President’s Message

Forms Committee

Annual Convention

Legislative Update

How to Use ALTA's Settlement Statements

From the Editor

President's Message

After attending a function for my company in Baltimore several years ago I had a few hours ahead of me before flying back to Greensboro.  I took that opportunity to visit Fort McHenry, site of the British bombardment during the War of 1812 which inspired Francis Scott Key to pen what is now our national anthem, The Star Spangled Banner. Among other fascinating facts, was that of the 1,000 soldiers garrisoned at the fort who endured twenty-five hours of rockets raining down, the total number of losses incurred was four. 

In North Carolina, as everywhere right now, our industry faces challenges which many of us liken to a bombardment of sorts.  Every week brings a new obstacle, a new challenge, some quagmire that bogs us down and seems to hamper our forward progress. But, like the defenders of Ft. McHenry, despite the hurdles we press on daily, providing protection for our consumer, commercial, and lender customers, as well as sound underwriting advice to our attorney customers.  

The annual meeting in Asheville was great.  We owe a big thank you to Nita Turlington, our Executive Director, for planning and executing a well-planned and fun meeting.  The venue was four stars, the food and entertainment terrific, the sponsorships outstanding.  I look forward to returning again sometime to the Grand Bohemian.

Congratulations to Debbie Brittain, recipient of this year’s Sam Mann Award for her tireless efforts making our organization a success.  Debbie continues to contribute to NCLTA with wisdom and dignity, for which we are most grateful.  Thank you, Debbie. 

In early October I was privileged with attending the American Land Title Association’s annual convention in Boston where I learned about more challenges headed our way, but also about some opportunities that will arise.  Some of these are: 

         - “Ban the Box” initiatives are beginning taking root at the federal level which if implemented will prevent employers from requesting information on job applications concerning an applicant’s prior criminal history.  This is obviously in direct conflict with many state insurance codes which prevent insurance agents and companies from hiring persons with criminal histories.  Stay tuned for further details as this will affect both agents and underwriters.

         - Millennials now make up the greatest market share of new home buyers.  So in response to this generation’s desire for more information about the home buying process ALTA has initiated the Homeowner Outreach Program.  Many state and federal agencies are asking why our industry does not to a better job educating homeowners and this will help in addressing those concerns.  Prospectively, this is designed to help explain the protections homeowners get when purchasing an owner’s policy and will hopefully bring consumers to realize that perhaps lack of an owner’s policy really is not an option

       -  Everyone is fairly familiar with the fact that data breaches are on the rise.  Currently forty-seven states have data breach laws on the books in addition to the federal protections in place under Gramm-Leach-Bliley.  Florida just passed a new version of its data breach law which requires companies to notify customers even if they only suspect they have incurred a breach.  Statistics show that if a retail provider suffers a data breach that after the required notification is made close to forty percent of their customers will not return. Imagine what a bank or law firm will do if your title agency suffers a breach?

         -In addition to email hi-jackings, good old fashioned wire fraud and forgeries have not gone away.  [As Sergeant Esterhaus used to say on Hill Street Blues, “Let’s be careful out there.”] 

        - On the forms front this coming year we can look forward to a couple of changes on the horizon:

*   The old ALTA Endorsement Form 2 – Truth in Lending will very likely be retiring.  No one ever asks for it anymore and if they did it would need to be greatly revised in light of TRID (Know Before You Owe), and Dodd-Frank.  So the Forms Committee is recommending that it simply be decommissioned.

*   Closing Protections Letters are slated for further revision to include provisions for cooperation on the part of the insured.  This will match the similar provisions already included in the ALTA policies.

         -As an industry we paid out $750 million in claims last year (2014).  The number of actual claims is decreasing, but it appears that the payout on individual claims is increasing.  The two largest claims in Title Insurance history came about in the last two years – both of which involved mechanics’ liens.

          - After the two mechanics’ lien claims mentioned above, identity theft is by far and away our loss-leader.  In that vein, be wary of transactions involving absentee landlords, REOs, and cash-out refi’s.

          - Turns out that high-definition video equipment in recorders offices across the country (along with public notices that one is being videoed) are helping to decrease fraudulent transactions in those jurisdictions where such equipment is being employed.  Something about being on a time-stamped video when presenting a fraudulent cancellation that just irks criminal types. 

         - Lenders and settlement agents are seeking to have states implement standard transaction fees as opposed to recording fees (or “uniform recording fees” if you prefer).  The idea being that while recording fees are typically the smallest item on the settlement statement, they represent the greatest amount of pain post-closing for everybody.  Documents are constantly getting rejected because the pages were counted wrong so the check is too little (or too much) and the recorder won’t accept the document without the recording fee being right.  These rejections are costly and in a post-TRID (Know Before You Owe) world the lender has only 30 days to correct the problem.  If the consumer is the focus we don’t want to make their experience worse because of rejections.  A standard transaction fee would go a long way toward solving this problem for lenders, borrowers, and attorneys. 

Those are some of the highlights of what was discussed at ALTA. 

The good work of the NCLTA would not be possible were it not for the various committees and volunteers that serve on those committees.  In particular this past year we owe a debt of gratitude to all who participated, especially those members who gave their time and attention to our legislative committee.  Joe Ritter, Kim Rosenberg, Steve Brown, Lisa Shields-Cook, Nancy Ferguson, Nick Long, David Ferrell, and others I have no doubt forgotten to mention, deserve special mention.  Thank you to you all.  For a sampling of the sort of “bombs” the Legislative Committee has been dealing with this past year, some of which will no doubt get replay in the upcoming short session, see David’s Legislative Update below. 

While 2016 will be challenging, with an improving economy and everyone gaining greater proficiency with TRID and Best Practices, the opportunities to succeed are there both for NCLTA and the industry.  I look forward to seeing us meet those challenges.  Thank you. 

Karl Knight, President, NCLTA

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 Forms Committee

All NC Filed ALTA forms can be found here http://nclta.org/alta-forms.  As new ones are approved they will be posted. 

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Annual Convention

Our 2015 NCLTA Annual convention held at the Grand Bohemian, Asheville was a huge success!  In addition to a stellar line up of speakers for the CLE portion of our meeting, our social events proved to be fun and entertaining for all!  The dessert bar at the Friday banquet was off the chain and a highlight of our President's Reception was ALTA's treasurer, Peter Birnbaum, sitting in on drums with the band Orange Krush during "Brickhouse."   A special thank you to our sponsors.  Truly without their support, this conference would not be possible.  And thank you to all who attended.  Please save the date for the 2016 Convention which will be held September 16th through the 18th at the Wild Dunes Resort, Isle of Palms, South Carolina.  

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Legislative Update

On Wednesday September 30, 2015 at approximately 4:17 a.m., the “long” session of the North Carolina General Assembly ended for the year. The session, which began on January 14 and was first projected to end in July, became protracted due to disagreements over the state budget bill, Medicaid reform, economic incentives, and other issues. The primary focus of the session was passing the state’s budget. On September 18, 2015, the legislature passed the $21.74 billion state budget bill.  The budget bill was signed by Governor McCrory on September 18, 2015.

The legislature passed 313 new laws during this session, based on 1,666 bills introduced. The legislature passed a number of significant pieces of legislation this session, including a bill to increase teacher pay, enact tax reform, economic incentives, and regulatory reform. Governor McCrory had until October 31, 2015 to review and sign bills passed in the last few days of the legislative session. If he does not sign or veto a particular bill by October 31, it will become law without his signature.

The legislature enacted bills that affect appellate court elections. Supreme Court justices, beginning with Justice Edmonds election in 2016, will stand for retention elections. The Court of Appeals candidates will continue with the current election process, except the races will be partisan, with each candidate listing their political party affiliation with their filing.

The legislature restored the historic preservation tax credit in the state budget enacted this year. The tax credits expired last year as part of a broader Republican-led tax reform plan. Without them, many historic preservationists said renovating old buildings would not be financially feasible. The credits will cost the state about $8 million a year. The new version of the tax credit is not as generous as the program in place from 1997 to 2014. The old credit gave property owners back 20 percent of the cost of improvements to income-producing properties and 30 percent for home restorations. Now the credit is equal to 10 or 15 percent of the cost of improvements to income-producing properties, depending on the total cost of the project. For homes, the credit is 15 percent of the cost, up to $22,500. Property owners can now receive the entire credit at once, instead of spacing it out over several tax years as required in the old program.

The 2016 “short session” is scheduled to begin on Monday April 25, 2016. The legislature did not adopt a studies bill this session. The President Pro Tem of the Senate and Speaker of the House have the inherent authority, including through the Legislative Research Commission and Courts Commission, to study issues, and I understand that there will be formal studies before the 2016 legislative session convenes.

This article contains a summary of the legislation of interest from the 2015 Legislative Session.  The first section contains bills enacted into law, and the second section includes bills that have not been enacted into law. For more information about legislation described in this article, feel free to contact me at dferrell@vanblk.com or (919) 754-1171.  Information is also available on the General Assembly’s website:  www.ncga.state.nc.us.

BILLS OF INTEREST ENACTED INTO LAW

House Bill 97, 2015 Appropriations Act, contains the 2015-2016 State Budget Bill. The budget bill: (1) Sets the percentage rate used in calculation the insurance regulatory charge under G.S. §58-6-25 at 6.5% for the 2016 calendar year; (2)  Requires the State Chief Information Officer to implement an online digital program for State agencies that includes secure electronic signature capabilities. Effective: July 1, 2015. Session Law 2015-241.

House Bill 126, Mortgage Origination Support Registration, authorizes the Office of the Commissioner of Banks to implement a registration system for persons engaged exclusively in the processing or underwriting of residential mortgage loans and not engaged in the mortgage business. Effective: November 1, 2015. The Governor has until October 31, 2015 to consider and sign this bill.

House Bill 168, Exempt Builders’ Inventory, exempts from property tax the increase in value of real property held for sale by a builder, to the extent the increase is attributable to subdivision or improvements by the builder, as long as the builder continues to hold the property for sale. The bill provides that in no event shall this exclusion extend for more than five (5) years from the time the improved property was first subject to being listed for taxation by the builder. Effective for taxes imposed for taxable years beginning on or after July 1, 2016, and applies to subdivision of or other improvements made on or after July 1, 2015. Session Law 2015-223.

House Bill 174, Landlord/Tenant-Foreclosure & Evic. Changes, makes changes to enhance certain notice requirements and protections for tenants of real properties in foreclosure.  The bill allows purchasers of real property under option contracts to pursue monetary damages separately from summary ejectment proceedings.  The bill makes other changes to the Homebuyer Protection Act enacted a few years ago.

The bill enacts new § 45-21.33A, effective foreclosure on preexisting tenancy, to provide that any purchaser or successor in interest who has acquired title to single‑family residential real property pursuant to this Article shall assume that interest subject to the rights of any tenant to occupy the premises until the end of the remaining term of the lease or one calendar year from the date the purchaser acquires title, whichever is shorter. In no event shall the purchaser be required to renew the existing lease. This provision applies to leases where (1) the tenant is not the debtor under the security instrument foreclosed or the child, spouse, or parent of the debtor; and (2) the lease is in writing, is not terminable at will, and requires the receipt of rent that is not substantially less than fair market rent for the property, provided that the rent has not been reduced or subsidized due to a federal or State subsidy.

A purchaser shall provide a tenant in possession of the single-family residential real property notice to vacate at least 90 days before making an application for possession pursuant to G.S. 45-21.29(k) in any of the following circumstances: (1) the tenant has an oral lease or the lease is terminable at will, or (2) The purchaser will occupy the premises as a primary residence.

The bill states that nothing in this section shall be construed to limit the remedies available to the purchaser or successor in interest for breaches of the lease terms by the tenant.

The bill amends Chapter 47G, Option to Purchase Contracts Executed With Lease Agreements, to provide that the term “option contract or contract” is an option contract for the purchase of single-family residential real property (was, property) that includes or is combined with, or is executed in conjunction with, a covered lean agreement. The bill amends § 47G‑5, Notice of default and intent to forfeit, to provide that a judgment rendered in an action to recover possession of the premises shall not prejudice either party in a subsequent action to recover monetary damages or other remedies.

The bill provides that in the event of default by the option purchaser under the terms of the lease agreement, the option seller may initiate a summary ejectment action to recover damages and possession of the leased premises pursuant to Article 3 of Chapter 42 of the General Statutes. The magistrate shall retain jurisdiction over the summary ejectment proceeding.  The bill provides that the option purchaser may counterclaim for monetary damages in any summary ejectment proceeding. If a counterclaim in a summary ejectment proceeding is barred pursuant to G.S. 7A‑219, the option purchaser shall not be estopped from asserting that claim in a separate action."

The bill amends § 47H-2, Minimum contents for contracts for deed, to provide that a contract for a deed shall contain at least a completed residential property disclosure statement that complies with Chapter 47E of the General Statutes, provided that the seller does not choose the option of making "No Representation" as to any characteristic or condition of the property.

The bill deletes the provision that made a violation of the contract for deed provisions an unfair trade practice under G.S. 75-1.1. The bill makes technical and other changes to the statutes on foreclosure rescure transactions.  Effective: October 1, 2015. Session Law 2015-178. services provider will be located. Effective: May 14, 2015. Session Law 2015-14.

House Bill 255, Building Code Reg. Reform., makes changes to reform building code enforcement and to promote economic growth. The bill conforms work in progress inspection authority to recently enacted inspection limitations. The bill requires the Building Code Council to study the alternative methods approval process. The bill raises the threshold for requirement of a building permit from $5,000 to $15,000 for single residence and farm structure repairs and renovations of certain types. The bill changes the membership on the Building Code Council, and creates the Building Code Council Residential Code Committee and the Building Code Committee. Effective October 1, 2015. Session Law 2015-145.

House Bill 346, Counties/Public Trust Areas, clarifies that counties may enforce ordinances within the State’s public trust areas and regulate, restrict, or prohibit the placement, maintenance, location, or use of equipment, personal property, or debris upon the State's ocean beaches. The bill allows cities and counties to adopt ordinances to regulate these topics. Effective: June 11, 2015. Session Law 2015-70.

House Bill 513, Real Property/Technical Corrections, makes technical corrections and other conforming changes to the General Statutes concerning real property. This bill was introduced at the request of the Real Property Section of the North Carolina Bar Association. The bill amends G.S. 45-35.10(c) to provide that “unless the satisfaction expressly states that the underlying obligation secured by the security instrument has been extinguished and the underlying note or instrument evidencing the obligation has been cancelled,” the recording of a satisfaction of a security instrument does not by itself extinguish any liability of a person for payment or performance of the secured obligation.

The bill makes various changes to G.S. 47C-3-104, transfer of special declarant rights. The bill provides that the mortgage, deed of trust, tax lien, or other conveyance to be foreclosed under this subsection shall not be required to contain specific reference to an assignment of special declarant rights but shall be deemed to include the special declarant rights as part of the right, title, and interest encumbered by the mortgage, deed of trust, tax lien, or other conveyance. The bill provides that upon foreclosure of a security interest, sale by a trustee under an agreement creating a security interest, tax sale, judicial sale, or sale under Bankruptcy Code or receivership proceedings of all units and other real estate in a condominium owned by a declarant, the declarant ceases to have any special declarant rights and the period of declarant control terminates unless either of the following applies: (1) The judgment or instrument conveying title provides for transfer of all special declarant rights held by that declarant to a successor declarant; (2) The declarant transferred special declarant rights related to the appointment of executive board members to another person pursuant to this section prior to the foreclosure or sale. Effective: June 4, 2015. Session Law 2015-56.

House Bill 651, Appraisal Bd. Recordkeeping & Bkgrd. Checks, bars civil actions against appraisers filed after the period of record retention established under the uniform standards of professional appraisal practice (USPAP) or five (5) years, whichever is greater. The bill requires appraisal management companies that require criminal background checks to accept criminal background checks performed within the preceding twelve (12) months. Effective: October 1, 2015. Session Law 2015-200.

House Bill 765, Regulatory Reform Act of 2015. Current law exempts partnerships, corporations, limited liability companies and other similar business entities from the real estate broker licensing law regarding selling or leasing property owned or leased by them when the acts are performed in the regular course of or as incident to the management of that property and the investment therein. This bill amends this exemption to clarify that managers, manager-members and employees of these business entities can perform the sales or lease activities. The bill also allows owners of closely held businesses (two or fewer owners) to sell or lease entity-owned real estate without a real estate broker license.

When a person conducts a real estate transaction pursuant to an exemption described above, the person shall disclose, in writing, to all parties to the transaction (i) that the person is not licensed as a real estate broker or salesperson, (ii) the specific exemption that applies, and (iii) the legal name and physical address of the owner of the subject property and of the closely held business entity, if applicable. This disclosure may be included on the face of a lease or contract executed in compliance with this exemption.  Effective October 31, 2015. Governor McCrory has until October 31, 2015 to review and sign this bill into law.

Senate Bill 83, Criminal Law/Filing False Document. The original contents of the bill were removed and replaced with language to provide a process for the Clerk of Superior Court to have liens and other similar filings reviewed by a judge if the clerk believes the filings to be fraudulent. This section of the statute does not apply to liens filed under Chapter 44A of the General Statutes.  The bill also makes changes to the existing process for register of deeds to dispute possible fraudulent filings. These changes are in section (b) of G.S. 14-118.6, and are clarifying changes that do not cause any title issues.

Unlike the existing process for registers of deeds, based on the original changes in the bill, the clerk would not be required to file or index a “placeholder” which provides notice that there is in the bill a potential claim existing that could relate back. The bill provided that the clerk would file-stamp the filing, but would not index or file it, and present it to a judge to review and approve. If it is ultimately approved (no time limit specified), then it would be filed and indexed, and take effect as of the original filing date. This would create a gap on the public record, since the effectiveness of the filing would relate back to the date it was originally file stamped.

I pointed out this issue with relation back to the bill sponsor and proposed some changes to the bill to address this issue. I worked with the Clerks of Superior Court to make sure our changes were workable. My suggested changes were added to the bill. So the bill as amended provides that the suspected “fraudulent” filing would not relate back to the date it was originally submitted, but, if approved for filing by a judge, would be effective as of the date it is indexed by the Clerk. So there is no “relation back” with this filing. Effective: October 1, 2015. Session Law 2015-87.

Senate Bill 119, GSC Technical Corrections 2015, makes various technical corrections to the General Statutes as recommended by the General Statutes Commission. Section 16 of the bill makes technical changes to Section Law 2010-32, a bill that prohibited transfer fee covenants. This session law was enacted in 2010 at the request of the North Carolina Land Title Association. Section 2 of Session Law 2010-32 provides that nothing in this Act shall be interpreted to mean that a transfer fee covenant recorded prior to the effective date of this Act is valid or enforceable. This bill codifies this language in the General Statutes as G.S. 39A-4. The bill then amends the newly transferred language to G.S. 39A-4 to make specific reference to the effective date of the ban on transfer fee covenants, July 1, 2010. 

The bill amends G.S. 36C-8-802(f) of the Uniform Trust Code which addresses a trustee investing trust funds in securities of an investment fund in which the trustee invests or receives compensation for investments, to clarify the reporting requirements by the trustee regarding compensation of the trustee from fees charged to the trust. The bill amends the reciprocal attorneys’ fees provision in business contracts in current law to provide that electronic signatures of business contracts with such provisions are enforceable.

The bill extends the beginning date from January 1 to July 1, 2016 for using the DMV electronic lien system to record information concerning the perfection and release of a security interest in a vehicle.

The bill prohibits local governments from adopting ordinances that prohibit oil and gas exploration and related activities, and provides additional provisions affecting such local government regulations.

The bill requires the NC Department of Transportation (“the Department”) to conduct a survey of the paved and unpaved roads in this State that are open to the public, but are not currently a part of the State system. The Department shall report its findings from the survey to the Joint Legislative Transportation Oversight Committee by June 30, 2016. Effective: October 1, 2015. Session Law 2015-264.

Senate Bill 123, Uniform Fraudulent Transfer Act, amends the Uniform Fraudulent Transfer Act to adopt the amendments approved by the Uniform Law Commission in 2014 and to make related conforming and technical amendments to the statute. The bill changes the title of the Act from “Uniform Fraudulent Transfer Act” to the “Uniform Voidable Transactions Act.” The bill makes various changes to acknowledge and account for electronic records and electronic signatures. The bill requires a creditor establishing a claim under this Act to prove the elements by a preponderance of the evidence

The bill amends §39-23.8, Defenses, liability, and protection transferee or obligee, to establish the rules that apply to the extent a transfer is avoidable in an action by a creditor under G.S. 39-23.7. The bill appears to continue to protect a person that took in good faith and for a reasonably equivalent value given the debtor or against any subsequent transferor or obligee. Effective October 1, 2015. Session Law 2015-23.

Senate Bill 159, Corrected Reval/Minimum Refunds/Prop. Taxes, provides Mecklenburg County property owners who owe more than $1,000 in back property taxes from 2011 to 2014 three (3) years to pay the debt off without interest. The bill provides that for parcels that were transferred in a tax year for which errors requiring reappraisals under this Act resulted in an underpayment of taxes, the following apply:

(1) The taxes for each tax year prior to and in the fiscal year in which the transfer occurred shall be collected from the owner of record as of January 1 of each tax year for which unpaid taxes exist. Only the remedies available in G.S. 105-367 and G.S. 105-368 may be used to collect against the owner of record as of January 1 of each tax year for which unpaid taxes exist.

(2) Notwithstanding G.S. 105-355(a), there shall be no lien on the real property for underpaid taxes that arose in a year in which the property is owned by a person other than the current owner as of January 1 of that year. The current owner shall not be held personally responsible for such underpaid taxes.

(3) If an owner not responsible for underpaid taxes pursuant to this section paid the underpaid taxes, the owner may assert a valid defense for a refund pursuant to G.S. 105-381, as a tax imposed through clerical error. Interest on the refund shall be calculated at a rate of five percent (5%) per annum from the date the owner asserting the defense paid the underpaid taxes until the date the refund is issued."

The bill allows local governments to deal with small underpayments and overpayments, including allowing the local government to adopt a resolution to not mail refunds of overpayments of less than $15. Effective: October 1, 2015. Session Law 2015-266.

Senate Bill 311, Register of Deeds/Filing False Marriage Docs, provides that prior to recording a document or instrument that (i) purports to impact an official record of marriage and (ii) is not a marriage license, a return, or an amendment or correction of a marriage license, the register of deeds shall conspicuously mark the first page of the document or instrument with the following statement:  “THIS DOCUMENT IS NOT AN OFFICIAL MARRIAGE DOCUMENT.”  The bill does not apply to instruments or documents that are attached as exhibits to land records, orders or judgments issued by a court of this State or another state, or separation agreements presented for registration.  Effective: June 4, 2015. Session Law 2015-53.

Senate Bill 332, Register of Deeds - POA Indexing Fees, enables Registers of Deeds to collect additional fees for indexing instruments that contain exhibits with multiple enterable parties.  The bill provides that for an instrument that contains excessive recording data, the fee would be an additional $2.00 for each entity listed in the instrument.  The bill states that an instrument contains excessive recording data when there are more than 20 distinct entities listed in the instrument, including any attachments and exhibits that require indexing. Effective: October 1, 2015. Session Law 2015-227.

Senate Bill 336, Estate Planning/Uniform Trust Code, amends the law governing estate planning and fiduciaries, amends the uniform trust code, and establishes a uniform powers of appointment act.  This bill was introduced at the request of the Estate Planning Section of the North Carolina Bar Association.

Provisions in the bill to clarify the law regarding the authority of a personal representative to sell or take action with respect to real property of a decedent were removed from the bill prior to its enactment. The prior version of the bill would have enacted G.S. 28A–13-3.1 to 3.3 to allow a personal representative to deal with real property without a court order, and provides that a personal representative may, without court order, take possession, custody, and control of the decedent's real property and sell, exchange, give options upon, partition, lease, mortgage, or otherwise dispose of the property to the extent that the will expressly grants any of these powers to the personal representative. Due to legislative opposition, these provisions were removed. Effective: October 1, 2015. Session Law 2015-205.

Senate Bill 370, E-Signatures/Vehicle Title and Registration, allows the use of electronic means to sign and notate certain documents required by the Division of Motor Vehicles (DMV). The bill amends G.S. 20-52 to provide that an application for a certificate of title, a registration plate, a registration card, and any other document required by the DMV to be submitted with the application and requiring a signature, may be submitted to the DMV with an electronic signature in accordance with Article 40 of Chapter 66 of the General Statutes.  The required notarization of any electronic signature on any application or document submitted to the DMV pursuant to this subsection may be performed electronically in accordance with Article 2 of Chapter 10B of the General Statutes. Effective: August 1, 2016.

The bill amends G.S. 20-58.4 to provide that upon the satisfaction or other discharge of a security interest in a vehicle for which the certificate of title data is notated by a lien through electronic means pursuant to G.S. 20-58.4A, the secured party shall, within two business days from the date of satisfaction, send electronic notice of the release of the security interest to the Division through the electronic lien release system established pursuant to G.S. 20-58.4A.  The electronic notice of the release of the security interest sent to the Division by the secured party would direct that a physical certificate of title be mailed or delivered to the address noted by the secured party providing notice of the satisfaction or other discharge of the security interest.  Upon receipt by the Division of an electronic notice of the release of the security interest, the Division would mail or deliver a certificate of title to the address noted by the secured party within one business day. Effective: December 1, 2015. Session Law 2015-270.

Senate Bill 386, Register of Deeds/UCC Recording Fees, establishes the following filing fees for UCC financing statements or other records: (a) for filing and indexing financing statements or records with two or fewer pages - $38; (b) for filing and indexing financing statements or records with more than two pages - $45 for the first 10 pages, $2 for each additional page; (c) for responding to an information request, including a communication with respect to requests for financing statement information for a particular debtor - $38. This provision does not apply to the recording or satisfaction of deeds of trust or mortgages that act as a fixture filing, or as a financing statement covering as-extracted collateral or timber to be cut as provided under G.S. 25-9-502(c). The Register of Deeds Association reports that the bill does not raise any fee, just clarifies that the filing fee for UCC financing statements filed electronically are the same as the fee for filing a physical copy. Effective October 1, 2015. Session Law 2015-206.

Senate Bill 513, North Carolina Farm Act of 2015, establishes marking and notice requirements for the construction of meteorological towers located on real property in North Carolina. The bill requires certain requirements for meteorological towers, including those over 50 feet to be marked and painted. The bill requires the NC Department of Transportation to adopt rules to require a person proposing to construct a meteorological tower on real property to register with NCDOT. NCDOT will maintain an electronic database that contains the location of all meteorological towers in the state.

The bill enacts a new G.S. 121-39A to provide a procedure for termination or modification of certain conservation agreements and easements. The bill provides that easements secured by the Agricultural Development and Farmland Preservation Trust Fund, including perpetual agricultural conservation easements and forest land easements, military base protection and flyway easements regardless of funding source, or any other agricultural conservation easement that has been secured, in whole or in part, with federal funds and where at least one party to the agreement is a public body of this State, shall not be terminated or modified for the purpose of economic development.

Prior to any modification or termination of a conservation agreement where at least one party to the agreement is a public body of this State, the agency requesting the conservation agreement modification or termination shall conduct a conservation benefit analysis. The criteria for the conservation benefit analysis shall be established by the agency requesting the conservation agreement modification or termination. Conservation agreements may only be modified or terminated if the conservation benefit analysis concludes that the modification or termination results in a greater benefit to conservation purposes. The Council of State must approved any modification or termination agreement involving the State. Parties to a conservation agreement may include a provision at the time an agreement is executed requiring the consent of the grantor or the grantor's successors in interest to terminate or modify the agreement for any purpose. The provisions of this bill do not apply to a condemnation action brought under Article 6 of Chapter 40A, Condemnation of Property Encumbered by a Conservation Easement. Effective: September 30, 2015. Session Law 2015-263.

Senate Bill 581, Study Subdiv. Streets/Traffic Calming Devises, directs the Department of Transportation to study the process for accepting subdivision streets dedicated as public on the State highway system for maintenance and to amend the percentage of property owners needed to approve traffic calming devices in certain subdivisions. Effective: August 10, 2015. Session Law 2015-217.

Senate Bill 679, NC Consumer Finance Act Amendments, allows a lender to recover court costs and related costs upon voluntary dismissal at the borrower’s request of an action to recover payments due under a loan under the North Carolina Consumer Finance Act. The bill would make other technical and conformation changes to the Act. Effective: September 1, 2015. Session Law 2015-179.

BILLS OF INTEREST NOT ENACTED INTO LAW

House Bill 3, Eminent Domain, would amend the North Carolina constitution to prohibit condemnation of private property except for a public use (deletes reference to public benefit), to provide for the payment of just compensation with right of trial by jury in all condemnation cases, and to make similar statutory changes.  House Bill 3 passed the House but was not enacted this session.

House Bill 127, DOT Condemnation Changes, would modify the measure of damages in a condemnation action initiated by the Department of Transportation (“DOT”). This bill would remove the ability to offset benefits to the property due to the project against the just compensation award.  The bill provides that interest on a DOT condemnation award shall be paid from the date of taking until the date the judgment is paid. The bill would authorize a defendant in a DOT action to recover attorneys’ fees and costs if the judgment exceeds the deposit by 25% or more. The bill provides that DOT shall send any relocation notice required by federal law within a specified period of time. 

This bill passed the House and was referred to the Senate where it received an unfavorable report in committee and was tabled. House Bill 127 was not enacted this session.

The General Assembly has been busy over the last few months. March 26 marked the Senate deadline to introduce public bills, and the House deadline was April 14.  There was a flurry of activity leading up to these deadlines, as legislators and legislative staff rushed to get all bills ready for introduction.  There have been a total of 716 bills introduced in the Senate and 942 bills introduced in the House, for a total of 1,658 bills this session.

The busy legislative schedule did not keep House and Senate leaders from agreeing to a “spring break” from legislative activities the week of April 6. Legislative leaders agreed that their chambers would not take recorded votes that week in part to give members time off after the Easter weekend.

The activity level at the General Assembly increased after the “spring break” week leading up to the April 30^th bill crossover deadline. More than 500 bills passed the House, Senate or both at the crossover deadline. The House along passed roughly 70 bills during 10 hours of floor debate in the days leading up to the crossover deadline.

After the legislative crossover deadline, the legislature turned its attention to the State budget. The House debated and adopted the State budget first this year and sent it to the Senate. On the heels of news of a state revenue surplus as opposed to the expected revenue shortfall, the House passed a $21.2 billion state budget on May 22 and sent it to the Senate for consideration. The House budget provided a 2% raise to teachers and state employees, put $200 million each in savings and repair and renovation accounts, and provided, among other things, funding enrollment growth in the public schools, universities and Medicaid. The budget did not raise taxes, but it did increase most Division of Motor Vehicles fees by 30% to pay for improvements to roads and the state ports.

The Senate adopted their version of the State budget bill on June 18. The Senate budget would spend nearly $21.5 billion next year, or nearly $700 million less than the House, on operating government, and proposes more significant policy changes to health care, taxes and education. Senators set aside $400 million more than what the House earmarked for two government reserve funds in the new fiscal year. The Senate also incorporated additional individual income and business franchise tax cuts beyond the 2013 tax law changes already taking effect, leaving Senators less revenues with which to work. Overall spending in the Senate plan would increase 1.8% compared to the current year.

As expected, the House voted unanimously not to accept the Senate budget bill, and a conference committee of Senate and House budget negotiators will be appointed to negotiate the differences between the two budget bills. Given that it is unlikely House and Senate budget negotiators will work out their differences and pass a state budget bill by June 30, the end of the fiscal year, the legislature is expected to adopt a continuing budget resolution that would allow state government to continue while budget negotiators work out their differences.

 Governor Pat McCrory has vetoed two bills this session. First, House Bill 405 gives businesses the right to sue employees who expose trade secrets or take pictures of their workplaces. "While I support the purpose of this bill, I believe it does not adequately protect or give clear guidance to honest employees who uncover criminal activity," McCrory wrote in his veto message. Proponents of the bill say it protects private property rights, but opponents say the bill muzzles whistleblowers. Second, Governor McCrory vetoed Senate Bill 2, which exempts magistrates from performing same sex marriage ceremonies if they have religious objections. After the vetoes, both the House and Senate voted with a three-fifths majority to override Governor McCrory’s veto of both bills. Therefore, the bills became law despite the Governor’s vetoes.

The following bills introduced or considered to date may be of interest to title insurance companies, title agents, and real estate attorneys:

Senate Bill 83, Criminal Law/Filing False Document. The original contents of the bill were removed prior to the crossover deadline and replaced with language to provide a process for the Clerk of Superior Court to have liens and other similar filings reviewed by a judge if the clerk believes the filings to be fraudulent. This section of the statute does not apply to liens filed under Chapter 44A of the General Statutes.  The bill also makes changes to the existing process for register of deeds to dispute possible fraudulent filings. These changes are in section (b) of G.S. 14-118.6, and seem to be clarifying changes that do not cause any title issues.

Unlike the existing process for registers of deeds, based on the original changes, the clerk would not be required to file or index a “placeholder” which provides notice that there is a potential claim existing that could relate back. The bill provided that the clerk would file-stamp the filing, but would not index or file it, and present it to a judge to review and approve. If it is ultimately approved (no time limit specified), then it would be filed and indexed, and take effect as of the original filing date. This would create a gap on the public record, since the effectiveness of the filing would relate back to the date it was originally file stamped.

I pointed out this issue with relation back to the bill sponsor and proposed some changes to the bill to address this issue. I worked with the Clerks of Superior Court to make sure our changes were workable. My suggested changes were added to the bill. So the bill as amended provides that the suspected “fraudulent” filing would not relate back to the date it was originally submitted, but, if approved for filing by a judge, would be effective as of the date it is indexed by the Clerk. So there is no “relation back” with this filing.

With these changes, the legislature approved Senate Bill 83 and Governor McCrory signed the bill into law. Effective: October 1, 2015. Session Law 2015-87.

Senate Bill 159, Transferred Properties in Corrected Revals. This bill was amended in the Senate to replace the original bill with a bill to give Mecklenburg County property owners who owe more than $1,000 in back property taxes from 2011 to 2014 five (5) years to pay the debt off without interest. Various provisions of the bill are opposed by the Mecklenburg County commissioners, for they favor raising the back-tax threshold to more than $1,500, lower the pay-back time to two (2) years, and charging an interest rate of approximately 9 percent. Further, questions were raised as to whether the bill is constitutional. A member of the Mecklenburg County Commissioners has stated that he is informed by attorneys that giving one set of taxpayers a tax break and not others is unconstitutional; for eliminating the interest would violate the N.C. Constitution as it would be a tax break to one set of taxpayers. The bill was approved by the Senate but has not yet been scheduled for a hearing in the House.

Senate Bill 311, Register of Deeds/Filing False Marriage Docs, provides that prior to recording a document or instrument that (i) purports to impact an official record of marriage and (ii) is not a marriage license, a return, or an amendment or correction of a marriage license, the register of deeds shall conspicuously mark the first page of the document or instrument with the following statement:  “THIS DOCUMENT IS NOT AN OFFICIAL MARRIAGE DOCUMENT.”  The bill does not apply to instruments or documents that are attached as exhibits to land records, orders or judgments issued by a court of this State or another state, or separation agreements presented for registration.  Effective: June 4, 2015. Session Law 2015-53.

Senate Bill 332, Register of Deeds - POA Indexing Fees, would enable Registers of Deeds to collect additional fees for indexing instruments that contain exhibits with multiple enterable parties.  The bill provides that for an instrument that contains excessive recording data, the fee would be an additional $2.00 for each entity listed in the instrument.  The bill states that an instrument contains excessive recording data when there are more than 20 distinct entities listed in the instrument, including any attachments and exhibits that require indexing. Senate Bill 332 has passed the Senate and was referred to the House Rules Committee.

Senate Bill 336, Estate Planning/Uniform Trust Code, would amend the law governing estate planning and fiduciaries, would amend the uniform trust code, and would establish a uniform powers of appointment act.  This bill was introduced at the request of the Estate Planning Section of the North Carolina Bar Association. The bill would, among other things, clarify the law regarding the authority of a personal representative to sell or take action with respect to real property of a decedent. The bill would enact G.S. 28A–13-3.1 to 3.3 to allow a personal representative to deal with real property without a court order.  The bill provides that a personal representative may, without court order, take possession, custody, and control of the decedent's real property and sell, exchange, give options upon, partition, lease, mortgage, or otherwise dispose of the property to the extent that the will expressly grants any of these powers to the personal representative. The bill passed the Senate, was amended and then passed the House, and was returned to the Senate to consider the House changes. The bill was referred to the Senate Rules Committee.

Senate Bill 386, Register of Deeds/UCC Recording Fees, would establish the following filing fees for UCC financing statements or other records: (a) for filing and indexing financing statements or records with two or fewer pages - $38; (b) for filing and indexing financing statements or records with more than two pages - $45 for the first 10 pages, $2 for each additional page; (c) for responding to an information request, including a communication with respect to requests for financing statement information for a particular debtor - $38. This provision would not apply to the recording or satisfaction of deeds of trust or mortgages that act as a fixture filing, or as a financing statement covering as-extracted collateral or timber to be cut as provided under G.S. 25-9-502(c). The Register of Deeds Association reports that the bill does not raise any fee, just clarifies that the filing fee for UCC financing statements filed electronically are the same as the fee for filing a physical copy. Senate Bill 386 passed the Senate and is currently in the House Finance Committee.

Senate Bill 575, NC/SC Original Boarder Confirmation, would make legislative changes to facilitate the work of the boundary commission in confirming and re-establishing the original boundary existing between the states of North and South Carolina. The bill provides that title to real property previously treated as being subject to the jurisdiction South Carolina, but that is recognized as being within the boundaries of North Carolina as a result of the certification of the boundary shall remain in full force, effect, and priority as if the title had been originally registered in North Carolina. Notwithstanding G.S. 161-14, for any portion of real property that is recognized as being within the boundaries of North Carolina as a result of certification of the boundary, and that previously has not been registered and indexed in North Carolina, the register of deeds shall register, index, and cross-index any instruments presented for registration retroactive to the effective registration date and time, as reflected by an original or certified copy of an instrument duly registered in South Carolina. In lieu of assigning a retroactive registration date and time in the index, the register of deeds may affix a statement, on a separate sheet of paper, immediately preceding the instrument presented for registration that cites this act and provides notice that the instrument shall have full force and effect as of the date of registration assigned by the South Carolina registry. The bill provides that notwithstanding any other provision of law, the register of deeds shall not collect any fees or taxes for instruments registered, indexed, or cross-indexed pursuant to this act.

The bill provides that foreclosure actions initiated on real property encumbered by a lien recorded in South Carolina wherein the real property is situated, in whole or in part, within the certified North Carolina boundaries shall be governed by the terms of the security instrument sought to be enforced. If the security instrument contains a power of sale clause, the party seeking to enforce the terms of the security instrument may initiate a foreclosure action in the county where the real property is situated pursuant to Chapter 45 of the General Statutes. A party seeking to enforce the terms of the security instrument may also resort to judicial foreclosure, pursuant to Article 29A of Chapter 1 of the General Statutes, in accordance with the terms within the security interest. Judgments or orders of foreclosure entered by courts of North Carolina are binding and effective only with respect to the portion of real property situated within North Carolina. Prior to initiating an action to enforce a security instrument, the security instrument shall be recorded in the office of the register of deeds for the county where the subject property is situated.

The bill contains various other provisions to address tax liability, licenses, permits, school enrollment, and other issues that may affect citizens who will shift into another state due to the re-establishment of the North Carolina/South Carolina boundary. The bill is identical to House Bill 834. Neither bill has been considered yet this session.

For more information about legislation described in the legislative reports, feel free to contact me at dferrell@vanblk.com or (919) 754-1171. Information is also available on the General Assembly’s website: www.ncga.state.nc.us.

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Prepared By: David P. Ferrell, Esq. - NCLTA Lobbyist

VANDEVENTER BLACK LLP

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