Month: January 2021

Some news from the transition that may affect dirt lawyers

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While we don’t all agree on politics, something we can all embrace from last week were the hilarious Bernie Sanders’ mitten memes. I saw friends from both sides of the aisle post one funny version after another. I even saw an interview that had Bernie himself laughing about them. He appears to be a good sport!  As a South Carolinian, my two favorites involved the Coburg cow and Cocky. I, for one, needed the comic relief.

There were a couple of real news items for real estate practitioners to consider.

First, the CFPB Director, Kathy Kraninger, stepped down at the request of the new administration. This blog has discussed several cases that have argued the CFPB was unconstitutionally organized as violating the separation of powers doctrine because it had a single director that could only be removed for cause. Last year, the Supreme Court held in Seila Law v. CFPB that the director can be removed at will by the president.

An interim director was named to take control until a permanent director can be confirmed. Rohit Chopra, a commissioner of the Federal Trade Association, is the choice to be the permanent CFPB Director. Stay tuned for changes that may be implemented under the new leadership. Speculation is that the bureau’s enforcement and oversight activities will be beefed up with an emphasis on COVID-related consumer relief.

Speaking of COVID relief, the Federal Housing Finance Agency has announced that Fannie Mae and Freddie Mac will extend their moratoriums on single-family foreclosures and real estate owned (REO) evictions through February 28. The moratoriums were set to expire at the end of this month.

The administration would also like to ease the current housing market pain of high home prices and low inventories by proposing a $15,000 first-time homebuyer tax credit which would serve as down payment assistance. There is also speculation that mortgage insurance premiums may be reduced.

On the other hand, mortgage rates appear to be on the rise, so it remains to be seen whether the new administration’s efforts to encourage development and home ownership will be successful.  As always, real estate practitioners will need to keep an eye on the news to assist them in predicting how 2021 will sort out on the housing front and in their businesses.

One-day error invalidates mechanic’s lien

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South Carolina’s Court of Appeals has made it crystal clear that our mechanics’ lien statutes must be strictly construed. In a case* refiled December 2, the Court affirmed the Circuit Court’s award of summary judgment because the lien was filed 91 days after the last work was performed, not 90 days, as the statute requires.

The case involved a kitchen remodel job in Columbia. The contractor was a kitchen designer who was paid not by the hour, but by the difference in the wholesale and retail cost of the products she purchased and installed. In this case, she was hired because she was the only dealer for Crystal Cabinets in the Columbia area.

The homeowner’s quote was slightly less than $50,000 plus about $3,000 for cabinet installation, payable in three installments. The homeowners paid two-thirds of the contract price but refused to pay the final installment because they were dissatisfied with the cabinets. The parties and the manufacturer were unable to come to terms. The contractor’s last work, according to its own pleadings, was performed on August 18, 2015, and the mechanic’s lien was served on November 17, 2015, a difference of 91 days. The Circuit Court granted the homeowner’s motion for summary judgment and awarded attorney’s fees, based on the one-day discrepancy.

On appeal, the contractor argued that the work actually extended beyond August 18, but the Court of Appeals held the contractor was bound by the pleadings. The contractor then argued that an amendment to the pleadings could easily cure the “slight discrepancy” between the date alleged in the lien and the actual date of the last work, but the Court held that this issue could not properly be raised on appeal. The contractor should have requested leave of the lower court to amend its pleadings.

The bottom line is that counting correctly is crucial in mechanics’ lien litigation! Be careful out there, lawyers!

* The Kitchen Planners, LLC v. Friedman, South Carolina Court of Appeals Opinion 5738, Refiled December 2, 2020.

Court of Appeals refiles order setting a timing rule on ATI exemption

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The new rule favors the taxpayer

A case* from the South Carolina Court of Appeals on August 26 concerns South Carolina Code Section 12-17-3135 which allows a 25% property tax exemption when there is an “Assessable Transfer of Interest” of real estate. The issue was one of timing, whether a property owner must claim this exemption during the first year of eligibility.

The order was withdrawn by the Court of Appeals, and a new order with the same result was refiled on December 23, 2020**. In comparing the two orders, I could find only one change, the deletion of a sentence that didn’t appear to affect the result. Perhaps someone involved in the case can point out the reason for withdrawing and refiling the order. Regardless, the Court of Appeals lets the result of its prior decision stand.

The Administrative Law Judge had consolidated two cases. In both cases, the property owner had purchased property during the closing months of 2012. Neither taxpayer claimed the ATI Exemption in 2013, but both claimed it in January of 2014. The Dorchester County Assessor denied the requests, but the ALJ decided the exemptions had been timely claimed.

The statutory language in question provides that the county assessor must be notified before January 31 for the tax year for which the owner first claims eligibility. The taxpayers argued that the plain meaning of this language allows them to choose when to claim the exemption. The Assessor argued that the exemption must be claimed by January 31 of the year following the transfers.

The Court looked at taxation of real property as a whole and held that the legislature intended that all purchasers would have a meaningful opportunity to claim the exemption. Under the Assessor’s interpretation, there would be a much less meaningful opportunity for taxpayers who purchase property later in the calendar year.

The Court also stated that the ATI Exemption is not allowed to override the appraised value set in the statutorily required five-year reassessment scheme, so there would be a built-in time limit for claiming the exemption.

* Fairfield Waverly, LLC v. Dorchester County Assessor, Opinion 5769 (August 26, 2020)

** Fairfield Waverly, LLC v. Dorchester County Assessor, Opinion 5769 (August 26, 2020); Withdrawn, Substituted and Refiled December 23, 2020.