Brief summaries of recently introduced legislation are set out below in the order of their introduction in the North Carolina Senate and House. While there have been numerous bills introduced in this session that affect real property practice, we have limited our coverage to the following at this time. Subsequent issues of this Newsletter will apprise our readers of significant legislative developments. We anticipate that our fall seminars will include an analysis and summary of significant adopted legislation as is our custom.

Senate Bill 405, House Bill 449, Report Real Property Sales Information, This bill creates N.C.G.S. Section 105-317.2 which would require the Department of Revenue to create a form whereby the following information is to be reported to a county tax assessor prior to the transfer of any real property and which would prohibit recording a deed until the report is filed:

(1) The name of each grantor and grantee.

(2) A brief description of the property.

(3) The total sales price.

(4) Whether the transaction involves family members or affiliated companies.

(5) A listing of any personal property conveyed with the transaction.

(6) Whether the transaction is the result of a forced sale.

The bill would also create a N.C.G.S. Section 161-32 which provides that a register of deeds may not accept for registration a deed transferring real property unless "the county tax assessor certifies that a sales information report"..."has been filed" in the House version or "is recorded with the deed" in the Senate version. The bill also provides that "failure to comply with this section does not affect the validity of a duly recorded deed."

Senate Bill 606, Notice to Creditors Without Administration (referred to the Senate Judiciary I Committee.) This Bill would allow for publishing a notice to creditors without requiring an estate administration when a decedent dies leaving no property subject to probate. Any person qualified to serve as a personal representative of the estate or as a trustee under the terms of the decedent's revocable trust may be appointed as a limited personal representative to provide notice to creditors. The bill would require a petition be submitted to the clerk in the form of a sworn affidavit signed by the applicant or attorney.

Senate Bill 612, House Bill 581, Partition Sales/Extend Times to Answer/Report (referred to the Senate Judiciary II Committee) This proposed bill would extend the time to file a response in a partition proceeding from 10 days to 30 days. The bill would extend the deadline for the commissioners to report their proposed division of the land from 60 days to 90 days.

Senate Bill 613, House Bill 578, Partition Sales/Commissioners, Sellers, Buyers, This proposed bill has been referred to the House Ways and Means Committee. This bill would prohibit attorneys who represent parties in a partition proceeding from serving as commissioners, holding the sale of a property or any attorneys, commissioners and appraisers purchasing any property in connection with a partition sale.

Senate Bill 614, House Bill 580, Partition Sales/Notice, Credit, Appraisal, This proposed bill has been referred to the House Ways and Means Committee. The bill requires greater notice to parties who may be unknown in a partition proceeding. It requires a petitioner's affidavit to specifically allege the due diligence in attempting to ascertain unknown or missing persons interested in the property. It requires the clerk to determine if due diligence was exercised before ordering notice by publication. The bill would require the clerk to appoint a disinterested person to represent unknown and unrepresented owners. The bill requires the clerk to order independent appraisals if requested. The bill would apportion the cost of an independent appraisal to all parties, pro rata. The bill codifies the practice of allowing owners credit for their existing interest in land when successfully bidding at a partition sale.

Senate Bill 724, Effect of Caveat on Estate Administration, (referred to Senate Judiciary I Committee) this bill would permit the continued limited administration of an estate while a caveat is pending. The bill provides for a notice, objection and hearing process, and the clerk may approve payments without hearing when no objections have been filed or when the parties consent.

Senate Bill 764, Real Estate/Settlement Agent Embezzlement, (referred to Senate Judiciary I Committee) this bill would create N.C.G.S. Section 45A-8 providing that all closing funds received by a settlement agent are trust or escrow funds received by the agent in a fiduciary capacity. It would require disbursement of closing funds only pursuant to the terms of a settlement agreement approved by the parties to the transaction. Noncompliance would be an act of embezzlement under N.C.G.S. Section 14-90 without requiring proof that the embezzled funds belong to a specific party. Under the current law, in order to support a conviction, proof must be made as identity of the owners of the specific funds embezzled rather than the group ownership in the general account where the theft occurred.

Senate Bill 795, Real Estate Disclosures Near Military Installation, (referred to Senate Commerce Committee) This bill would require that residential property disclosure statements contain high noise and "accident potential zone" warnings when the real property is located within one mile of a military installation.

Senate Bill 803, Protect Third Party Purchasers for Value, (referred to the Senate Judiciary I Committee) This proposed bill provides that a claim of lien on real property granted by Chapter 44A will not be effective against land conveyed to purchasers for a valuable consideration, including trustees under deeds of trust encumbering the real property and mortgagees, whose interest has been recorded in the office of the register of deeds prior in time to the filing of the claim of lien as provided for in G.S. 44A-12 even if after the date of the first furnishing of labor or materials to the property and the bill also increases the penalty for providing a false lien waiver to a Class H felony.

Senate Bill 812, House Bill 579, Partition Sales Buyout Options, The House version has been was referred to the House Ways and Means Committee. This proposed bill creates a purchase option in a tenant in common which would allow only respondents to purchase the petitioner's interest in the property, when the clerk determines the property cannot be divided. With permission of the court, a petitioner may withdraw and become a responding cotenant with the ability to purchase the interests of any petitioners. cotenant must notify the court of their intent to exercise the buyout option within 30 days after determining that the property cannot be divided. The bill directs the clerk to appoint independent appraisers to value the interest if the cotenants cannot agree, with the costs taxed to all cotenants, and that any cotenant may submit an appraisal at their own expense. The bill allows the petitioner to object to the appraised value of an interest subject to sale by written notice, by requesting a hearing. Cotenants who have exercised the buyout option have 45 days to close. This section would not apply to written tenants-in-common or joint tenants management agreements. This legislative scheme will very likely have the opposite effect its proponents intend. By increasing the complexity of partition proceedings, adding issues to dispute and driving up the cost, many landowners may find themselves forced off of the land by reason of pure contentiousness where they previously may have successfully bid in for fair market value.

Senate Bill 819, Abolish Certain Deficiency Judgments, (referred to Senate Judiciary II Committee) This proposed bill would abolish deficiency judgments for mortgages made on or after January 1, 2010, secured by a deed of trust on the debtor's primary residence and foreclosed under power of sale.

Senate Bill 850, Liens/Condominiums and Planned Communities, (referred to Senate Judiciary II Committee) This proposed bill is intended to provide a uniform procedure to enforce liens for condominium and planned community association assessments. It adds a new N.C.G.S. Section 47C-3-116(a3) setting out the procedures for a non-judicial foreclosure of an assessment lien. The new procedures specify notice to the unit owner, appointment of a trustee to conduct the foreclosure (with the appointment to be filed with the register of deeds and the clerk of superior court), cancellation of the lien upon payment of the assessment and all costs (including the trustee's fee) by the unit owner, power of the condominium association to bid on and acquire the unit, and payment of a reasonable fee to the trustee. The bill adds a new conforming N.C.G.S. Section 47F-3-116 for planned communities. There are also two validating statutes for non-judicial foreclosures and sales by condominium associations and planned community associations completed before October 1, 2009.

Senate Bill 900. Enable Registers Of Deeds To Protect Identity, (referred to Senate Judiciary I Committee) This proposed bill would allow registers of deeds to redact personal identifying information Internet records even in the absence of a request. Covered information would include Social Security numbers, driver's license numbers, savings/checking account numbers, credit/debit card numbers, birth dates, or any passwords or personal identification codes.

House Bill 615, Business Trusts, (referred to the House Judiciary I Committee) This proposed bill would amend the provisions of Chapter 39 governing business trusts to include Illinois land trusts and Delaware statutory trusts. The bill would enact new provisions allowing any business trust to convey or encumber real property by an instrument executed by an officer other than one of its trustees, or other authorized agent identified in a recorded memorandum or in a declaration of trust. The bill provides that this section is deemed complied with if a resolution is recorded separately in the office of the register of deeds in the county where the property is located.

Conforming with corporate execution provisions in Chapter 47, the bill provides that a recorded instrument that appears to have been signed in the ordinary course of business by a listed officer, it is deemed valid as to third parties purchasers for value without knowledge as if duly authorized by the board of trustees, unless it reveals a breach of fiduciary obligation on its face.

House Bill 720, Senate Bill 475 Amend Carrboro Charter to Conserve Energy/Water, (referred to House Local Government II Committee) This proposed bill would permit the Board of Aldermen of the Town of Carrboro to adopt ordinances prohibiting deed restrictions that prohibit solar collectors, clotheslines, rain barrels, garden fences, or any other devices designed to generate or conserve energy.

House Bill 794, Omitted Trustee Substitution, (referred to House Financial Institutions Committee) This proposed bill would amend N.C. Gen. Stat. § 45-10 governing substitution of trustees in mortgages and deeds of trust, to create a new subsection (b) providing that when the name of a trustee is omitted from a deed of trust, the instrument will be deemed to be a deed of trust, and the owners executing the deed of trust and granting an interest in the real property will be deemed to be the constructive trustee or trustees of record for the secured party. The bill then authorizes a substitution of trustee under the provisions in N.C. Gen. Stat. § 45-10(a).

House Bill 799, Unequal Shares in Joint Tenancy Survivorship, (referred to House Judiciary II Committee) This proposed bill would clarify that interests in a joint tenancy with a right of survivorship may be held in unequal shares. The statute will contain a presumption that the interests of the grantees is equal unless otherwise specified in the conveyance, that any grant of a joint tenancy interest to a husband and wife, is deemed to be single share held as a tenancy in the entirety unless otherwise specified and that the interests of three or more joint tenants held in unequal shares are to be divided among the surviving joint tenants according to their respective pro rata interest upon the death of one joint tenant unless the grant provides otherwise. The bill validates prior unequal tenancies and provides that prior distributions will not be disturbed.

House Bill 800, Renunciation (referred to House Judiciary I Committee) This proposed bill would amend the law dealing with renunciations and make conforming amendments to the laws governing estate administration, powers of attorney and the North Carolina Uniform Trust Code. The bill makes it clear that the spouse of the renouncing party is not required to join in and the spouse has no statutory dower, inchoate marital rights, elective share, or any other marital interest in the interest renounced. Importantly, the bill provides that failure to file or register the instrument of renunciation does not affect the effectiveness of the renunciation as between the person whose property or interest is being renounced and persons to whom the property interest or power passes by reason of the renunciation; however, record title to a renounced interest in real property does not pass to persons receiving the renounced interest by reason of the renunciation until the instrument of renunciation is registered.

House Bill 806, Notice on Liens for HOA Assessments, (referred to House Commerce Committee) This proposed bill would require the association to make reasonable and diligent effort to ensure that its records contain the lot owner's current mailing address, that notices of a claim of lien for assessments filed by a homeowners association be served on the lot owner in the same manner as service of a summons in a civil action and that the association must produce an affidavit of service in any foreclosure proceeding.

House Bill 1060, Senate Bill 1015, Homeowners Protection Act, Land Installment Contracts This proposed bill would regulate installment sales contract lending on property that will be the purchasers' primary residence. It would include option contracts executed concurrently with a residential lease agreement, but would exclude contracts providing for a standard purchase money deed of trust. There is a requirement for inclusion of specific information from a list of seventeen items in a written contract and any down payment must be immediately deposited in a insured trust or escrow account until either the vendor conveys the property or the agreement is cancelled with a trebled recovery by the purchaser for failure to do so. The agreements will be subject to the protection of Chapter 42 as a residential lease as well as 47G. They will be subject to a right of rescission and reinstatement rights in the purchaser.

Late fees are limited to a maximum of 4%. Upon default, the vendor must serve notice pursuant to N.C.G.S. Section 1A-1, Rule 4. The notice must provide a 90 day right to cure, otherwise purchaser's rights shall not be forfeited, and the purchaser will be entitled to a claim for damages or the right to rescind the contract and seek the return of all payments that have been made under the contract less rental value.

The notice of intent to forfeit shall contain all of the following:

(1) The name, address, and telephone number of the vendor and the vendor's agent or attorney giving the notice, if any.

(2) A description of the contract, including the names of the original parties to the contract.

(3) A legal description of the property.

(4) A description of each default under the contract on which the notice is based.

(5) A statement that the contract will be forfeited if all defaults are not cured by a date stated in the notice which is not less than 90 days after the notice of intent to forfeit is sent or any longer period specified in the contract or other agreement with the vendor.

(6) An itemized statement of, or to the extent not known at the time the notice of intent to forfeit is given or recorded, a reasonable estimate of all payments of money in default and, for defaults not involving the failure to pay money, a statement of the action required to cure the default.

(7) Any additional information required by the contract or other agreement with the vendor.

The vendor will have to provide the purchaser with a statement of account at least annually and must hold unencumbered legal title unless agreed to as a condition of a loan obtained to place improvements on the property or is for purchase money and the vendor, notifies the purchaser in of the following a separate written disclosure three days before the date the contract is executed,:

1. Of the name, address, and telephone number of the lienholder or, if applicable, the servicer of the loan.

2. Of the loan number and outstanding balance of the loan.

3. Of the monthly payments due on the loan and the due date of those payments.

4. In 14-point type, of the fact that if the vendor fails to make timely payments to the lienholder, the lienholder may attempt to collect the debt by foreclosing on the lien and selling the property at a foreclosure sale.

And the lienholder:

1. Does not prohibit the property from being encumbered by a land installment contract; and

2. Consents to verify the status of the loan on request of the purchaser and to accept payments directly from the purchaser if the vendor defaults on the loan.

A violation of this section will be a violation of G.S. 75-1. Additionally, violation entitles the purchaser to cancel and rescind the contract and a return of all payments of any kind made to the vendor under the contract plus reimbursement for taxes paid and improvements made by the purchaser.

Wally Wiseacre was a student at the Blackstone School of Law correspondence degree program and had just finished studying about Easements and Access in his Real Property Course.  The section on Cartways caught his attention because his uncle had a piece of land that did not have legal access to it.  Wally, ever the brilliant lawyer wannabe, thought of a solution to his uncle Earl's problem that he just thought was exceptional.  He pulled a copy of the Cartway statute and showed it to his uncle.  It read as follows:

§136-69. Cartways, tramways, etc., laid out; procedure.

(a)       If any person, firm, association, or corporation shall be engaged in the cultivation of any land or the cutting and removing of any standing timber, or the working of any quarries, mines, or minerals, or the operating of any industrial or manufacturing plants, or public or private cemetery, (emphasis added) or taking action preparatory to the operation of any such enterprises, to which there is leading no public road or other adequate means of transportation, other than a navigable waterway, affording necessary and proper means of ingress thereto and egress therefrom...

The part that caught Wally's eye was the sentence that read "private cemetery".  His aunt Dora had passed on several years before and Wally's uncle kept her cremated remains in an urn.  But suppose the uncle designated a portion of the land as a private cemetery and placed aunt Dora's remains on it, wouldn't he then be granted access to this land under this statute?  Uncle Earl would be able to build his new dream house on the property, and, in time, Wally would be the recipient when the uncle went on to be with Dora.

Uncle Earl wasn't born yesterday, and although he respected his nephew's opinion as a student at a prominent correspondence law school, he decided to verify what Wally had told him about setting up a private cemetery.  Sid Smartlawyer listened to Earl and then explained to him that the Cartways granted under the statute were intended to be used only for the purposes designated in the statute.  In other words, a Cartway granted for a private cemetery could only be used for cemetery related purposes, not a residential use as Earl intended.  "But couldn't I build the house and be like a cemetery caretaker" ,Earl had asked.  Sid explained that the problem with that was that he had only one memorial, that of his wife and that hardly constituted a cemetery in the law's eyes.

But Sid was a smart lawyer for a reason.  He had another idea that he wanted to run by Earl.  There was another statute that might help him.  N.C.G.S §136-96.1, titled Special proceeding to declare a right-of-way dedicated to public use provided:

(a) A special proceeding under Article 3, Chapter 1 of the General Statutes may be brought to declare a right-of-way dedicated to public use if:

(1) The landowners of tracts constituting two-thirds of the road frontage of the land abutting the right-of-way in question join in the action;

(2) The right-of-way is depicted on an unrecorded map, plat, or survey;

(3) The right-of-way has been actually open and used by the public; and

(4) Recorded deeds for at least three separate parcels abutting the right-of-way recite the existence of the right-of-way as a named street or road.

Sid explained that they should try and get the neighbors whose property fronted on the old country road to join in a petition before the Clerk of Court to have the road declared a right of way dedicated to public use.  All they would need would be to have the right of way surveyed and then he would check the titles of these other owners to make sure that deeds for three parcels made reference to that old country road in their description. They would also need to get affidavits showing others had used the road but Earl didn't see a problem with that.  Sid promised to get back with Earl in a few days and let him know what he had found out.  In the meantime, Earl would be contacting the neighbors.  Earl left Sid's office feeling better that he might be able to realize his dream of building a new home on property that he had thought was worthless because it didn't have a recorded right of way.