Month: January 2026

Georgia Real Estate Investor Fined for Violating OFAC Sanctions

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Imagine that you have a real estate investor client who purchased a big house in a gated community at a foreclosure sale. The client then took out a mortgage on the house, paid to make significant repairs and renovations, and ultimately signed a contract to sell it on to a third party. Then, all of a sudden, the Federal government sends your client a cease and desist order, a subpoena, and eventually fines him $4,677,552.00 for violating OFAC (Office of Foreign Asset Control, an agency of U.S. Treasury) sanctions against a family member of a Russian oligarch. Does that sound fun to anybody? Unfortunately, that is more or less what happened to one real estate investor in Atlanta who unknowingly bought a house which was, in fact, owned by a person who was on the OFAC sanctions list.  

This particular person whose name appeared on OFAC’s sanctions list is now known as Karina Rotenberg. She is a family member of a Russian oligarch who was identified for US financial sanctions after Russia invaded Ukraine. For a time in the early 2000’s, she lived and worked and owned homes in Atlanta. At the time, her name was Karina Fox. Guess which last name her Atlanta home is owned under? That’s right – it’s Fox.

Well, it just so happened that, after it added her to the sanctions list, OFAC figured out that Ms. Fox/Rotenberg owned property in Atlanta. This means that her property could not be sold, mortgaged, or otherwise transferred, since doing so would be a violation of the sanctions. OFAC sent a notice to the Fulton County Clerk of Court specifically mentioning the property’s address, and listing several names by which Ms. Fox/Rotenberg was known (including both “Fox” and “Rotenberg”), and asked the Clerk to file the notice in the county records to let the public know that the OFAC sanctions existed. And the Clerk of Court did file that notice. Unfortunately, for reasons which are not clear, the Clerk appears to have only indexed the notice under the name Rotenberg. So, a title searcher who did not know that Karina Fox and Karina Rotenberg are the same person would not necessarily know that this home was owned by a person on the OFAC sanctions list.

Now, here comes our local real estate investor, by all accounts an entrepreneurial fellow who had immigrated from India and worked to further his education and succeed in this county. He operated his real estate deals through an LLC: King Holdings LLC. Most of his past deals had been smaller single-family homes that he had bought in distress, improved, and flipped for a profit. This home would be bigger than most of his past projects. But it was being sold at foreclosure and seemed like a bargain. King Holdings buys the home at foreclosure sale in January 2023.

Around April of 2023, OFAC learns about the foreclosure, and tracks our investor down. He says that an OFAC investigator called him on his cell phone and told him that he should not be doing anything with the home, due to the sanctions. In our investor’s version of the story, the caller seemed sketchy, and he says he wondered at the time if it was a scammer trying to scare him into giving up some personal information.  

Our investor goes ahead and mortgages the property to have funds to begin renovations. The law firm which closed the mortgage says it searched title to the home and did not find the OFAC notice (which, again was indexed in a different name, Rotenberg).

By December, 2023 our investor has learned that this home has significantly more repair/maintenance problems than he’d bargained for. He is beginning to think it was not such a great deal. He signs a contract with a third party to sell the home. After initially listing the property for $2.5M, he finally signs a contract to sell it for $1.4M.

In February 2024, OFAC issues a cease-and-desist order and administrative subpoena to our investor, restating the sanctions and requiring that he immediately stop doing anything with the home. The subpoena also demands information on all dealings involving the property since January 2023. It seems that our investor certified the accuracy of a response that disclosed the renovation work but did not say anything about the property’s listing and pending sale.

In March 2024, our investor closed the $1.4 million sale of the property to the third party buyer.

OFAC took the position that pretty much everything our investor did violated OFAC’s regulations/sanctions. (I also get the sense that they were pretty mad about him not disclosing the sale, and then going ahead with the sale to the third party, after OFAC had issued their cease-and-desist order.) So, as punishment, OFAC imposed the $4,677,552.00 fine on him personally.

It is really disappointing that the Clerk of Court did not index the OFAC notice under all the names that OFAC had listed. Another possible way this could have been avoided is if our investor had checked the OFAC sanctions list before proceeding. This is a great tool that all our CTIC agents should be using too – it could even help you save a client from ending up like our Atlanta investor!

Appeals Court Upholds Ruling Nullifying Transfer of Common Elements

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The SC Court of Appeals released a new decision this week confirming that a Developer of a Horizontal Property Regime (HPR) may not remove common elements from the regime once the right to the common elements has vested in the individual unit owner. 

The facts are somewhat complicated, but I will try and simplify it as best as I can. The Developer of the fully constructed Mariner’s Cay Marina in Charleston committed the property to a HPR in 2006.  

The Marina consisted of individual boat slips, a fuel dock with a wastewater pumping station, and a two-story Ship Store. The 88 individual boat slips were converted to separate units or apartments with a designated ownership percentage of the common elements. The first and second floors of the Ship Store were designated Commercial Units 1-A and 1-B respectively. The fuel pump and the attendant wastewater pumping station were designated as Commercial Unit 2. The Master Deed stated that the Commercial Units were “common elements or limited common elements [of the Regime].”    

However, the Master Deed also provided that the Developer retained a right to “unilaterally amend the declaration for any purpose” for the earlier of 18 months or the point where it sold 90% of the unit, but not in such a way as to “adversely affect the title to any Unit unless the Owner shall consent in writing.”

In 2007, during its “unilateral” rights period, Developer amended the Master Deed by removing the language that designated the the Commercial Units as common elements or limited common elements.  At the time of the Amendment, at least 39 individual units (slips) had been sold. 

Shortly after recording the amendment to the Master Deed, Developer sold the Commercial Units to a third party, who in turn sold the property to another entity. This down the line entity borrowed money for construction at the Store, which it secured by a mortgage on the Commercial Units.  

It would not make for a good story unless the mortgage went into default. Lender filed a foreclosure action naming the HPR as a defendant by virtue of its liens for assessments. The Court indicates that the HPR participated in the proceedings without contesting the foreclosure or the right of the Developer to have transferred these units in the first place. In February 2015 the property was sold at public auction. It eventually was sold again to the two LLCs that are the defendants in the ensuing litigation.

It appears that between 2006 and 2015, the slip owners had enjoyed free use of the waste-water pumping station on the fuel docks and of the restrooms in the Ship Store. However, the new Commercial Unit owners changed quite a few things after taking possession of the units. The Commercial Unit owners took action to bar the slip owners from the use of the pumping stations, forced the dock master to vacate the Ship Store where his office had been located, and denied access to the restrooms.  

In response, several individual unit owners filed suit alleging that the Commercial Units were common elements of the HPR and that Developer did not have authority to change that status when it recorded the amendment to the Master Deed. In defense, the Commercial Unit owners argued that the Master Deed gave the Developer unilateral authority to amend the Master Deed and that the HPR waived the right (of all unit owners) to contest the Developer’s action when it acquiesced to the foreclosure proceedings. 

The Court of Appeal focused its holding on its prior ruling in  Vista Del Mar Condo. Ass’n v. Vista Del Mar Condos., LLC, 441 S.C. 223 (Ct App. 2023). In Vista Del Mar, a Developer originally committed a tract of land to a HPR pursuant to a multi-phase development plan. After construction of the initial phase, the Vista Developer changed its plan of development and determined that a portion of the undeveloped property committed to the HPR was no longer necessary to its intentions. The Master Deed had language giving the Vista Developer a unilateral authority to add or remove property from the regime on behalf of itself and as the agent for the individual unit owners.

Unit owners sued the Vista Developer arguing that common elements could not be conveyed. In issuing its opinion, the Court concluded that the Vista Developer had authority to convey the property because the unit owner’s rights in the particular property as common elements had not yet vested in the unimproved portion of the property, because the property was not scheduled to be a common element for recreation and the contemplated construction on the unimproved portion had not been commenced or completed. 

In the current opinion, the Court found that the rights of the slip owners in the common elements at Mariner’s Cay had fully vested. Once the vesting occurred, Developer’s authority to remove common elements ended regardless of the provisions of the Master Deed. The Court ruled that the Master was correct in finding the Commercial Unit owners “wrongfully held title.”

The Court was not impressed with the argument that the HPR’s participation had waived the rights of individual unit owners to contest the transfer of the common elements. The Court ruled that the individual units were not parties to the foreclosure action. Not being parties, they could not be estopped by any failure of the HPR to assert defenses in the foreclosure hearing.  Attorneys that litigate all kinds of cases against HPRs should take heed that the HPR Association does not necessarily have authority to bind individual unit owners.

While this new ruling is confirmation of prior standard concerning the vested rights of unit owners in common elements, practitioners may find that the devil is in the details concerning the point at which such rights vest. The Court was not exceptionally clear in laying out specific for determining whether a right to a common element vests, but it seems that it was important to the Court that the common elements were fully constructed, in active use by the slip owners. Perhaps too that fuel docks and pumping stations and restrooms have more obvious correlation to the expectation of slip owners in a Marina than unimproved property slated for future development might have had to unit owners in Vista Del Mar. Yet another distinction between the two case may have been what seems like much more explicit language in the Vista Del Mar Master Deed concerning the authority of the Developer in adding and subtracting property for use in future phases.

Attorney Opinion Letters – Worth the Risk?

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Have you ever been asked to provide a title opinion in connection with a real estate transaction? What does that mean? To me, it means that the client asks you to give your legal opinion as to the legal and factual validity of title ownership for a particular piece of land, and to note any matters of record that impact the title. That raises the question: Do you want to be personally responsible for that opinion?  More importantly, do you want to be personally responsible to the client or a third party if that opinion is incorrect?

What if the records are incomplete or inaccurate? Will you search title yourself or are you going to rely on a title abstractor? Will the abstractor have sufficient E&O coverage to protect you if they make a mistake?  Are you comfortable taking the risk that the abstractor did not miss anything in title? Lastly, why would you want to bear that risk when there is a national industry offering title insurance to protect parties from the same types of title risks that would be covered by a title opinion?

I think buyers and lenders look at these opinions as a guaranty that the opinion is correct. As a lawyer, you would never guarantee the outcome of litigation or settlement negotiations because there are too many factors that are outside of your control. In a perfect world, real estate or public records would contain no errors and no mis-indexing and there would be no forgery, fraud or people attempting to take advantage of the system. But we, our systems and our abstractors are not infallible. However, when lenders and buyers close a real estate transaction, they want certainty. 

In recent years there has been a push, especially with refinances and home equity mortgages, for lenders to accept an attorney opinion letter (commonly referred to as an “AOL”) in lieu of a title insurance policy.  At first, this may seem like an additional stream of revenue for your office, but you must weigh the benefits against the potential harm. 

A legal opinion is an analysis by an attorney subject to a promise of care, not an insurance contract.  If the legal opinion is wrong, the remedy is a claim of legal malpractice or negligence on the part of the attorney. 

In comparison, a title insurance policy is a contract of indemnity in which the title insurance company has certain obligations to its insureds pursuant to the terms of the policy. Coverage depends upon satisfaction of the commitment requirements and is subject to the specific exceptions as well as the conditions and exclusions of the policy jacket.   

While the perception may be that AOLs are faster and less expensive and appropriate where risk is considered low (refinances and HELOCs), The American Land Title Association (ALTA) and other industry leaders caution that an AOL does not provide the same level of protection as title insurance products. 

For attorneys, loss resulting from an inaccurate AOL could negatively impact a practice’s bottom line.  An attorney making a payout under an E&O policy may soon have an increased deductible or lose the policy altogether. A firm may see its reputation suffer in the community to a greater degree from a personal allegation of malpractice than from a claim against a title policy. 

There are companies that offer a variety of services which include AOL programs.  One such provider is Voxtur Analytics Corp.  Earlier this year Voxtur (and its 20+ affiliated entities) filed bankruptcy in Canada and has petitioned the U.S. Bankruptcy Court for the District of Delaware to be recognized and restructured under a Chapter 15 petition. According to online information, Voxtur has been suffering large losses for the last several years: $54.3 million in 2023, $73.6 million in 2024.  Reportedly, as of March 2025, its liabilities exceeded its assets by $33.2 million. 

Many lenders have relied on Voxtur’s AOL program and others like it in lieu of title insurance. The bankruptcy should cause these lenders and their servicers to question not only the reliability of such programs but also the longevity of the remedies available under such a program. As a result of the bankruptcy, parties that utilized Voxtur’s services must be questioning whether Voxtur will be able to satisfy any claims related to its AOL program. Voxtur should be a reminder to the industry that vendor insolvency is a real risk in the AOL model of risk allocation. 

So back to my original question: are AOLs worth the risk? Is it worth the risk to an attorney’s personal, professional liability or reputation to provide an opinion of title for a fee that may not match the potential risk? Is it worth the risk to fast-track a transaction or cut costs when the result may be to weaken the lending industry’s access to reliable protections in the event of title claims, especially for those matters which may be covered under certain title policies of insurance but would not be covered under an AOL?   

…Just a little food for thought as we digest all those holiday feasts. Cheers!