, Loan Policy/Loan Amount $375, Lender Requesting Closing Services Insurance Lender Requesting ALTA and ALTA 9 06 Endorsements. Title Company provides an invoice showing that a total of $ is due and attributing the bulk of the charges to the Owner s Policy in compliance with rates for title insurance filed with the North Carolina Department of Insurance. CHICAGO TITLE Know before you close. Example TRID Disclosure Amounts Purchase Transaction Owner s Policy/Sales Price $400, Loan Policy/Loan Amount $375, Lender Requesting Closing Services Insurance Lender Requesting ALTA and ALTA 9 06 Endorsements. Title Company provides Title Charges Loan Policy Disclosure Amount = $ And Title Charges Owner s Policy Disclosure Amount = $67.50 that total $ pricing the Loan Policy as if it were the only policy to be issued and attributing the balance of charges due to the Owner s Policy. CHICAGO TITLE Know before you close. Example CD (Page 2) The Title Charges Loan Policy Disclosure Amount should be shown on the CD for the Title Lender s Title Policy. The Title Charges Owner s Policy Disclosure Amount should be shown on the CD for the Title Owner s Title Policy. CHICAGO TITLE Know before you close. 18

19 CD Seller Paying Owner s Policy Charge In a seller pay situation, the bureau indicated that there are at least three ways in which the additional credit between the seller and the consumer may be disclosed on the CD: 1. The remaining credit could be applied to any other title insurance cost, including the lender s title insurance cost. (See (f)&(g)) 2. The remaining credit can be considered to be a general seller credit and disclosed as such in the Summaries of Transactions table on page 3 of the CD. (See (k)(2)(vii)) 3. Use of a credit specifying the remaining amount for the owner s title insurance cost in the Summaries of Transactions table on page 3 of the CD. (See (k)(2)(viii)). This credit could be disclosed as a simultaneous issue credit in the Summaries of Transactions. The bureau stated that any one of these three methods for disclosing the remaining amount of the seller s credit for the owner s title insurance premium is permissible under the final rule. CHICAGO TITLE Know before you close. Owner s Policy Adjustment Amount In addition to providing the Title Charges Owner s Policy Disclosure Amount and the Title Charges Loan Policy Disclosure Amount needed in all transactions covered by the Rule that include the simultaneous issuance of a loan and owner s policy, Chicago Title will provide an Owner s Policy Adjustment Amount that will only be needed in those transactions in which the Seller is paying all or a portion of the charge for the Owner s Policy. The Owner s Policy Adjustment Amount represents the difference between the Title Charges Owner s Policy Disclosure Amount and the filed rate charge for the Owner s Policy. An example of that calculation and one method of its handling on the CD is included on the following slides. CHICAGO TITLE Know before you close. Calculation of Owner s Policy Adjustment Amount The Owner s Policy Adjustment Amount is determined by subtracting the Owner s Policy Disclosure Amount (covered on previous slides and calculated below for comparison purposes) from the Owner s Policy filed rate charge as illustrated below. $ (Owner s Policy charge per filed rates) (Charge for Loan Policy simultaneously issued per filed rates) $ (Total filed rate charge for the Owner s and Loan Policies) (Full Loan Policy charge as if no Owner s Policy simultaneously issued per filed rates) $ Owner s Title Policy Disclosure Amount under the Rule $ (Owner s Policy charge per filed rates) (Owner s Policy Disclosure Amount) $ = Owner s Policy Adjustment Amount In this example, if the Seller is paying the Owner s Policy charge per the filed rates, in addition to the $67.50 shown as due for the Owner s Policy per the Rule, an additional $ is due to equal the filed rate charge. CHICAGO TITLE Know before you close. 19

20 Example CD page 2 Seller Paying Owner s Policy Charge Section B or C, as appropriate, under Borrower Paid for the Lender s Title Policy charge (Loan Policy Disclosure Amount) Section H under Seller Paid for the Owner s Title Policy charge (Owner s Policy Disclosure Amount) CHICAGO TITLE Know before you close. Example CD page 3 Seller Paying Owner s Policy Charge Section L for an increase in the amount due from the seller and a reduction in the amount due from the borrower (Owner s Policy Adjustment Amount) CHICAGO TITLE Know before you close. Closing Disclosure Seller Paying Owner s Policy Charge CFPB-TRID Frequently Asked Questions April 29, 2015 Owner s Title Insurance Q: Does the owner s title insurance premium have to appear on the borrower's side even if the seller is paying? A: No. If the Seller is paying, it will appear in the Seller column. CHICAGO TITLE Know before you close. 20

21 Agent Underwriter Split Disclosure CFPB-TRID Frequently Asked Questions April 29, 2015 Agent/Underwriter Split Q: Where do we show the agent/underwriter split of premium on the new disclosures? A: The agent/underwriter split is not required to be on the Closing Disclosure form. CHICAGO TITLE Know before you close. Owner s Title Insurance Optional?? Owner s Title Insurance Optional?? Owner (and attorney) BEWARE the decision to forego owner s insurance Loan coverage is not Owner s coverage in fact, lender recourse may be to the uninsured owners breach of warranty and attorney s malpractice FIRST!! NO WAY! 21

22 Mechanics Liens: Appointing Lien Agent Searching in LiensNC Forms: Waivers & Subordinations Mechanics Lien Agent Law Effective April 1, 2013 Projects: First contracted after April 1, 2013 Cost $30,000 and over Residential or commercial property NOT renovation to property used by Owner as a residence (no matter price) Whether or not a building permit is needed NOT public projects (not lienable, bonded under Article 3) STEP 1: Appoint Lien Agent Owner (or their Rep) MUST Appoint Lien Agent AND Post at Job Site At time of first contracting (even if they do not yet own the property) 22

23 STEP 2: Notice to Lien Agent Contractor or Subcontractor MAY File Notice To Lien Agent Preserves their ability to enforce lien rights (if any) against Property vis-à-vis purchasers and lenders Does not affect their contract rights (if any) with higher tier contractors, subs or owner Critical Dates First Contracting Lien Agent must be appointed in LiensNC First Furnishing Contractor (date of relation back) Subcontractor (Potential Lien Claimant) Relation back 15 additional days to file Notice in LiensNC Last Furnishing 120 days claim; 180 days civil action STEP 3: Search Search Period Smart Searching Tips (Advanced and Entry #) The Search Process Example Searches 23

24 Search Period FROM: FIRST CONTRACTING Before the survey Before the plat (for developer) Before the architectural drawings (for new condo) Before the purchase (for acquisition/construction loan) THROUGH: LAST 15 DAYS PRIOR TO CLOSING (so search to date of closing & Form 5, 6 & 7 include latest providers) PLC s can file 15 days after first furnishing, -- which may be post-closing if first furnishing is just before closing Remember: Work often starts before they own the property. See Pitt Dev. V. Dalton Moran Shook Search Tips No wild card Start simple and literal DO USE Distinctive words (Owner, street name) Connectors (ALL CAPS) AND, OR, NOT Quotation marks around multiple words that have to appear together precisely DO NOT USE Common words (North or Smith) Abbreviated words or initials Avoid: St or Rd or Dr ) Avoid: D.R. or DR or D R Plurals: Builder vs. Builders Punctuation and spaces (they are ignored in search query) 24

25 Results Appointments only Yes for Related Filings Report Related Filings Report Look at Related Filings Column Available to Print and/or Download Closing Notice Notification Option Print or Download NO DOCUMENTS TO REVIEW! Advanced Search: QUERY 1 25

26 Advanced Search: QUERY 2 QUERY 3 Entry # Search Look at Related Filings Report 26

27 Related Filings Report Date and time stamp included. Analyze Results Owner Contractor Design Professionals Potential Lien Claimants Design Professionals (earlier filings) Closing Attorney, Settlement Agent, Lender Lien Agent Be sure to use the Closing Notice option to stay alerted of future filings on your Appointments! STEP 4: Forms at Closing NCLTA FORMS FOR EVERY OCCASION 27

28 NCLTA Lien Forms Non MLA Forms FORM 1 Lien Waiver no new construction FORM 2 - Construction recently completed FORM 3 Construction in Process or Immediately Contemplated MLA forms FORM 5 Owner Affidavit FORM 6 -- MLA appointed and Construction Recently Completed (WAIVER) FORM 7 MLA appointed and Construction in Process or Immediately Contemplated (SUBORDINATION) Commitment Requirement 28

29 Commitment Requirement: Definitions Non-MLA Projects Owner -- holder of any interest in the Land, including leasehold owner or contract purchaser. Potential Lien Claimant (or PLC - MLA ) Commitment Requirement: Definitions Contractor Any person or entity who has performed or furnished or has contracted to perform or furnish Labor, Services or Materials pursuant to a contract, either expressed or implied, with the Owner of real property for the making of an Improvement thereon. OR who has delivered a claim of lien upon funds to the Owner. Commitment Requirement: No Recent OR Contemplated Construction By this Owner NCLTA FORM 1 (Owner Affidavit) from every seller (on sale) or borrower (on refinance) Have not contracted for recent or contemplated improvements on the Land or for a construction loan BE AWARE!!! If BUYER has contracted for or is contemplating improvements, BUYER must comply with CONSTRUCTION CONTEMPLATED OR IN PROCESS requirements, appointment, posting. 29

30 Commitment Requirement Recently Completed Improvements Non-MLA project: NCLTA FORM 2 (Owner/Contractor Affidavit, Lien Waiver, and Indemnity) from every Owner & PLC MLA project: Receipt of proof satisfactory to the Company that prior to closing or prior to first contracting for construction (whichever occurs first) A Lien Agent was designated on the LiensNC.com website & The Appointment of Lien Agent was posted at the Land NCLTA FORM 5 (Owner Affidavit) from every Owner; AND NCLTA FORM 6 (MLA Lien Waiver) from every PLC-MLA NCLTA Lien Forms: Recently Completed Construction Non MLA: FORM 2 MLA: FORM 5 (Owner) AND FORM 6 (each Potential Lien Claimant ) Commitment Requirement Construction Contemplated or In Process Non-MLA project: NCLTA FORM 3 (Owner/Contractor Affidavit, Indemnity and Lien Subordination) (for lender coverage only) from every Owner and every Potential Lien Claimant MLA project: Receipt of proof satisfactory to the Company that prior to closing or prior to first contracting for construction (whichever occurs first) A Lien Agent was designated on the LiensNC.com website, & The Appointment of Lien Agent was posted at the Land; NCLTA FORM 5 (Owner Affidavit) from every Owner; AND NCLTA FORM 6 (MLA Lien Waiver) or NCLTA FORM 7 (MLA Subordination of Liens) from every PLC 30

31 NCLTA Lien Forms: Construction Contemplated or In Process Non MLA: FORM 3 MLA: FORM 5 (Owner) AND FORM 7 (each Potential Lien Claimants ) Commitment Requirement Construction Contemplated or In Process #1 NOTE: If buyer has contracted for or is contemplating improvements, see NO RECENT IMPROVEMENTS above regarding seller lien affidavits as well. Commitment Requirement Construction Contemplated or In Process #2 NOTE: In all cases in which an MLA was required but not (timely) appointed, prior approval and terms of coverage (if any) by Company underwriting counsel is required. 31

32 Mechanics Liens: Forms From Whom? If No Lien Agent Construction Loan FORM 3 (or 2 if finished) Owner ALL contractors within 120 days Completed Construction FORM 2 Owner ALL contractors within 120 days If Lien Agent Appointed FORM 5 Owner Construction Loan FORM 7 (or 6 if finished) Notice filers First furnishers in last 15 days Completed Construction FORM 6 Notice filers First furnishers in last 15 days People and Entities: Title to Real Property 2 issues (1)Is it the same person? Tomika Investments case (2000) Sue Smith becoming Sue Jones or Sue Smith-Jones (2)Can you find them in the Register of Deeds indexing system? GS GS GS GS GS (b) and (b1) 32

33 COMPETENT GRANTORS Individual (living) Unmarried (including divorced or widowed) Married Separated Minor Incompetent Decedent s Estate through Personal Representative Sole Proprietorship ( dba [doing business as]) Estate of future interest holder (through guardian ad litem) Corporation through its officer(s) Limited Liability Company (LLC) through its member(s)/manager(s) Partnership through its partner(s) General Limited Unincorporated Non-Profit Association Trust or Trustee (Non-Business Trust and Trustee in Deed of Trust/Foreclosure and Trustee in Bankruptcy [not debtor in possession]) through trustee(s) Business Trust through trustee(s) or officer(s) Corps, LLC s, LP s Non-Profits & Charities Notary Public Standards Minimum Standards for Indexing Real Property Instruments UCC s 33

34 Non-Profits By County BANKS & LENDERS NC Commissioner of Banks: HUD FHA Lender List: FDIC (for federal banks): U.S. Small Business Administration: Comptroller of the Currency: 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 NC Certificate of Authority for foreign entity not required just to own and convey property 34

35 ENTITIES (cont d) Annual Reports current officers/managers -- legal reliance current address good standing 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) Self-Dealing is BAD! ENTITIES: Name change, conversion, consolidation or merger (GS 55D-26) Certificate issued by the NC Secretary of State (or entity s resident state authority) MUST: Recite name change, merger, consolidation or conversion Be recorded in Register(s) of Deeds where property lies Former entity = Grantor New entity = Grantee ENTITIES Dissolutions Title remains vested in entity Corp GS (b)(1) LLC GS 57D-6-07(e) Partnership GS 59-65(a)(1) 35

36 ENTITIES Dissolutions For current transaction, either: Deeds must be consistent with winding up (if administrative dissolution) OR Entity must bring reports, fees, taxes current (if revenue suspension or ongoing operations) GS (revenue suspension) (But see Le Oceanfront, Inc. vs. Lands End of Emerald Isle, 768 S.E.2d 15 (2014) Title Insurance on Merger, Dissolution, Name Change or conveyance to affiliate policy Fairway endorsement (coverage despite change of equity owners in Insured) Additional Insured (adding an affiliate such as parent entity) Assignment of Policy (transfer coverage to new affiliated entity on conveyance) 2006 form policy Definition of Insured : Successors by operation of law (heirs, etc.) Successors by dissolution, merger, consolidation, distribution or reorganization or conversion Convey to 100% affiliate Trust of named Insured for estate planning CORPORATIONS (GS Ch. 55) Articles of Secretary of State (resident state) Merger or name change GS 55D-26 Register of Deeds Secretary of State (resident state) 36

37 CORPORATIONS (cont d.) Mortgage, sale in ordinary course of business or sale leaving 25% of assets and 25% income or revenues Board of Directors without shareholder approval GS (Effec ) All or substantially all requires shareholder approval (by majority or as in their Bylaws or Articles) GS Limited Liability Companies (LLC s) GS Ch. 57D Articles of Secretary of State (resident state) Managers (title depends on Operating Agreement) GS 57D-3-20 Merger or name change GS 55D-26 Register of Deeds Secretary of State (resident state) LLC s (cont d) Annual Report = legal reliance GS (d) Subject to Operating Agreement: Ordinary course of business: by a single manager or delegatee GS 57D-3-20 Transfer all or substantially all of the assets of the LLC: unanimous vote of all members GS 57D-3-03(3) 37

38 GENERAL PARTNERSHIP Partnership name OR individuals Association of 2 or more persons to carry on as co-owners a business for profit GS Tenants in Common? Joint tenants with right of survivorship? GS Assumed Name Register of Deeds (proposed changes 2015) GS & GENERAL PARTNERSHIP (cont d) Not apparently for the carrying on in the usual way of the business of the partnership requires joinder of all general partners GS & LIMITED PARTNERSHIP Certificate of Limited Secretary of State (resident state) Merger or name change GS 55D-26 Register of Deeds Secretary of State (resident state) 38

39 LIMITED PARTNERSHIP (cont d) Sale of real property Subject to Partnership Agreement General partners has same powers as general partnership Sale not apparently for the carrying on in the usual way of the business of the partnership requires joinder of all general partners GS (a) GS & NONPROFIT CORPORATION Articles of Secretary of State (resident state) Merger or name change GS 55D-26 Register of Deeds Secretary of State (resident state) NONPROFIT CORPORATION (cont d) Board of Directors unless Articles or Bylaws require otherwise. Sell, lease, exchange or dispose of in usual & regular course of activities Mortgage or encumber, whether or not in usual and regular course of it activities GS 55A

40 NONPROFIT CORPORATION (cont d) By members and directors, subject to Articles and Bylaws Sell, lease, exchange or dispose of other than in usual & regular course of activities GS 55A Charitable or Religious organizations must give notice to NC Attorney General GS 55A-12-02(g) TRUSTS Current trustees Purpose of trust -- still ongoing Passive vs. active trust Statute of Uses, GS 41-7 Special case: trustee and beneficiary of deed of trust are same Trust agreement -- for authority to deal with real property GS 36C-8-816(2), (8), (9), (10) GS 36C and (Certification of Trust) TRUSTS (cont d) NO self-dealing unless specifically authorized in trust, by beneficiaries or by court -- incl. mortgage on trust property for individual debt presumed conflict GS 36C VOIDABLE 40

41 Trusts (cont d) Co-trustees GS 36C Trustee successors GS 36C & -704 Judgments against beneficiaries of trust can attach to trust property if supplemental proceedings GS 1-315(4) NAKED or BLIND TRUSTS -- GS 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 BUSINESS TRUSTS GS et seq. Memorandum of Trust required GS Trustees sign conveyances if title in trustees names Officers sign conveyances if title in common name of Business Trust 41

42 VOLUNTARY ORGANIZATIONS (GS et seq. now repealed) Title can be held by trustees or in common name Charitable, fraternal, religious or social organizations Conveyance must be authorized by resolution of the body duly constituted and held former GS CHURCHES & RELIGIOUS ORGANIZATIONS Entity type & name in which title held Title limitations in vesting instrument Reversions and restrictions CHURCHES & RELIGIOUS ORGANIZATIONS (cont d) Types of organizations : Nonprofit corporation -- GS Chapter 55A Religious Societies, (bishops, ministers, other ecclesiastical officer or Trustees) -- GS Chapter 61 (prior) Voluntary organization -- GS Uniform Unincorporated Nonprofit Association Act (other than trust or LLC) GS Chapter 59B ( Statement of Authority ) 42

43 CHURCHES & RELIGIOUS ORGANIZATIONS (cont d) Local church Organizational documents / requirements Approval by congregation and board Authorized persons Connectional churches Organizational requirements Due authorization and approval Web sites 43

44 INDIVIDUALS Spouse Getting married soon Getting divorced soon Over age 18 Competent Tenancy-by-the-entirety (OR NOT??) Same time & same instrument Convey title during marriage GS No straw man necessary NOT AUTOMATIC with voluntary partitions GS NEW Tenancy by Entireties Trust GS Tenancy-by-the-entirety: Not all-protective anymore Becomes tenancy in common on divorce Federal Tax Liens United States v. Craft RICO (GS 75D-8(a)) Slayer Statute (GS Chapter 31A) 44

45 Same Sex Marital Partners Now legal in all 50 states Title exam indexing: Either partner may take the other partner s last name, hyphenate or keep their maiden name Still some concern whether tenancy-by-entireties because of statutory phrasing: Conveyance to a husband and wife GS Conveyance Between Spouses Valid to vest title only GS Not a waiver of marital rights 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 45

46 Property Settlement Agreements Provide property settlement survives Full disclosure Consideration Not unconscionable Clear and complete waiver language Original or Memorandum recorded in the Registry of county where property located GS , GS 52-10, GS Agreements between Spouses Full disclosure Consideration Not unconscionable Clear and complete waiver language Original or Memorandum recorded in the Registry of county where property located (GS 52-10) Final Divorce Severs the Tenancy-By-Entireties Terminates purely marital interest Equitable Distribution Lis Pendens Marital property may be in only one name GS

47 Court Order - Rule 70 Judgment directs party to convey Party fails to comply Judge may enter judgment actually divesting title of party and vesting it in others ACTUAL CONVEYANCE (not just order to convey) Other Marital Issues Joint Conveyance (to waive marital rights GS 29-30, GS 39-7 Divorce from Bed and Board GS 50-7 Slayer Statute GS Ch. 31A Fee Simple (Absolute) entire interest that can be owned in land potential for infinite duration. unconditional powers to dispose of the entire property during the owner's life, and pass by descent or will to the owner's heirs or devisees upon her death. 47

48 Fee Simple Determinable the interest terminates upon the happening of some stated event the possibility of reverter Common example, conveyance to a church, "for so long as" the property is used for church purposes. If the property stops being used for church purposes, then the fee simple determinable expires and it automatically reverts back to the grantor or her heirs or assigns. Fee Simple Subject to a Condition Subsequent Not automatically expire upon the happening of the specified event Requires the grantor, or her heirs or assigns, to exercise the power of termination their right to reenter Example: conveyance to a church, on condition that" the property is used for church purposes. Tenancy in Common (TIC) Co-ownership between two or more persons or entities, each owning a separate undivided interest in the land and each having a right to occupy the whole in common with the other cotenants. Voluntary partition does not create TBE GS Direct undivided interest in the land, rather than equity interest in the LLC or partnership that owns the land. 48

49 Joint Tenancy with Right of Survivorship (JTWROS) Co-ownership between two or more parties, each owning an undivided interest in the whole, with the right of survivorship. GS 41-2 Life Estate Interest in real property limited by the length of the life of named person(s) the life tenant(s). Upon the death of life tenant(s), the remainder interest passes per the creating document (will or deed). For example: "to Al for life, then to George." Al has right to possess the property until his death. At Al's death, George's remainder interest becomes a fee simple interest. The property does not pass through Al's estate and is not subject to marital rights. Remainder: A future interest in property which becomes possessory upon the termination of the prior estate (usually a life estate). Remainders may be contingent upon some future event (such as surviving the person with the life estate) or vested (already owned by the remainderman, just not a current interest until, for example, the life tenant dies). Contingent Remainder - a remainder that is subject to satisfying a future condition. For example, "to Al for life, then to George if George attains the age of 21." In order for George, or his heirs, to acquire the fee at Al's death, George must reach the age of 21. Vested Remainder - A vested remainder is not subject to satisfying a future condition. The remainder will become possessory upon the happening of a necessary event. For example, "to Al for life, then to George." Al cannot live forever, so George, or his heirs, will eventually acquire the fee simple interest. 49

50 Leasehold Estate for years Contract (lease) whereby a tenant is to have the right of possession of lands or tenements for some determinate period. Statute of Frauds: Any lease that may extend for more than three years from the time of making must be in writing in order to be valid. GS 22-2 Lease for more than three years must be recorded in order to protect priority against lien creditors or purchasers for value of the lessor. GS Leasehold estates of three years or less do not have to be recorded. POWERS OF ATTORNEY & ATTORNEYS-IN-FACT Principal Alive and Well Need lender pre-approval Why can t principal attend in person? Incompetent principal -- durable POA GS Ch. 32A POA must be recorded in county of property OR reference recording in other NC county GS 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) 50

51 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 Military POA s and acknowledgments 10 U.S.C. 1044a GUARDIANSHIPS Incompetents & Minors Special Proceeding required to convey property GS 35A-1301 et seq Superior Court Judge approval for minors Adult spouse of minor -- joinder or waiver by minor spouse GS Competent spouse convey separate property with joinder of guardian of incompetent spouse waiving marital rights only GS 39-7 MINORS 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 51

52 THANK YOU! 52