Summer 2020

President's Message

By: Don Merritt

                                                                                    Stranger Things

Greetings once again to fellow NCLTA member companies, agents, underwriters and attorneys.  When the current year of North Carolina Land Title Association activities began, economic forecasts for 2020 were guardedly optimistic. Commercial and residential real estate development in North Carolina was healthy and projections were largely positive. The future also promised an election year surely to pose questions about that country’s economy.  All that has been replaced by a stranger upside down world of the novel coronavirus.  As remote working environments became normal and social distancing a necessity, the real estate industry enjoyed no immunity.  Legal and practical hurdles seemed to appear at every turn of a of real estate transaction.  Your NCLTA leadership and staff immediately became involved in a number of efforts to address the repercussions of the virus.  A conventional notary acknowledgement became difficult, if not impossible, given governmental orders and health concerns.  The possibility of office closures and the suspension of civil filing and document recording services became real.  Thanks to the involvement of NCLTA committees along with a number of interested industry and bar association groups, both formal and informal, solutions were achieved.  NCLTA provided a possible mechanism for real estate closings to occur despite office closures.  Once the General Assembly convened, statutory proposals drafted and vetted by the working groups were enacted.  Both the amendment to the Good Funds Settlement Act and the temporary Emergency Video Notary Act addressed the needs of our industry and were signed by the Governor and became effective on May 4, 2020.  Suggested forms and explanations of these various solutions have been posted on the NCLTA website and are available for use by member companies and their customers.  As time permits, additional information will be added including a suggested form of Power of Attorney for a client to appoint the closing attorney as his or her agent to execute loan documents for a residential closing.

Finally, in light of the fact that both of the statutory changes described above will automatically expire on August 1, 2020, unless extended by further action of the General Assembly, the NCLTA Legislative Committee along with the Legislative Committees of the Real Property Section of the North Carolina Bar Association and possibly other Bar Sections will begin to discuss the likelihood and need for a permanent remote notary statute.  Please contact me or any member of the NCLTA Executive Committee if you are interested in being involved with such a group. You can find our names and contact information on the NCLTA Leadership Tab under the WHAT IS NCLTA? => NCLTA Leadership heading on the NCLTA website (www.nclta.org) and we encourage you to contact us with any other questions, concerns or comments.

As of the date of this newsletter, the 2020 NCLTA Convention at the Omni Oceanfront Resort in Hilton Head has been re-scheduled for September 16-18, 2021. Please check the NCLTA website periodically for changes or updates to the schedule. Notices in that regard will also be sent to the membership. In the meantime, please Stay Safe.

Don Merritt, President NCLTA 2019-2020

NCLTA 2020 Convention

By: Tracy Steadman, Executive Director

Amicus Brief Update

by: Zip Edwards & Amy Hunt; Offit Kurman

C Investments 2, LLC v. Auger et al; COA 19-976; from Mecklenburg County, Case No. 18-CVS-12903 – The North Carolina Real Property Marketable Title Act and the Residential Use Only Exception.

          This case, which is currently pending before the North Carolina Court of Appeals,  centers on the question of whether certain 1952 restrictions, which at one time affected a residential subdivision in Mecklenburg County, have been rendered null and void by the North Carolina Real Property Marketable Title Act (the “Act”). The North Carolina Land Title Association has submitted an amicus brief (prepared by Zip Edwards and Amy Hunt of Offit Kurman, PA, formerly Horack Talley) in support of the appellees’ position in this case to the effect that the exception to the Act set out in N.C. Gen. Stat. §47B-3(13) is, as per its plain language and consistent with the stated purpose of the Act: (1) applicable solely to residential use only restrictions and (2) all other restrictions fall within the Act’s provisions rendering null and void those restrictions which do not appear in a property’s chain of title for 30 or more years. Below is a summary of the underlying facts in this case, a brief overview of the relevant portions of the Act, its current procedural posture in the Court of Appeals, and a high level view of why it is crucial that this exception to the Act be enforced as the appellees and NCLTA contend it was written and not expanded to effectively “swallow the rule”.

 Summary of the Underlying Facts and the Trial Court’s Ruling

The Plaintiff in this action, C Investments 2, LLC (“ C Investments”) and the Tillman defendants own parcels of property along Providence and Kuykendall Roads in Charlotte, North Carolina, in a subdivision known as Country Colony. Restrictive Covenants encumbering the lots in Country Colony were recorded in February of  1952 (the “Restrictions”). The first restriction is a “residential use only” restriction, and it provides:  “All lots in the tract shall be known and described and used for residential lots only” (the “Residential Use Restriction”).   Restrictions 2 through 9 include prohibitions on certain structures, nuisances, and subdividing and establish certain setbacks and rights of way. C Investments and the Tillmans have unbroken chains of title for 30 (or more) years, without reference to the Restrictions.

In June of 2018 C Investments filed this action against the other Country Colony lot owners, seeking a declaratory judgment that, among other things, the Restrictions, with respect to its property, were “null and void” pursuant to the Marketable Title Act, G.S. § 47B-1 et seq. (the “Act”). The Tillman defendants joined in the relief sought by C Investments. Certain defendants and C Investments/the Tillmans filed cross motions for summary judgment. Following a February 2019 hearing, Superior Court Judge Casey Viser of Mecklenburg County granted, in part, C Investments/Tillmans’ motions for summary judgment, holding that the undisputed material facts showed that they held Marketable Record Title to their lots, and therefore, by operation of G.S. § 47B-2(c), C Investment and the Tillmans’ parcels are free and clear of Restrictions 2-9 of the Restrictions.  The Court held that § 47B-2(c) did not extinguish the Residential Use Restriction because of the exception in § 47B-3(13). Certain defendants appealed the trial court’s ruling to the North Court of Appeals.

 What’s happening in the Court of Appeals?

Brief overview of the relevant Provisions of the Act

          In 1973, the legislature enacted the Act with the stated purpose of:

… provid[ing] that if a person claims title to real property under a chain of record title for 30 years, and no other person has filed a notice of any claim of interest in the real property during the 30-year period, then all conflicting claims based upon any title transaction prior to the 30-year period shall be extinguished.

N.C. Gen. Stat.  47B-1. The legislature further specified:

This Chapter shall be liberally construed to effect the legislative purpose of simplifying and facilitating real property title transactions by allowing persons to rely on a record chain of title of 30 years as described in G.S. 47B-2, subject only to such limitations as appear in G.S. 47B-3.

N.C. Gen. Stat.  47B-9.

N.C. Gen. Stat. § 47B-2 provides that if a party has a record interest in real property, comprised of a 30-year (or longer) chain of recorded documents, and nothing appears of record within that 30-year period that is contrary to the party’s interest, that party has marketable record title to the real property. Subject to specific exceptions set forth in section 47B-3, the party’s interest in the real property is free of any interests which were recorded prior to the 30-year period.

§47B-3(13) provides that the Act shall not extinguish:

Covenants applicable to a general or uniform scheme of development which restrict the property to residential use only, provided said covenants are otherwise enforceable. The excepted covenant may restrict the property to multi-family or single-family residential use or simply to residential use. Restrictive covenants other than those mentioned herein which limit the property to residential use only are not excepted from the provisions of Chapter 47B.

N.C. Gen. Stat. § 47B-3(13) (2018).

Positions taken in the Court of Appeals

Briefing in this case has closed and in short, the defendants/appellants argue that exception § 47B-3(13) excepts not only the “residential use only restriction,” but also restrictions 2 through 9 because, these defendants assert, these are restrictions applicable to a general or uniform plan of development. Community Associations Institute (“CAI”) filed an amicus brief in support of the defendants/appellants’ position. The appellees (C Investments and the Tillmans) contend that the Trial Court correctly concluded that the exception to the Market­able Title Act set out in N.C. Gen. Stat. § 47B-3(13) is applicable solely to residential use only restrictions. The North Carolina Land Title Association has submitted an amicus brief in support of appellees’ position. The briefs filed in the case are available on the Court of Appeals website (www.ncappellatecourts.org) and should be reviewed for an in depth understanding of the arguments presented by the appellees, NCLTA and the opposing parties.

Why submit an Amicus Brief?

As set out in the NCLTA’s motion to allow submission of its amicus brief:

“The issue before [the Court of Appeals] is one of first impression, and it is critical that the North Carolina Real Property Marketable Title Act be applied in accord with its plain language, its purpose, and the policy behind same. Affirmation of the trial court is necessary to accomplish this.

          The North Carolina Real Property Marketable Title Act (Chapter 47B) was enacted for the purpose of “simplifying and facilitating real property title transactions by allowing persons to rely on a record chain of title of 30 years…”. N.C. Gen. Stat. §47B-9. The Act was intended to make land freely alienable and marketable, eliminate interests in real property which were created in the public records at remote times, avoid litigation caused by these remote interests, allow real property transfers to be economical, and provide owners with certainty with respect to their title to real property. The trial court’s ruling is both a correct application of the plain language of the Act and effectuates its purpose.  In contrast, reversal of the trial court is effectively a determination that the Act does not, in fact, provide a time limit upon which title searchers and property owners can rely.  This, in turn, will lead to increased costs associated with land purchases, increased litigation over antiquated interests, and impediments to the marketability of land – impacts which are in direct contravention of the stated policy and purpose of the Act.”

           Another purpose of the amicus brief is to correct the common misconception that the Act eliminates valuable restrictions. There are many ways to protect important restrictions. For example, the statute specifically provides a means for recording a notice that preserves the restriction for an additional 30 years, or interests can be preserved simply by including specific references to restrictions in the property’s chain of title. It is absolutely false to believe that the Act, as the trial court has interpreted it, prohibits all restrictions on real property. What it prohibits, are antiquated restrictions that may not be identified within a reasonable title search period.

Current procedural status of this Case

Oral argument was originally scheduled for April 15, 2020, before an appellate panel consisting of Judges Chris Dillon, Richard Dietz, and Lucy N. Inman. In light of the various Covid-19 issues, however, the Court of Appeals has postponed the argument to a, yet to be set, later date, before the same panel. So, stay tuned!

When Everything Closes (COVID-19)

By: James Saintsing

GAP COVERAGE WHEN THE REGISTER OF DEEDS OFFICE CLOSES: A NEW APPROACH FOR RESIDENTIAL CLOSINGS

When Covid-19 arrived, it became clear that any workplace might have to close for an indefinite period – including register of deeds offices. North Carolina is fortunate in having a high percentage of counties that offer electronic recording, so that even if a register’s office closes to in-person recording, documents can still be e-recorded in counties that offer the option. However, the possibility that an entire register’s staff may be unavailable even to record documents electronically prompted several national underwriters to plan for the contingency of closing real estate sales and refinances without being able to record immediately.

Coverage of the gap between closing and recording was the solution. While gap coverage is common in many other jurisdictions, and for commercial practice in NC, it is a novelty for NC residential practitioners to rely on the owner’s undertaking and indemnity not to impair the title being conveyed before the documents can be recorded, whenever that might occur. Not only is recording before disbursement hard-wired into their practice, it is required under the NC Good Funds Settlement Act, NCGS Chapter 45A. Attorneys had justified concerns about civil liability and ethics compliance.

Since gap coverage indemnity forms developed by national underwriter companies typically did not account for closing by approved attorneys, and virtually none accounted for the NC GFSA, NCLTA’s forms committee stepped up to provide members standard forms of commitment gap requirement language and gap indemnity appropriate for NC use. These forms are optional, and must be approved by the issuer’s underwriting company. The Covid-19 gap requirement is offered in a long form and short form. In deciding whether to use the long or short form of requirement, local issuers may want to consider actors such as the availability of e-recording in the county where the property is located, as well as the relative risk at the time of commitment issuance that Covid-19 could cause widespread office closures. Some issuers provide the closing attorney a copy of the Covid-19 gap indemnity with each commitment.

The model commitment requirement language and Covid-19 gap indemnity forms are currently featured on the www.NCLTA.org landing page. 

Legislative Update

By: David Ferrell

Leadership in both chambers have indicated that they hope to finish up business for the short legislative session by the end of the week beginning June 22. However, various bills and issues remain unfinished, including tax legislation, bills to reopen various sectors of the economy, Department of Transportation (DOT) reform, and appropriations bills. The House is also working on a regulatory reform bill, which contains many of the same provisions as last year’s regulatory reform bill, which was vetoed. The State remains under Phase II of Governor Cooper’s three-part plan to reopening, with restaurants and personal care salons open at limited capacity. Various groups have sought legal and legislative relief to allow them to reopen. Governor Cooper recent vetoed a bill that would have allowed gyms and bars to reopen, citing in his veto message that government officials need the ability to swiftly act in response to an outbreak. Other reopen bills moving through the legislature include: one to reopen bowling alleys, skating rinks, and baseball stadiums; one to reopen venues, arcades, fairs, and outdoor stadiums; and one to allow Fourth of July parades and fireworks. Phase II, spelled out in Executive Order 141, is set to expire on June 26, 2020, and Governor Cooper is expected to announce further guidance and orders the week of June 22. He has indicated that relaxing restrictions under Phase III may be coming. However, Department of Health and Human Services (DHHS) Secretary Many Cohen has stated that returning to a stay-at-home order may be necessary if cases and hospitalizations continue to increase.

The Senate approved legislation to provide assistance to businesses affected by COVID-19. The bill would establish a grant program for businesses that employs at least 90% of their workforce during the COVID-19 period, has seen at least a 10% decrease in sales, and did not participate in the federal Paycheck Protection Program, the Rapid Recovery Loan Program, or the Mainstreet Loan Program. The bill appropriates $200 million for grants, and grants maybe be in amounts up to two months average payroll of a business plus 25%. Grants may not exceed $500,000. The bill also creates the “COVID-19 Increased Investment in North Carolina Program” to award grants to businesses that increase their investments in North Carolina. The “COVID-19 Local Government New Infrastructure Program” is also established in the bill, and is to be used to help local governments match and receive federal funds.
 
The House has tentatively approved the Education & Transportation Bond Act of 2020, and is expected to take a final vote on the bill the week of June 22. The legislation would put $3.1 billion in General Obligations bonds on the 2020 ballot for voter approval. The money would go to the following areas: $800 million for public school capital projects, $600 million for UNC System capital projects, $200 million for community college capital projects, and $1.5 billion for transportation infrastructure. The bill would place the bonds on the 2020 ballot as two separate questions, one for the $1.6 billion in education bonds and one for the $1.5 billion in transportation bonds. Both would require approval by a majority of the voters. Bill sponsors  claim that the bonds will allow the State to take advantage of its good credit rating and low interest rates. Bill sponsors also point out that the bonds will help boost the State’s economy, which is suffering from COVID-19 fallout. The House has traditionally been in favor of bonds, while the Senate has been more skeptical. It is not yet clear what action the Senate will take on the bill.

The House adjourned on Thursday and Senate adjourned on Friday, and both will reconvene on Monday afternoon.

BILL STATUS
House Bill 679, Rules of Civ Procedure/E-Filing and Service, was revised to allow for e-filing and e-service in civil matters. The bill was ratified and sent to Governor Cooper for his signature.

House Bill 806, HOA/Condo Pool Opening Ltd. Immunity, the bill was amended in the Senate to limit homeowners a condo owners association lability for COVID-19 infections if they open community pools. The bill was approved by the Senate and sent to the House for consideration.

House Bill 920, Condominium Association Changes, was considered and approved by the Senate Judiciary Committee on Wednesday and Thursday, and was approved by the Senate Rules Committee on Friday. 

House Bill 1072, GSC Technical Corrections 2020, passed the House, was sent to the Senate, and referred to the Senate Rules Committee. 

House Bill 1080, Revenue Laws Recommendations, was amended in the House Rules committee to establish the insurance regulatory charge applicable to insurance companies at 6.5%. The bill was approved by the House Rules Committee.

Senate Bill 315, North Carolina Farm Act of 2019-20, was signed into law by Governor Cooper. Session Law 2020-18.

Senate Bill 374, Regulatory Reform Act of 2020. The original contents of Senate Bill 374 were removed and replaced with various provisions. Among other things, the bill would extend the expiration date for the emergency video notary and emergency video witness provisions that were enacted in the legislatures COVID-19 relief bill, Session Law 2020-3, from August 1, 2020 to March 1, 2021. 

The bill would also provide that a city may require by ordinance that manufactured homes be installed in accordance with the Set-Up and Installation Standards adopted by the Commissioner of Insurance; provided that a city shall not require a masonry curtain wall or masonry skirting for manufactured homes located on land leased to the homeowner. 

The bill was approved by the House Rules Committee.

Senate Bill 595, Change to Real Property Statutes, was approved by the House Rules Committee, approved by the full House, sent to the Senate, the Senate concurred in the House changes, the bill was ratified, and sent to Governor Cooper for his signature. The bill contains the two technical changes to Register of Deeds’ statutes, but does not contain notice of settlement act provision. 

Senate Bill 720, GSC Conforming Amends./2019 Land-Use Changes, was signed into law by Governor Cooper. Session Law 2020-25.

Senate Bill 729, GSC Modernize Partition Laws, was signed into law by Governor Cooper. Session Law 2020-23.
_______________________________________
For more information about legislation described in the legislative reports, feel free to contact me at dferrell@nexsenpruet.com or (919) 573-7421. 
Information is also available on the General Assembly’s website: www.ncleg.gov.

Prepared By: 
David P. Ferrell, Esq. - NCLTA Lobbyist
NEXSEN PRUET PLLC
150 Fayetteville Street, Suite 1140
Raleigh, North Carolina 27601
Telephone: (919) 573-7421
dferrell@nexsenpruet.com
www.nexsenpruet.com

NC Cares Act

Limited Power of Attorney

Message from the Editor

By: Sharon Schlacter

The Summer 2020 Edition of the NCLTA Newsletter is attached. I hope you will find the information informative and useful in your firms and businesses. Our contributors have dedicated a great deal of time and energy in providing topics of interest to NCLTA members and we thank them. Your questions and comments are welcomed.

Executive Staff