Month: May 2021

South Carolina legislature passes “IPEN” electronic notary law

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Don’t know what that is? Neither did I!

South Carolina rarely leads the pack when it comes to innovation, and we certainly didn’t break our streak with the early passage of an electronic notarization law. When we did pass legislation, it undoubtedly wasn’t the RON (remote on-line notary) legislation we need to move into this century. Instead, we have “IPEN” legislation—in person electronic notary, a term I had never heard. Why do we need in person electronic notarization when old fashion notarization is easier?

Doing my best to put a positive spin on this idea, perhaps we have taken baby steps.  Our legislature passed the South Carolina Electronic Notary Public Act on May 13, and Governor McMaster signed it into law on May 18. Our Code was amended to add Chapter 2 to Title 26. Chapter 1 was also amended.

At first blush, the new law does appear to be RON legislation, but buried deep inside is the requirement that signatory be in the notary’s presence. This provision defeats the whole purpose of RON legislation.

The last time I was at an in-person seminar with a roomful of South Carolina real estate lawyers where the topic of RON was discussed (and that seminar was pre-COVID, so it’s been awhile), several lawyers pushed a collective panic button and encouraged the group to lobby against this idea because they believed RON legislation may lead to electronic notaries, not South Carolina lawyers, supervising closings.

The new law specifically addresses that issue. Section 26-1-160 was amended to add Section 5, “Supervision of attorney”, which reads, “Nothing in this act contravenes the South Carolina law that requires a licensed South Carolina attorney to supervise a closing.”  Maybe this is the baby step we need. If lawyers are assured that this provision will be included in RON legislation, they may support that legislation.

Implementing the new law we do have will not be a simple process. Our Secretary of State has significant work to do to get ready to receive applications for registration of electronic notaries. The Secretary of State must create the regulations necessary to establish standards, procedures, practices, forms and records relating to electronic signatures and seals. The regulations must create a process for “unique registration numbers” for each electronic notary. The Secretary of State must approve “vendors of technology.”

Each electronic notary must secure an electronic signature, an electronic journal, a public key certificate and an electronic seal. A form called a “Certificate of Authority for an Electronic Notarial Act” must accompany every electronic notarization. I’m not sure any of this is worth the effort unless it facilitates the implementation of true RON legislation that may be passed in the future. The earliest the new legislation can be considered is January of 2022.

South Carolina dirt lawyers: let’s get behind RON legislation with the provision requiring lawyers to continue to supervise closings. We really don’t have anything to lose, and there is much to gain!

Special thanks to Teri Callen, professor and dirt lawyer extraordinaire,  who helped me figure out what is going on with this legislation!

Lexington County’s subdivision suspension stricken…and then reinstated

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This blog discussed on April 22 Lexington County Council’s move to suspend all new subdivision applications for six months. The Council indicated it planned to review its standards during the six-month moratorium. The ordinance applied to applications to develop ten or more lots for new housing, subdivisions with lots of less than half an acre, and developments with some “attached land use activities.”

There has been quite a lot of activity on this topic since the ordinance was initially passed.

In a suit brought by The Building Industry Association of Central South Carolina, Circuit Court Judge Debra McCaslin on May 4 struck down the ordinance, stating the closed-door executive session violated the Freedom of Information Act. The County argued that the ordinance was proper as an emergency measure because of the impact of new subdivisions on schools, roads and county services.

On May 6, the Council reinstated the moratorium but eliminated subdivisions of less than half an acre.

Completed applications will continue to move through the system.

We have seen other counties and municipalities impose similar freezes. Notably York County and Hilton Head Island have taken similar action in the past.

We are in the middle of a “sellers’ market”, with inventory in housing being a major impediment to residential sales. This moratorium is likely to exacerbate that situation in the midlands.

D.C. Federal Court vacates CDC’s eviction moratorium

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…. then temporarily stays its ruling

This blog reported in early April that the Centers for Disease Control and Prevention (CDC) had extended the national moratorium on residential evictions through June 30. The U.S. District Court for the District of Columbia issued an order on May 5 vacating the moratorium, but later in the day temporarily stayed its own ruling to give the Court time to consider the merits of the arguments on both sides. The result of the stay is that the eviction moratorium remains in place for the time being.

The suit* resulting in these remarkable rulings was brought on November 30 by two trade associations, the Alabama and Georgia Associations of Realtors, and by individuals who manage rental properties. The complaint raised several statutory and constitutional challenges to the CDC order. Both parties filed motions for summary judgment. The plaintiffs’ motion was granted on the grounds that the CDC had exceeded its authority by issuing the broad moratorium. The Department of Justice filed an emergency appeal within hours.

The Court asked for a defense response this week and a reply from the government by May 16, so it is likely that a new order will be issued soon. But with the moratorium’s expiration date of June 30, a new ruling will have little, if any, effect. 

In addition to the national moratorium, some state and local laws restricting evictions remain in place.

The Court’s order vacating the moratorium pointed to the unprecedented challenges for public health officials and the nation caused by the COVID-19 pandemic. The difficult policy decisions, like the decision to impose the moratorium, have real-world consequences, according to the Court. The Court stated that it is the role of the political branches, not the courts, to assess the merits of such policy decisions. The Court perceived the question before it to be very narrow:  does the Public Health Service Act grant the CDC the legal authority to impost a nationwide eviction moratorium? The Court held that it does not.

*Alabama Association of Realtors v. United States Department of Health and Human Services, United States District Court for the District of Columbia, No. 20-cv-3377 (DLF).

Will we repeat the real estate crash of 2008?

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Those of us who were in the real estate industry in 2008 when the music stopped in that crazy game of musical chairs we seemed to be playing never want to see that scenario repeated.

It was frightening.

Our incomes plummeted, we had to reduce staffs, great employees left the business (many never to return), real estate lawyers dipped into their retirement and other savings to keep afloat. Real estate lawyers switched to other practice areas. I recently asked a lawyer of retirement age about his plans. His response was that he has no plans to retire because he is still making up the income lost in the crash.

Our business is crazy again.

We hear of houses routinely closing at above listing price in South Carolina. I read a national statistic that suggested more than 40% of houses are going to contract at more than the listing price.  Leading up to 2008, I can vividly remember being amazed that contracts on houses were being sold, sometimes more than once, before a closing could take place. We spent lots of time figuring out whether “flips” were illegal based on their facts. I am a member of a female lawyer page on Facebook, and someone posed the question yesterday asking how other lawyers are closing these multiple-contract transactions.

Why are we here now? Inventory is low. Builders are unable to keep up with the demand created, in part, by the angst of staying at home during COVID leading to appetites for better living space. Many have left cities for areas of less population, and, as always, the sunny South sees a constant influx of those looking for better weather.  Mortgage rates are low. The economy is good. These factors are converging and generally keeping everyone in the industry hopping.

Will the bubble burst again?

I have read everything I can find on what the experts are saying on this topic, and it appears that most economic and housing experts believe we are in much better shape this time around. The main protection appears to be responsible lending. Leading up to 2008, it seemed that anyone who could hold a pen could get a mortgage.  It now appears that loans are being made to more credit-worthy borrowers with decent down payments.

We will see a softening in the market at some point. Mortgage rates will rise resulting in less affordability in the market, and mortgage applications will decline. But that kind of cyclical activity is normal. Our business is accustomed to handling those typical economic and seasonal cycles. Everyone will probably welcome a break in the activity.

I hope and sincerely believe the experts are calling this situation correctly, so hold on for the ride and look forward to the break.