September Charity Luncheon Reminder
Photo by Michael Mulligan
We’ll have our September charity luncheon on Wednesday, September 2. Our sponsored charity will be Hand Tools for Hope. Hand Tools for Hope gets hand tools to those in need in Third World countries. As always, there will be plenty of good food. Please bring a hand tool or donation if you are able to do so. We look forward to seeing you all on Wednesday!
–Russ DeMott
Like Getting Smacked with a Mallet
Photo by Michael Mulligan
Transferring property to your children to avoid probate causes a multitude of legal problems. See my recent post on Bankruptcy Law Network for a brief discussion on why this is such a bad idea. http://www.bankruptcylawnetwork.com/2009/08/10/transferring-property-to-avoid-probate-like-getting-smacked-in-the-head/
August Charity Luncheon Reminder
Photo by Michael Mulligan
Just a reminder that we’re having our August charity luncheon this Wednesday, August 5 at noon. We took a month off in July and are looking forward to seeing you all again. Our sponsored charity is Operation Home, which makes emergency home repairs for disadvantaged residents of Berkeley, Charleston, and Dorchester counties.
We look forward to seeing you!
–Russ DeMott
Got a Dog of a Business Picture?
My good friend and photographer, Tammy Wolfe, will be taking pictures right here in my office on July 31 and August first. My daughter, Marissa, is just completing an internship with Tammy up in Pennsylvania. Tammy and her business partner, Tamar London, have some slots available for professional head shots. So if your pics are a bit out-of-date, give them a call. They also specialize in digital photo editing, so they’ll make you look your best (and then some)! There are also slots available for senior pictures and family pictures in Azalea Park. THERE IS NO SITTING FEE! If you don’t like the pictures, you owe nothing. Their website is: www.londonwolfe.com. See below for more information.
–Russ DeMott
Can’t Get No Satisfaction (Part Two)
Photo by Michael Mulligan
In my last post, “Can’t Get No Satisfaction (Part One),” we examined the legal effect of an unsatisfied mortgage. This post will address one commonly used solution to an unsatisfied mortgage, as well as the penalties a lender faces under South Carolina law for failure to satisfy a mortgage once full payment has been made.
First, if there’s no satisfaction recorded, you should contact the prior closing attorney. If the attorney paid off the mortgage at closing, the attorney may issue an “Attorney Satisfaction.” See S.C. Code Ann. §29-30-330. When the Attorney Satisfaction is recorded, it has the same legal effect as if the lender recorded the satisfaction; that is, title is rendered marketable.
Second, South Carolina law has a stiff penalty for lenders who fail to issue a satisfaction once the mortgage note is paid in full and the borrower has made a valid request for the satisfaction. If the lender fails to satisfy the mortgage within three months of a valid request, the lender must pay the borrower either $25,000 or one-half of the mortgage note amount, whichever is less, along with any other damages, costs, and attorney’s fees. See S.C. Code Ann. §29-3-320.
The South Carolina Supreme Court recently outlined the process of triggering the lender’s liability in Dykeman v. Wells Fargo Home Mortg., Inc. (S.C. 2009) 2009 WL 294745. The Court held that for the penalty to apply, a borrower must show: “(1) that he has made full payment of his debts, including any applicable damages, costs, and charges, (2) that he has made a ‘request by certified mail or other form of delivery’ that the mortgage be satisfied of record, (3) that he has made a ‘tender of fees of office for entering satisfaction,’ and (4) that the mortgagee has failed to ‘enter satisfaction in the proper office on the mortgage’ within three months of the request.” The request for satisfaction has no standard format, and need only convey an “affirmative desire” on the part of the borrower to have the mortgage satisfied. The fee required to record a mortgage satisfaction in South Carolina is $5.
–Russ DeMott
Can’t Get No Satisfaction (Part One)
Photo by Marissa DeMott
You’re headed toward the finish line. The goal: closing. You’ve taken all the precautions, done all the leg work. Maybe it’s your first closing, so you’ve got your helmet on and your training wheels attached. You’re moving right along. Then it happens: there’s a missing mortgage satisfaction. A Big Fat Title Defect.
I confess that whenever I hear my staff say “we’re missing a satisfaction,” I just can’t help but think of Mick Jagger’s song “(Can’t Get No) Satisfaction.”
When I’m drivin’ in my car
and a man comes on the radio
he’s tellin’ me more and more
about some useless information
supposed to fire my imagination.
I can’t get no, oh no no no.
Hey hey hey, that’s what I say.
I can’t get no satisfaction,
I can’t get no satisfaction.
‘Cause I try and I try and I try and I try.
I can’t get no, I can’t get no.
I’m also reminded of my mother’s frequent rebuke to me for using double negatives. “Can’t get no” is a double negative that my mother-a school teacher-hated. Mom wouldn’t appreciate Mick Jagger’s poetic license with the English language.
Why is a missing mortgage satisfaction a problem? Because the mortgage is a lien on the property until it’s satisfied. It follows the property. This means that if Jones owes a mortgage on the property at the time he sells to Smith, Smith now owns property with that same mortgage on it. And if the mortgage is not paid, the lender can foreclose on Smith’s property, even though Smith is not personally liable for the underlying debt. Clearly, Smith did not acquire marketable title to the property. (See my prior post on Insurable and Marketable Title.) So if we find a mortgage on the seller’s property, we need to find a corresponding satisfaction to ensure that the buyer isn’t buying property with a huge title defect. Just like biscuits and gravy, mortgages and satisfactions go together.
Under South Carolina law, a mortgage continues to be a lien on real estate for 20 years beyond the maturity date stated in the mortgage. For example, if a 30-year mortgage were granted in 1963, it would mature in 1993, and would continue to be a lien on the property until 2013 (unless it were satisfied or otherwise canceled before then). If there is no maturity date stated, the mortgage only continues to be a lien for 20 years from the date the mortgage was granted.
In part two, we’ll examine some solutions resolving situations in which an unsatisfied mortgage remains a lien on the property.
–Russ DeMott
Closing Attorney Does Not Represent Lender
Photo by Michael Mulligan
Today, the South Carolina Ethics Committee issued Ethics Advisory Opinion 09-07. The Committee addressed the issue of whether, in a routine residential closing, the closing attorney has an attorney-client relationship with the lender. The Committee said the attorney does not act as an attorney for the lender unless the lender is relying on the closing attorney for more than simply closing the transaction. Specifically, the Committee stated:
A ‘standard real estate closing’ means a residential real estate closing where Borrower has chosen and retained Lawyer and a sophisticated institutional Lender is providing financing evidenced by a loan package prepared in advance by the Lender and forwarded to the closing attorney for execution. While the Lawyer has an obligation to explain the documents proffered by Lender to the Borrower, Lender’s instructions that Lawyer ensure that its documents be properly executed does not, in and of itself, create an attorney-client relationship between Lender and Lawyer.
The Committee did note that the results would be different when the attorney has an ongoing business relationship with the lender. ”A business relationship,” the Committee stated, “does not exist when Lawyer is not employed or engaged by Lender, has not drafted Lender’s closing package, and has not provided a legal opinion to Lender on the quality or legitimacy of the documents contained in Lender’s closing package.”
Many attorneys have incorrectly concluded that a closing attorney acts as attorney for the lender, despite the fact that the overwhelming majority of lenders only view the closing attorney as a title agent. Furthermore, the opinion comports with the South Carolina Consumer Protection Code, which requires lenders to allow borrowers to choose their own attorney for the closing. See S.C. Code Ann. 37-10-102(a). To suggest that the closing attorney represents a lender who is forbidden by statute from choosing the closing attorney is illogical. More importantly, if a closing attorney were deemed to be an attorney for the lender, the attorney would be unfairly exposed to liability even though the lender has sole control over drafting and selecting closing documents for the borrower to sign. Accordingly, the Committee’s common-sense approach to this issue is a welcome development.
–Russ DeMott
Thank You to My Friends
Photo by Marissa DeMott
Now that I’ve been blogging for about two months, I’d like to say thank you to some friends of mine who have helped me along the way.
First and foremost, I’d like to thank my good friend Dave Walker. Dave is both a true friend and a talented website designer and software programmer. Dave has helped me understand how to operate the blog, which is no small task since I had never done one before. He has taken a generic Word Press theme and added to it to make it look great. The house in the shopping cart at the top was Dave’s idea. Check out Dave’s website at http://www.interfacevisuals.com. He’s also almost finished designing a bankruptcy website for me, which will hopefully launch in about two weeks. Dave is a patient man who wants his clients to be happy. He’s been great to work with, and I can’t say enough good things about him. Thanks for all your hard work and advice Dave!
Second, I’d like to thank Michael Mulligan for the photos he’s given me for the blog. As many of you know, Mike is the technological force behind The Mulligan Team. His photos are exceptional, and they have helped give the blog strong visual appeal. Mike recently gave me some more photos, and I look forward to using them. He does a jaw dropping great job, and I’m amazed at his talent. Keep the photos coming, Mike!
I’m also getting photos from a friend of mine, Kim Held, who is an amateur photographer. She took that great shot of the Cooper River Bridge I used in the post on insurable and marketable title.
Likewise, my daughter Marissa took the photo you see above. Marissa sees things others don’t. As she said today, “looking and seeing are two different things.” Marissa is passionate about photography and will being doing an internship with a high school friend of mine, Tammy Fowler Wolfe. Tammy is a professional photographer in Pennsylvania. Check out Tammy’s amazing work at http://www.londonwolfe.com.
Last but not least, there are others who have helped me with ideas and editing. Thanks very much to all of you!
–Russ DeMott
But I Paid the Rent!: Protecting Tenants at Foreclosure Act of 2009
Photo by Michael Mulligan
There is good news for any tenant facing eviction after foreclosure. The Protecting Tenants at Foreclosure Act of 2009, which became law on May 20, guarantees almost all tenants at least 90 days after receiving notice of foreclosure before they can be evicted from their homes. This applies even to month-to-month leases. And even better news for some tenants is that they may be able to remain in their homes for the remainder of their lease terms, giving them an opportunity to make alternative housing arrangements. Of course, this does not bode well for lenders, who may find themselves reluctantly managing rental properties over the next three years.
So if you’re the tenant, how do you know how long you can stay in the house if the bank forecloses?
- If the new owner plans to use the property as a personal residence, you get at least 90 days to vacate. If you’re living in the property month-to-month, you also get 90 days to vacate.
- If your lease is up next month, guess what? You still get 90 days to vacate.
- If, however, the new owner isn’t going to use the property as a personal residence, you get to stay in the home until your lease expires.
One important point: leases have to be “bona fide” in order for the tenant to qualify for this protection. If you’re living in the house for a dollar a month because your cousin really likes you (or because he lost a bet), you’re probably not protected by this Act. To be considered a bona fide lease, three requirements must all be met: “(1) the mortgagor or the child, spouse, or parent of the mortgagor under the contract is not the tenant; (2) the lease or tenancy was the result of an arms-length transaction; and (3) the lease or tenancy requires the receipt of rent that is not substantially less than fair market rent for the property or the unit’s rent is reduced or subsidized due to a Federal, State, or local subsidy.” Consequently, new owners may have a valid defense in some circumstances.
Check out the National Low Income Housing Renters in Foreclosure Toolkit at http://www.nlihc.org/template/page.cfm?id=227
–Russ DeMott
Insurable Title and Marketable Title
Photo by Kim Held
Every few months I get a call from a realtor or a client asking me to explain the difference between “marketable title” and “insurable title.” Usually, this comes up in connection with some particular title issue that has either been disclosed by the seller or that our office has found during our title search.
“Marketable title” is the gold standard in title quality. My colleague Claire Manning, dirt lawyer extraordinaire and author of the Handbook for South Carolina Dirt Lawyers, describes marketable title as title which would pass without objection by the most conservative lawyer. In my mind, being from Michigan, I think of marketable title as being pure as the driven snow. (If you’ve ever had to deal with snow in your life, you know what I mean. If not, well, you’re lucky.) In short, marketable title is close to perfect. One more thing: when we use the term “marketable” or “marketability” we are not referring to whether the property can be sold. There is no prohibition against selling property with title problems, and on rare occasions, a buyer decides to purchase property with very serious title defects. Marketable in this context solely relates to title quality.
“Insurable title,” on the other hand, is a description meaning that the title may have problems, but not such troublesome ones that they would prevent the issuance of a title policy on the property. In short, it’s not close to perfect, but it’s not riddled with horrible problems, either. The most conservative lawyer you know-and maybe some not-so-conservative lawyers too-would not view the title as marketable. However, insurable title, even if not marketable, is of good enough quality for a title insurance company to insure. The title insurance company will note the particular issue in the “exceptions section” of the policy but still give “affirmative coverage” over the title defect.
Some examples may be helpful. A tax sale in the chain of title, depending on how long ago the sale occurred, could render the title unmarketable, uninsurable, or both. For example, if the tax sale occurred within the last five years, the title will certainly be both unmarketable and also uninsurable. That’s because if the tax sale was not done properly-and many aren’t-the property owner who lost the property for unpaid taxes may be able to successfully set aside the sale. Bottom line: no title insurance company will insure over a recent tax sale and no competent lawyer would conclude the title was marketable or even insurable.
However, if we change the facts a bit, the results change. Let’s say the tax sale occurred 28 years ago. Our “most conservative lawyer” would still say that the title is not marketable. Despite being unmarketable, though, many title insurance companies would insure over the title defect.
Why? Title insurance, just like property and casualty insurance, is about managing risk. No insurance company wants to “buy a claim,” but insurance companies stay in business by collecting premiums. Therefore, if the risk is small enough, the title insurance company will, in essence, bet that there will be no claim made and insure over the defect. Insuring a title with a 28-year-old tax sale would almost certainly be a safe bet.
Let’s change the facts again. What if the tax sale occurred 48 years ago? Would the title still be unmarketable? No. South Carolina, like most states, has a 40-year marketable title act. This means that defects in title more than 40 years old are not defects which render the title unmarketable. So the title in this example would be marketable and, of course, insurable.
Other title defects that might render a title unmarketable include judgments, unsatisfied mortgages, and various liens. Depending on the facts, these title defects might also render the title uninsurable.
In other areas of the country, marketable title has been redefined as insurable title. In other words, if the title insurance company will insure it, it’s deemed marketable. In our example, a tax sale from 28 years ago could not be used by the buyer to terminate the contract due to title not being marketable. The contract redefines marketability.
In the Charleston, South Carolina area, however, marketability tends to be the standard. Our Charleston (CTAR) “form contract,” left unmodified, requires marketability in order for the contract to be binding on the purchaser. Still, understanding the difference between marketability and insurability is important, and giving the buyer the option of accepting insurable title may be a way to save a transaction.
–Russ DeMott
