Month: February 2017

SC Dirt lawyers: check your documents

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SC Supreme Court issues opinion that may keep us up at night!

Are the words “developed” and “improved” used interchangeably in your form real estate documents?  You might want to pull your documents to check based on a recent South Carolina Supreme Court case.*

The Supreme Court affirmed a Court of Appeals decision finding property had not been developed into discrete lots entitling them to voting rights under a set of restrictive covenants. While the two courts agreed on that determinative point, the Supreme Court felt the need to clarify the Court of Appeals’ opinion that may be read to “conflate” the terms “developed” and “improved”. (The only word that was unclear to me was “conflate”, which I now know means to combine two or more concepts into one.)

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The Supreme Court cited a 2007 Washington state opinion for the definition of “developed”: conversion of raw land into an area suiting for building, residential or business purposes. Improving land is subject to a higher threshold, according to the Court, and would require such actions as installing utilities or buildings.

Chief Justice Pleicones and Justice Few concurred, and the Chief wrote a separate opinion for the sole purpose of expressing concern that dictating the meanings of the terms “developed” and “improved” may inadvertently alter the meaning of documents or create a conflict with legislative enactments. He used a subsection of a statute dealing with mechanics’ liens as an example.

South Carolina Code Section 29-6-10 (2) contains the following definition of “Improve”:

 “Improve means to build, effect, alter, repair, or demolish any improvement upon, connected with, or on or beneath the surface of any real property, or to excavate, clear, grade, fill or landscape any real property, or to construct driveways and roadways, or to furnish materials, including trees and shrubbery, for any of these purposes, or to perform any labor upon these improvements, and also means and includes any design or other professional or skilled services furnished by architects, engineers, land surveyors and landscape architects.”

That definition is written as broadly as possible to protect the interests of any professional who provides labor or services in connection with developing, I mean improving, real estate.

The underlying Court of Appeals opinion** indicated that platting separate lots on paper without further steps did not rise to the level of the term “develop”, which, according to the Supreme Court, is a lower threshold than the term “improve”, which, according to the statute, includes platting. Do you see the Chief’s concern? I certainly do! Good luck with those documents!

*Hanold v. Watson’s Orchard Property Owners Association, Inc, South Carolina Supreme Court Opinion 27702 (February 15, 2017)

**Hanold v. Watson’s Orchard Property Owner’s Association, 412 S.C. 387, 772 S.E.2d 528 (2016)

IRS issues urgent warning about W-2 phishing scam

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On February 2, the Internal Revenue Service issued an urgent alert to all employers about a W-2 email phishing scam. The scam was launched in 2016 but has been expanded this year, according to the bulletin, which can be read here.

The bulletin warned that cybercriminals employ a number of spoofing techniques to create an email that appears to originate from an organization’s executive. The email is sent to employees in human resources and payroll departments, requesting a list of employees and their W-2 forms. These forms, of course, contain identifying information including addresses and Social Security numbers.

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Last year, the scam targeted the corporate sector, but this year, the scam appears to be spreading to school districts as well as nonprofit and tribal organizations. Another twist is that the cybercriminals may follow with emails requesting wire transfers. Some companies have lost funds in addition to sensitive information. Some organizations report having received these emails in 2016 and 2017.

The IRS memo urges employers to be vigilant and to share this information with their payroll, finance and human resources departments. Organizations should report incidents to phishing@irs.gov with a subject line of “W2 Scam” and should file a complaint with the Internet Crime Complaint Center (IC3).

Individuals whose W-2 forms have been stolen should take the actions set out in www.identitytheft.gov or www.irs.gov/idenditytheft.  They should also file a Form 14039, Identity Theft Affidavit, if a tax return is rejected because of a duplicated Social Security number.

IRS Commissioner John Koskinen said, “This is one of the most dangerous email phishing scams we’ve seen in a long time. It can result in the large-scale theft of sensitive data that criminals can use to commit various crimes, including filing fraudulent tax returns. We need everyone’s help to turn the tide against this scheme.”

A useful SCDOT website for South Carolina dirt lawyers

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opposite-road-signs-sc-dot My colleague Tom Dunlop recently shared a South Carolina Department of Transportation website with me that is a nifty tool for determining whether the DOT maintains a road.  Check out the site here.

I entered my own street, Chimney Hill Road, and found out that the DOT does not maintain my street but that I could get more information from the Resident Engineer’s office at 803-786-0128. (I know Chimney Hill Road is marginally maintained by the City of Columbia from watching the repair of the pothole in front of my house at least annually.)  Here’s what the website shows:

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Then, I tried Garners Ferry Road (U.S. 76) and learned that the DOT does maintain this road.  Here’s the map:

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Trying another County, I entered one of my favorite roads (the road to the beach!), Highway 17 (Ocean Highway S) in Georgetown County. This road is maintained by the DOT, and the phone number for the local office, for more information, is 843-546-2405.

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Turning to the upstate, I tried Woodruff Road (SC 146) in Greenville County and learned that this road is maintained by the DOT, and the phone number for the local office, for more information, is 864-241-1224.

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I hope this website will provide real estate closing attorneys with some quick information when road maintenance becomes an issue.

Can you be sure your real estate agent is not a serial killer?

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Maybe not! A recent South Carolina arrest brings this terrifying issue to light. Consumers visit houses accompanied only by real estate agents in South Carolina every day. Is this practice safe?

In November, Todd Kohlhepp was arrested in connection with the deaths of three individuals whose bodies were found on his property in Woodruff. Investigators were on his property near Wofford Road when they heard banging. They found a kidnap victim alive inside a large metal container “chained like a dog”. The victim had been missing for two months.

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Todd Kohlhepp – photo by myfox8.com

Kohlhepp was charged with three counts of murder, three counts of possession of a weapon during the commission of a violent crime, and one count of kidnapping. Kohlhepp is also alleged to be connected with four slayings in 2003 at Superbike Motorsports in Spartanburg.

Kohlhepp was a South Carolina licensed real estate agent. Real estate agents in South Carolina are licensed by the Department of Labor, Licensing and Regulation (LLR). A November 7 “Housing Wire” article asks how Kohlhepp got his license. The article quotes a prior article in “FOX Carolina” to the effect that LLR had stated Kohlhepp applied for a real estate license in 2006.

A background check was not required for the application. LLR’s website indicates an applicant who has been convicted or a crime must reveal that fact on the application and that the Real Estate Commission may review the application and conduct an investigation which may result in a delay in processing.

Kohlhepp had, in fact, been convicted of a 1986 kidnapping and rape in Arizona and had served 15 years in prison. But on his LLR application, according to FOX Carolina, he explained:

“I entered into a verbal agreement with my girlfriend who was also 15 at the time. I was charged with felony kidnapping due to the fact that I did have a firearm on me.”

He obtained the license and eventually established a firm of twelve agents and a reputation for being successful, professional, out-going and hard working. He was called a great salesman. He looked the part! He dressed well. He drove expensive cars.

What’s the lesson here? Consumers should eunderstand that a real estate agent’s license is no indication that the person who shows a home is honest and trustworthy.  Paying proper respect to the many, many wonderful real estate agents I know, however, it should be noted that we have seen cases in other parts of the country where real estate agents were harmed by their clients.

Unfortunately, for both sides of this equation, caution should be exercised in these situations of one-on-one contact with strangers in confined locations. Ask your friends for referrals. Do some on-line digging about the person you are about to meet. Take a business associate. Take a friend. Take your scary-looking cousin. Shoot, take your whole family. Schedule meetings during daylight hours. Let your business associates, friends and family know where you are, who you are with and how long you should be there. Keep your cell phone in your hand.

The good news is that this particular former real estate agent, who has confessed to the crimes, is likely to be off the streets permanently.