2014 ALTA Convention
The Number One Problem Involving North Carolina Real Estate Transactions
From the Editor
Another eventful year in the NC Land Title world has passed, and another executive board has started its tenure. Jay Williams has handed off leadership to me after a busy year of legislative activity and dispersal of information to our clients on the implementation of processes and procedures for the impending changes that the CFPB is bringing.
As I sit to write this address, it occurs to me that perhaps “Change and Evolution” are the buzz words for the new NCLTA year. During our executive meeting this month, we discussed our goals for the year. It was accurately noted that the identity of NCLTA has changed and evolved over the years. We have become a more outspoken organization on issues affecting the title industry. We have gained some credibility as a group with an active purpose and involvement with issues which affect title to Land and to our industry. This change is largely attributable to the introduction of the Mechanics Lien Legislation and implementation of the NCLiens system during the terms of Ryan Wainio, Matt Powers and Jay Williams. Our organization owes a great deal to these three past presidents as well as to many of our other members who have volunteered their time and energy to the Mechanics Lien legislation and other legislation and issues which the Association has supported or opposed.
We are not sponsoring a particularly controversial piece of legislation nor do we have an expansive legislative agenda for the upcoming Long Legislative Session. As a result, we have reduced our Special Assessment by half. It is our goal to be able to eliminate or further reduce the Special Assessment next year. However, we could not cut the Assessment completely this year because we do have a lot of potential legislation that we are monitoring and will support or oppose as necessary to preserve or promote the title industry during the upcoming legislative session. In order to be able to properly and efficiently respond, we will need to continue to have funds available to do so. Included in the potential legislation is: a) the North Carolina-South Carolina Boundary; b) Potential changes to the Mobile Home Statute; c) proposed changes to the Community Property Act; d) redaction of information on the public record of law enforcement officials; e) tax revaluation; f) Mechanics Lien legislation; and g) effect of same-sex marriage on the interpretation of tenants by the entireties estate in land (This list is not all inclusive—just a quick summary for illustrative purposes).
Over the last two years, in response to CFPB regulations and in hopes of defining what the CFPB’s expectation would be for ALTA members, the American Land Title Association developed Seven Pillars of Best Practices to articulate how settlement service providers should and would protect consumers. Our members have worked diligently over the last year to provide Continuing Legal Education opportunities to educate NC Closing Attorneys, who are our current settlement services providers (SSPs) in North Carolina, on these Best Practices and how to implement them into their practices. The upcoming year will be the year that SSP compliance will be established or checked through whatever audit or vetting process is implemented by Lenders and/or the CFPB. These compliance efforts will change the way our members’ clients and our members operate.
The American Land Title Association held its Annual Convention the week of October 13th in Seattle, Washington. The conference was well attended by our NCLTA members who brought back lots of important news and information. It is no surprise that one of the Hottest Topics, both of discussion and for presentations. was the CFPB and its effect on Lenders and settlement service providers across the nation. The message was clear to those who attended: The time to be compliant is now, and the way to show compliance is very similar to the way an attorney presents evidence and lays the foundation in a trial or encourages their business clients to create and document their policies and procedures. We should be encouraging them to draw on those skills and get their practices in order.
Here are some tips and suggestions to aid in the implementation of the ALTA Best Practices straight from the ALTA Conference:
· TIME IS OF THE ESSENCE—You need to be “Walking the Walk”, not just “Talking the Talk”--DON’T WAIT ANY LONGER TO GET YOUR PRACTICES AND PROCEDURES IN PLACE AND IMPLEMENTED—There are a lot of moving pieces to work out between now and the purported August 1, 2015 deadline. Auditors will be using various time lines and look back periods to determine compliance.
-60 days for Escrow Account Reconciliation Compliance
-90 days for obtaining final policies and submitting premiums in a timely manner
-Up to 6 months for documentation of compliance.
This means that you need about 6 months of documented compliance and/or evidence of compliance to go through a meaningful audit—not just 6 months of having policies and procedures in place. With the RESPA-TILA revisions which are coming in second quarter 2015, it makes sense to set your timeline of compliance as January 1, 2015, if you are not already compliant, so that you can start gathering evidence of current compliance and have a chance to revise any necessary policies to deal with any policies or procedure changes, and then show that you have implemented them into your practice.
· ESTABLISH YOUR CASE--Use your attorney skills to compile your evidence of compliance. This will help with proving to auditors, lenders or the CFPB that you are in fact compliant with the Best Practices. This includes employee training logs, effective dates for implementation of the policy and for reviews, and records memorializing what you have done to comply with the best practice.
· Policy and procedure compliance includes the actions of any outside searchers/vendors—independent paralegals and other attorneys. Evidence of their compliance should also be gathered and kept.
· Self Assess compliance before bringing in an auditor for a third party compliance assessment. This will save money and time necessary to remediate given the look-back periods for audits noted above. The audit is pass/fail. (NOTE: All Self-Assessment Guidelines have been published. There are 107 questions, 268 tests with 64 focusing on Pillar #3.)
· Auditor Criteria—if you are hiring an CPA as an auditor:
Have they passed peer review?
Do they understand the industry (they can answer questions like: “Do you know what ALTA stands for?” and “Do you know who drafts deeds or closes a real estate transaction?”)
Can they cover all offices and/or operations for your firm?
If they assist you as a consultant and then you hire them for the audit, will they credit you for the work they have already done?
There are resources available to help: (this is a very limited list, not meant to be all inclusive and not specifically endorsed by NCLTA but offered as a sample to get you started:
Habif, Arogeti & Wynne, LLP—provide an initial assessment review with compliance benchmark questionnaire providing gap analysis report (see www.compliancesuccess.com for sample report) to come back for actual testing in the future. –Kim.McConkey@hawcpa.com --404-898-8237
Agility Recovery—business continuity planning—firstname.lastname@example.org –720-490-4611—www.agilityrecovery.com
www.MyCloudstar.com --Matt Price (email@example.com) 201-401-3018
The time for implementation is winding down and failure to comply or partial compliance with the regulations and Best Practices may interfere with SSPs’ streams of business, which in turn, may interfere with our member’s businesses. Therefore, helping our members’ clients successfully implement the Best Practices is directly related to our members’ continued success. To that end, one of NCLTA’s goals and agendas for the year will be to support our members’ efforts to assist client’s implementation efforts. We have re-established our Education Committee to explore how to best support these efforts to provide interactive resources—such as webinars and workshops. While it is early in the re-establishment process, we anticipate moving quickly to provide this support. There are educational and informational resources out there. I received a message from the Assistant Director of the CFPB this week asking for assistance with disseminating information on the resources which are available to understand and implement the RESPA/TILA Integrated Disclosures into settlement service provider’s forms and practices. A link to the information is as follows: http://www.nclta.org/content/trid-outreach-0 The Integrated Mortgage Disclosure merges two federal regulations as well as combining two separate forms. These regulations implement new timeframes for consumers to receive these documents. These regulations will require more coordinating and sharing of information between parties. These changes will affect Lenders, Buyers, Sellers, Realtors, Attorneys and Settlement Service Providers. They will also have to be implemented into the best practice parameters establishing how we deal with non-public personal information obtained and provided by groups and individuals who may not be as exposed to the CFPB regulations as the title industry and its settlement service providers have been. Due to the recently adopted definition of non-public information by the CFPB, the necessary practices to maintain confidentiality will bring change in how our members and clients interact with other parties and players in real estate transactions.
All this to say, our industry faces some challenges and changes for the coming year. NCLTA intends to support its members and their clients as we all continue to evolve in the ever changing industry. We are looking forward to growing and contributing to our members and to our industry over the year to come, and I look forward to working on NCLTA’s goals as its President.
All The Best,
Lisa Shields-Cook, President
North Carolina Land Title Association
2014 ALTA Convention
Report from the 2014 ALTA Convention in Seattle:
Own Your Future
The American Land Title Association held its Annual Convention last month, October 13 through 18, in Seattle, Washington, and it was my privilege to attend as your NCLTA Affiliate Representative. One benefit of attending the convention was getting to learn about the effort ALTA undertakes on our behalf in Washington, DC, to see that our interests are addressed at the federal and national level. ALTA sees to it that we have a seat at the table when decisions impacting our livelihood are being discussed by Congress and regulators. But ALTA is also assisting at the state level through the Title Action Network (TAN). It was pointed out at the convention that over the last year TAN participated with state land title associations in Minnesota, Colorado, Indiana, New York, Missouri and Ohio to address issues of interest to its membership in those states. NCLTA was recognized at General Session for having the highest increase in TAN membership among all states for 2013-14. Thanks to all NCLTA members who participated by getting the word out, becoming members of TAN, and encouraging others to become TAN members, a resource we will no doubt be calling on in the near future.
The convention was aptly titled, “Own Your Future,” and some 800 plus title professionals from across the U.S. attended with just that thought in mind – how to take charge of their future in this ever changing industry we care deeply about. And as you might imagine, the topic consistently on everyone’s lips was Best Practices. But the convention’s structure of General Sessions, Committee Meetings, and Professional Development Courses, in conjunction with the vendors, was designed to help title professionals meet Best Practices which have been brought on with this new regulatory environment, and provide information about new changes that lie ahead. While the regulatory and compliance pressures facing us can seem intimidating, the programs and resources made available were designed to empower title professionals so we could own our future again.
Attendees were able to get updates not just about ALTA’s Best Practices, but also the CFPB’s rules for integrated mortgage disclosures, and learn how title professionals elsewhere are coping with these changes. One thing was evident; if you are already Best Practices compliant you are a leg up competitively in this market. If not, you better get there.
In that vein, the “Stories from the Front Lines: ALTA Best Practices Implementation” session was packed. Literally, standing room only. Panel members discussed their experiences to date in implementing Best Practices and shared their successes and failures. All agreed that while the larger banks have yet to pull the trigger on requiring settlement agents to be Best Practices certified, that day is coming quickly and when it does arrive it likely will be accompanied with a statement to the effect, “… and we expect these Practices to be in place in the next thirty (30) days.”
At the State Regulatory Committee Meeting we learned about other state association’s efforts to educate their respective members and regulators about the upcoming Integrated Mortgage Disclosure under RESPA/TILA. The CFPB has mandated that the Good Faith Estimate (GFE) and the initial Truth-in-Lending (TIL) be combined into one form. This has led to quite a bit of confusion among states whose regulators have mandated their own state-specific forms over the years, and are now struggling to catch up with what is going to be required come August 1, 2015. ALTA has requested the CFPB reconsider its policy regarding how title insurance fees are disclosed to make the disclosure less confusing and duplicative forms of existing state forms. But regardless, such conflict is putting title professional in a cross-fire so to speak.
Then at the Governmental Affairs Committee we heard from Congressman Denny Heck who represents the 10th Congressional District in Washington State. Rep. Heck sits on the House Financial Services Committee, and helped educate us about the continual threat posed by cyber-attacks against our nation’s financial institutions. Rep. Heck also serves with Rep. Robert Pittenger of North Carolina’s 9th Congressional District, and together they have introduced a bi-partisan bill that would establish a Small Business Advisory Board at the CFPB. A good idea, but not yet enacted.
We heard incoming President Diane Evans and ALTA past President Frank Pellegrini talk about ALTA’s year-long research project to help title professionals better communicate the value of the title industry. With a greater educated public empowered by the internet, homebuyers want more information about the real estate closing process and costs. So it is becoming more critical for title professionals to take control of the message and ensure that consumers, lenders, real estate agents, lawmakers and regulators understand what we do.
Then at Friday’s morning-long General Session the focus was again on the Integrated Mortgage Disclosure rules. The panel discussed what lenders and realtors are going to need from title professionals in preparing to get the disclosures out. As one panelist from Wells Fargo pointed out, the Three Day Disclosure is going to take seven days to fulfill. It’s called a Three Day Disclosure because the consumer must get the information three days before closing (absent a limited waiver which may not be available in many cases anyway). But the rule presumes it will take three days for the disclosure to reach the borrower by U.S. first class mail, or alternatively, if email is used that the consumer will not open their email for three days. Given that the bank needs one day to prepare the information, you’re really talking about that information needing to be in the lender’s hands seven days in advance.
As I bring this article to conclusion you can see by now the recurring theme at the convention was “Best Practices. Best Practices! BEST PRACTICES!!” The message has been out there since 2012. So if you’re ready … awesome. If not … time to get ready. Best Practices consists of seven “pillars.” People and resources are available to help you succeed at meeting the requirements of each pillar. If you are a closing attorney a great place to start is at www.ncclosingattorneybestpractices.org. If you’re an agent, get with your market representatives, title counsels, or state managers. It’s not too late, but waste no more time thinking there will be a last minute reprieve. The train may not have left the station yet, but the boilers are heating up.
Karl Knight, Vice President
North Carolina Land Title Association
The NCLTA Annual Convention was held September 11th through the 13th in Charleston, South Carolina, at the beautiful Renaissance Charleston Historic District Hotel. A wonderful time was had by all! The food and beverages were excellent and seeing old friends and making new ones was a highlight, as were the great educational opportunties presented. We said goodbye to our president Jay Williams with much gratefulness for all that he contributed to NCLTA's success during his tenure and the association presented him with a plaque commemorating his service. Ryan Wainio was also honored with the Sam Mann award, recognizing excellence in the title industry. Please visit our gallery to view some of the pictures of these highlights and more!
SAVE THE DATE! We are now planning our 2015 NCLTA Convention to be held September 10th through the 12th in Asheville, North Carolina. Please stay tuned for additional information on sponsorship opportunities and when registration will open. We hope that our 2015 event will be the biggest and most successful one yet, and want you to be a part of it.
JUST WHAT DOES THIS EASEMENT ALLOW ME TO DO?
(HUMPS, BUMPS AND MOVING TO THE FAST LANE)
When asking Real Estate lawyers to identify the “number one problem involving North Carolina Real Estate transactions,” “legal access” is many times the response. An attitude of good neighborliness that was the hallmark of earlier generations seems to have dissipated. According to a Campbell Law Review article published in Spring, 2001”, entitled Legislative Kudzu in the New Millennium: An Opportunity for Reflection and Reform”, “access is often sought in modern society for more than a single family home place on the back forty.” Patrick Hetrick, Legislative Kudzu in the New Millennium: An Opportunity for Reflection and Reform, 23 Campbell Law Review 157 (2001). At times it can mean a new subdivision or industrial park generating significant vehicular traffic that most landowners would understandably prefer to see routed elsewhere. Even where legal access exists, the nature and scope of that access can be the subject of a dispute. Can the access be widened? Can a speed bump be installed? Can a gate be placed on the right-of-way? Can the road be relocated? Can the way be paved?
The general rule in North Carolina is that an easement may not be moved without the mutual consent of owners of both the dominant and servient estates. See Smith v. Jackson, 180 N.C. 115, 117, 104 S.E. 169, 170 (1920); see also Jones C. Carroll, 91 N.C. App. 438, 440, 371 S.E. 2d 725, 727 (1988). However, according to Webster’s Real Estate Law in North Carolina, 5th Edition, §15-17.4.
Anyone who has ever taken the first year property course in law school remembers the day we learned that an easement couldn’t be moved by either party without the consent of the other party. Your editors remember thinking “now that is a stupid rule.” Today’s law students have the same reaction. Nevertheless, the cases to that effect are numerous. However, a closer analysis of the cases addressing this issue reveals that courts are often willing to allow unilateral relocations by the servient owner when equities indicate relocation is proper.
At least one important writer on North Carolina Property Law does not agree with the general rule. As you read more of the text in fact, Webster states that he favors doing away with the general rule in favor of a new rule allowing unilateral relocation of easements by the owner of the servient estate. Who knows, this wish may one day be granted if the appellate courts are presented with a case with just the right facts for them to render that decision.
It is interesting to note that in Cooke v. Wake Elec. Membership Corp., 245 N.C. 453, 485, 96 S.E. 2d 351, 354 (1957), the Supreme Court made the following comments:
Unless there is an express grant which provides otherwise, ordinarily, when the location of an easement is once selected it cannot be changed by either the landowner or the owner of the easement without the other’s consent.
Unfortunately, the court did not go on to say what should be done in non-ordinary circumstances.
Another interesting theory that has also been raised in cases supporting relocation is the doctrine of “Equitable Estoppel” when a servient owner has in fact relocated the easement to a more convenient and/or useable location and the dominant owner does not speak out and protest. The doctrine of equitable estoppel is raised when the dominant owner, by his silence, induces the servient owner to believe that in fact the relocation of the easement area is approved with consent. Equitable Estoppel has been recognized in North Carolina as a valid legal doctrine. Whitacre P’ship v. Biosignia, Inc., 358 N.C. 1, 16, 591 S.E. 2d 870, 881 (2004). Equitable estoppel should be applied:
When any one, by his acts, representations, or admissions, or by his silence when he ought to speak out, intentionally or through culpable negligence induces another to believe certain facts exist, and such other rightfully relies and acts on such belief, so that he will be prejudiced if the former is permitted to deny the existence of such facts.
Id. at 17, 591 S.E. 2d at 881.
The general rule in North Carolina is that an easement holder may not increase his use so as to increase the burden on the servient tenement. If the easement holder makes an unwarranted use of the land, in excess of the easement rights held, such use will constitute an excessive use and may be enjoined. Hundley v. Michael, 105 N.C. App. 432, 435, 413, S.E. 2d. 296, 298 (1992). “Easement Holders have the right to use their property within the easement consistent with the purpose for which the easement was created.” Id. at 436, 413 S.E. 2d at 298. The courts will then determine or look into whether any Express Agreement allowed for easement holders to pave and create speed bumps or humps. The courts will look into the facts and circumstance of each easement to determine if in fact this was anticipated or intended by the parties, and such an action would not overburden the servient owner’s property in a way not intended by the original Easement Agreement. When the intent of the party is not clear in a written agreement, extrinsic evidence is not permitted in order to add to, detract from or vary the terms of an integrated written agreement, extrinsic evidence is admissible in order to explain what those terms are. Century Communications v. Housing Authority of the City of Wilson, 313 N.C. 143, 146, 326 S.E. 2d 261, 264 (1985). Extrinsic evidence as to the circumstances under which a written agreement was made has been held to be admissible in ascertaining the parties’ expressed intentions, subject to the limitations that extrinsic evidence is not admissible in order to give the terms of a written agreement a meaning of which they are not “reasonably susceptible.” Id. at 147, 326 S.E. 2d at 264.
Therefore, many times the court may actually hear parol evidence regarding the meaning and the intent of the parties as to whether a particular use of the easement area should be allowed, and/or whether such actions and use overburdened the property owners over which the easement crosses.
The doctrine of “reasonable enjoinment” presents a question of fact. Thus, we are left to further ponder whether a court may determine if a “speed hump” or “speed bump” can be installed for reasonable enjoinment of an easement and to what extent the court will go to allow modifications and deviations for traffic calming devises.
While no North Carolina case was found regarding speed humps or speed bumps, a Court of Appeals case from Florida may provide some insight. The issue in that case was an appeal from a final judgment denying the request of a property owner who wanted a mandatory injunction that a property owner association remove speed bumps that were installed on a private road by the association over the land owner’s objection. The association constructed the speed bumps to reduce traffic and speed and to maintain the “private nature of the road”. The landowner who protested was denied an injunction at the trial court and the trial court denied the requested relief based on “the balancing of the relative conveniences of parties.” In that case, Golfview Road was 1,200 feet long, had fifteen residences and a private club on it. Of the fifteen residences, thirteen were served by a private rear alleyway and did not need to traverse the road. Two residences, including the one of the property owner who was protesting, had access only via the road itself. Thus, the majority of the owners making up the association did not need to traverse the road to get to their house, but the landowner who was protesting had to use the road and cross the speed bumps to arrive at his home. Since the installation of the speed bump, the traffic had significantly decreased and it caused most people simply to avoid all use of the road. The trial court went into the doctrine of balancing the conveniences as an equitable principle stating that where a technical encroachment of another’s right is slight, and the cost of removing the encroachment would produce great harm and where the resulting benefit is small, the courts will balance the conveniences. The Court of Appeals said this was the wrong test to apply in this case, as the rights of common owners of an easement are limited to the purpose for which the easement was established, and may not be exercised in derogation of the rights of other common owners. Cartish v. Soper, 157 So. 2d 150 (2d D.C.A. Fla., 1963). The court went on to say that it’s important to note that the Association, even when representing a majority of the easement holders has no right to substantially diminish the convenience of the roadway. While the Association argued the speed bumps were necessary to serve the” private aspect of the easement,” the Court of Appeals ruled that a “private road must first be a road, and the substantial violation of the individual’s rights to the road are not cured by the fact that the violation increased the private nature of the way.” The court went on to state that the Trial court should have granted an injunction requiring the removal of the four speed bumps as the Appellant had no other remedy at law, and the action of the Association was intentional and affected a substantial violation of a meaningful right of the Plaintiff in that case. Edmund C. Monell v. Golfview Road Association, 359 So. 2d. 1978, Fla. App., Lexis 15475.
One is left to ponder what a North Carolina court may do when faced with questions regarding humps, bumps and movements to relocate or install a fast lane.
Terry M. Taylor
Terry is certified by the North Carolina State Bar as a specialist in real‑property law for business, commercial, industrial, and residential transactions. Terry’s law practice includes primarily commercial real estate law, business and corporate transactions, local governmental entities and authorities, tax-exempt organizations, wills and trusts, and estate planning. Terry practices with Young, Morphis, Bach & Taylor,LLP in Hickory, NC.
From The Editor
Welcome to our new NCLTA secretary and newsletter editor, Marc Garren!
"I am excited to serve as editor of the NCLTA Newsletter this year. Hopefully, you will find the information to be helpful. We are always looking for timely articles to include in the newsletter. If you have a topic that you would be interested in or, even better, if you would like to submit an article for publishing we would greatly appreciate any contributions. Please feel free to contact me with any questions or concerns that you may have at firstname.lastname@example.org. I hope everyone has a great Holiday Season."
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