Is “title theft” a thing?

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Can and should a consumer buy protection against title theft?

Several years ago, a real estate lawyer asked whether title insurance companies should offer protection against “title theft”…the protection touted by the companies who routinely advertise their services on the radio. This question prompted us to research the services of those companies and analyze whether title insurance companies should offer the same service.

The advertisers who bombard the airwaves with warnings about title theft say thieves can steal homes by forging the names of homeowners on deeds, then reselling or mortgaging the property to hijack the equity. The thieves would purportedly pocket the proceeds, leaving the homeowner without title or with new mortgage payments. The companies promise to monitor title to protect against such devastating losses.

My understanding of the product being offered at that time was that the company would regularly check the land records to see whether the homeowner’s name appeared on any deed or mortgage. The homeowner would be notified of any “hits”. If the homeowner responded to the notification that the instrument in question was, in fact, a forgery, then the company would prepare and file in the land records a document to alert future buyers and lenders of the forgery. I was told that the product did not include attorneys’ fees for clearing titles.

But is “title theft” a thing? Does a forged deed convey real estate? No! Does a forged mortgage require the true owner of the real estate to make payments? No! But can a forger wreak havoc for a property owner? Yes, indeed!

I’ll never forget the name, Matthew Cox or the telephone call that tipped us off that we had a serious mortgage fraud situation here in Columbia. Long before the housing bubble popped beginning in late 2007, an attorney called to let us know what was going on that day in the Richland County ROD office. Representatives of several closing offices were recording mortgages describing the same two residential properties in Blythewood, as if the properties had been refinanced multiple times in the same day by different closing offices.

At first, we thought our company and our attorney agent were in the clear because our mortgage got to record first. South Carolina is a race notice state and getting to record first matters. Later, we learned that deeds to the so-called borrower were forged, so there was no safety for anyone involved in this seedy scenario. Thousands of dollars were lost.

Next, we learned about the two fraudsters who had moved to Columbia from Florida through Atlanta to work their mischief here. The two names were Matthew Cox and Rebecca Hauck. We heard that Cox had been in the mortgage lending business in Florida, where he got into trouble for faking loan documents. He had the guts to write a novel about his antics when he lost his brokerage license and needed funds, but the novel was never published. With funds running low, Cox and his girlfriend, Hauck, moved to Atlanta and then Columbia to continue their mortgage fraud efforts.

We didn’t hear more from the pair until several years later, when we heard they had thankfully been arrested and sent to federal prison.

The crimes perpetuated by Cox and Hauck were made easier by the housing bubble itself. Housing values were inflated and appraisals were hard to nail down. And closings were occurring at a lightening pace. The title companies who had issued commitments and closing protection letters for the lenders were definitely “on the hook”. And the important thing about title insurance is that coverage includes attorneys’ fees for defending titles. I don’t believe the property owners in this case had any coverage but clearing the mortgage issues eventually cleared their title problems.

Would the title theft products have been valuable to the homeowners in this situation? The companies may have notified the owners of the forged deeds and may have filed some kind of notice of the forgery in the land records, but that is all they would have done. Nothing would have prevented the forged mortgages. I am now informed that, under some circumstances, attorneys’ fees to clear title may be included with the title theft products, so perhaps today, the owners would have some protection with a title theft product. These products require “subscriptions” and periodic payments.

A far better alternative is the coverage provided by the ALTA Homeowners Policy of Title Insurance which requires a one-time payment at closing. This is the policy we commonly call “enhanced” coverage. The cost of this policy is twenty percent higher than the traditional owner’s policy, but it includes protection for several events that may occur post-closing. Forgery is one of those events. And, again, title insurance coverage includes attorneys’ fees.

Dirt lawyers who are asked about the title theft products should advise their clients that they can check the land records, most of which are online, to discover whether anyone has “stolen” their titles. And, better yet, they can buy title insurance coverage for peace of mind.

Wire fraud advice from industry insiders

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Dirt Lawyers: educate your clients!

Please take a look at this article by Bill Svoboda of CloseSimple entitled “Wire Fraud in the Wake of COVID-19”. The article quotes some industry insiders, including Rick Diamond of our company. Rick was one of our speakers for our recent seminar and often advises real estate lawyers on issues including how to protect client funds.

The article also quotes Tom Conkright of CertifID, one of our office’s solution partners. CertifID has a proven success rate on protecting client funds, including returning client funds that go missing. We highly recommend that you take a look at what CertifID has to offer. Reach out to your agency representative to ask for a demonstration.

But the main purpose of this blog is to remind you to continually educate your clients about wire fraud. Like the victim in this article, many of your clients are pulling up roots and moving to sunny South Carolina. Many of your clients are retirees. The earlier you can give new clients advice about protecting themselves against fraud, the better. Give them advice in bright red, bold print in your engagement letters. Add bright red, bold print warnings under your email signature lines. If you protect one aging consumer by these methods, the effort will be worth it!

Speaking of aging consumers, many of you have heard that I’m retiring in February. One thing that concerns me about retirement is not being able to keep current on industry advice about fraud. If you hear something next year that I should know, give me a call!

Succession planning and the real estate practitioner

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Like me, many of my real estate practitioner friends are retirement age. Before COVID-19 prevented travel, I often visited our law firms across South Carolina and at some point became acutely aware of our aging population. Real estate must not be as fascinating to young folks as it is to me and many other lawyers my age. I announced last week that I will retire next February. For corporate employees like me, the retirement process is easy. Let me restate that. Once the extremely difficult mental threshold is crossed, the paperwork is easy.

Retirement from a law firm is much more difficult both in the decision-making process and the paperwork! The old not-so-funny joke is that lawyers don’t retire; they die at their desks. Don’t do that!

My office encourages our real estate lawyers to seriously consider succession planning at least five years before they plan to step away from their offices. For sole practitioners, no succession planning means the value built over a lifetime of work vanishes the moment of death or disability. Lawyers who practice in firms can also lose their sweat equity if they don’t have the foresight to plan.

We encourage sole practitioners to consider hiring younger lawyers to train up to take over their practices. We also encourage lawyers to identify other lawyers who may be interested in purchasing their practices or merging practices. Conversely, we encourage younger lawyers who seek to grow their practices to reach out to lawyers nearing retirement age to explore purchasing or merging practices.

Several years ago, I contacted my friend Bill Higgins, a practitioner here in Columbia who has worked extensively with ethics and business entity issues, and asked him to develop a practice area that includes succession planning for lawyers. Bill has done that, and if you need legal advice in this regard, I highly recommend Bill as an excellent source.

If you want information about the firms who practice real estate and who might be open to discussing the issues of merging or purchasing practices, reach out to your title insurance company. We are singularly positioned to know what’s going on in the market place and we might be able to point you in the direction of a lawyer or firm that may want to discuss these issues.

The reason this topic came to my mind now is that the Ethics Advisory Committee issued new EAO 20-03 that touches on the issue of succession planning. The question in this opinion is a little complicated. “A, B, C & D, P.A.” is the name of an existing law firm.  Lawyer A is already retired. Lawyer B is the 100% equity owner of the firm, and now seeks to retire. Lawyers C and D are non-equity members who have each practiced with the firm more than ten years. Lawyer C plans to practice with another firm.

Lawyer D seeks to purchase most of the assets of the firm and to operate a new firm called “A, B & D, P.A.” in the same location, using the same phone number and website and retaining two or more of the employees. Lawyer D seeks to continue to represent Lawyer B’s current clients in ongoing and future matters if the clients elect to retain the new firm’s services via formal substitution of counsel agreements. The question became whether Lawyer D may ethically utilize the names of retired lawyers A and B in the name of the new law firm.

Analyzing Rules of Professional Responsibility 7.1 and 7.5 and prior Ethics Advisory Opinions 79-06 and 75-01, the Committee opined that Lawyer D may use the names Lawyers A and B in the new firm name.  The Rules have changed since the prior opinions, and the Committee sought to provide us with this updated analysis. The Committee assumed Lawyer D had the legal right to use the names of the two retired partners.

In Opinion 02-19, the Committee opined that a law firm may continue to use the name of a deceased or retired partner if the new law firm is a “bona fide successor” to the prior firm.  The question for the current opinion became what constitutes a bona fide successor, and the Committee stated that Lawyer D will be a part of the continuing line of succession of the firm and may use the names.

The Committee encouraged Lawyer D to review the comments to Rule 7.5 and EAO 05-19. The Committee also suggested that Attorney B remain at the firm for a time after the purchase to increase the “bona fides” of the firm name since both lawyers will work under the new name and therefore provide a continuing succession in the firm’s identity. Additionally, Lawyer D was encouraged to take care to avoid misleading the public by using asterisks or some other means to show that Lawyers A and B are retired.

This brief discussion is an example of how complicated succession planning can become. I encourage you to start early!

South Carolina is one of three states without remote online notarization

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This HousingWire article really caught my attention this morning. South Carolina is one of only three states without an online notarization option.

Efforts have been in progress to pass Remote Online Notarization (RON) legislation here for a couple of years, but the Council of the Bar’s Real Estate Section opposed the legislation on the theory that RON would challenge the control South Carolina licensed lawyers currently enjoy. Many other lawyers disagree with that position, but the legislation stalled.

Other states have used a variety of permanent and temporary solutions to allow for remote online notarization during the COVID-19 crisis. But, at this moment, California, Oregon and South Carolina are the only states with no solution.

What’s your opinion, South Carolina real estate lawyers? Would RON be a good solution to facilitate closings in South Carolina or would it erode your control? The legislation is likely going to be discussed in the next legislative session. Your opinion matters!

Is it ethical to buy a competitor’s name as a search engine “keyword”?

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Most South Carolina dirt lawyers don’t do much direct advertising, but some make use of Internet keyword advertising. For that reason, I wanted to make sure you noticed the recently issued Ethics Advisory Opinion 20-01, which you can read here.

South Carolina’s Ethics Advisory Committee was asked the following question:  “May a lawyer bid on and use the names of other lawyers and law firms as a part of a competitive keyword advertising strategy?” In other words, it is ethical for a lawyer to pay an internet search engine to insert his or her ads when a searcher types a competitor’s name into the search engine?

In some search engines, the resulting advertisements appear on the right side of the page. In other search engines, they may appear marked as an “ad” or “sponsored” above the organic search results.

The Committee pointed out that competitive keyword advertising is different from search engine optimization (SEO). SEO is the process of increasing the visibility of a web page by users of a search engine and is directed at optimizing unpaid placement organic results. This opinion addresses only keyword advertising.

The Committee followed the lead of New Jersey, Texas and Wisconsin and opined that a lawyer may purchase an internet competitive advertising keyword that is the name of another lawyer or law firm in order to display a “sponsored” website advertisement.

The Committee stressed that lawyers should be mindful to comply with all advertising rules and should use care to ensure that no derogatory or uncivil message is conveyed. The Committee also pointed out that surreptitious redirection from a competitor’s website to a lawyer’s own website via hyperlink is prohibited under our Rules.

What do you think?

Tips for doing business … when we can’t do business as usual

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Our company has a remarkable network of intelligent, creative, caring agents in South Carolina. I asked our staff to pass along to me the innovative methods they are hearing that our residential closing attorneys are using as they continue to do business in this world infected by COVID-19, a world where business as usual is impossible.

I’m sharing this list with you to pass along some new ideas for your business and request that you share your innovative ideas with me. Let’s talk and continue to figure out ways to keep our clients, our staff and ourselves safe and well.

Some have asked why real estate closing services are considered to be “essential”. The technical explanation is that closings are an ancillary service of financial institutions, and financial services are essential. A better explanation may be that our industry allows access by our customers to the equity in their homes. If consumers are unable to sell or refinance their properties in a time of financial difficulty, then they are denied an avenue to prevent or delay financial difficulties. The same concept can be applied to commercial clients. They need access to their properties during difficult financial times more than ever. Never doubt that our closing services are essential in this environment.

Here are some ideas that our agents are using to conduct safe closings:

Communicate, communicate, communicate!

We have heard that clients are often surprised by the changes to closing procedures. Don’t let that happen. The new rules you establish should be clearly communicated with clients. You can’t control this unusual situation if you don’t clearly communicate the innovative methods you are using

  • Add the new rules to your email signatures.
  • Add the new rules to your engagement letters.
  • Use attractive signs inside and outside your office.
  • Make telephone calls!
  • Add video chatting to your website, Facebook pages and other social media venues.
  • Make sure your real estate agents and lenders understand the new procedures. They deserve extra communication during this time, too!
  • Let clients, real estate agents, lenders and other real estate professionals know about county office closures and other inconveniences that may affect closings.

Move closings to different locations:

  • Close at the client’s car. Allow the client to remain in the vehicle. Hand the client a pen to keep. Watch the execution from a distance and witness signatures at that same distance. Some lawyers are calling these closings “curbside service” and “drive-through closings”.
  • Close on the trunk or hood of the client’s vehicle.
  • Rope off parking-lot spaces for closings. Use attractive signs to mark the designated spaces.
  • Use a tailgating tent in your parking lot or other outdoor location. Fresh air is a huge advantage!
  • Buy colorful, plastic tables and chairs for this purpose.

Limit contact with individuals who are not necessary for closings:

  • Don’t allow real estate agents, lenders and others who are not needed for signing documents into your office.
  • Don’t allow children in your office. If parents must bring children, have one parent remain outside with their children while the other parent signs, then switch.
  • Clearly communicate that extra individuals are not allowed during this difficult time.

Limit the individuals who come into your office for any reason:

  • Don’t allow walk-ins during this time.
  • Stagger closings.
  • Have clients call from their vehicles to check in. Then call them and ask them to come into your office only when they can enter without encountering other individuals.
  • Set up separate waiting rooms if you have space.
  • Separate buyers and sellers.
  • Use video conferencing for activities other than actual closings.

Keep your office de-cluttered and cleaner than usual:

  • Buy pens in bulk and allow one-time use only. Give clients the pens they use.
  • Clean all surfaces clients touch, including conference tables, chairs, doorknobs, elevator buttons, stair railings, restrooms. Cleaning should take place between closings.
  • Use effective, antibacterial cleaning products.
  • Communicate additional cleaning requirements with the individuals who clean your office after hours.
  • Keep hand sanitizer and wipes at convenient locations throughout your office.
  • Remove children’s play areas.
  • Remove magazines and other extraneous items from waiting rooms and conference tables.
  • Wear masks and gloves. Encourage visitors to wear masks and gloves. Consider providing those items to your visitors.
  • Ask visitors to clean hands at the door.
  • Encourage pre-and post-closing hand washing.
  • Pack up glasses and cups. Use only disposable items. Limit food and drink sharing.
  • Clean after visits from delivery services.
  • Increase ventilation by opening windows and adjusting HVAC systems.

Other ideas:

  • Designate drop locations for documents and checks. These locations may be on porches or lobbies. But don’t forget security! We added a new, locked drop box to the exterior of our office.
  • Mail or wire all funds. Don’t allow anyone to wait for checks in your office.
  • Sadly, don’t allow hand-shaking or hugging!
  • Advise anyone who feels sick to stay away! This includes your valuable staff members.
  • Use powers of attorney.
  • Use open spaces for meetings.
  • Use Plexiglass to separate individuals.

All of these ideas, of course, are not useful for every office. Use your best efforts! I heard a horror story about a closing office where staff members came to work despite feeling ill. The result? Individuals from twenty closings were infected. Don’t allow a horror story to occur in your office.

Please share ideas with me. I would love to add to this list to benefit everyone!

Stay safe and well out there!

Congress is working on online notary legislation

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Please see the linked March 22 article from HousingWire that outlines the bipartisan movement in Congress led by Sens. Mark Warner (D-VA) and Kevin Cramer (R-NC) to allow for remote online notarization nationwide.

While most of our agents seem to support this effort, we understand some oppose the South Carolina remote online notary law (RON) because they believe they would lose control of closings if it passed. I understand that concern, but point out that neither the state nor federal proposals would change our unauthorized practice of law precedent. In fact, the senators working on the federal version indicate it would not impede consumer choice nor change any state law governing the practice of law.

The federal bill is entitled “Securing and Enabling Commerce Using Remote and Electronic Notarization Act of 2020.” Currently about half the states allow for RON at this point, but South Carolina is not one of them.

Please pay attention to this movement and contact your congressmen whether you support or oppose the legislation.

SC Supreme Court rule change affects every lawyer with a trust account

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Make one simple change to stay in compliance

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On October 23, our Supreme Court implemented several changes to the South Carolina Appellate Court Rules dealing with lawyer and judicial disciplinary rules enforcement procedures. If things go well in our respective practices, most of us will never have to study the rule changes.

But one change affects every lawyer with a trust account.

Rule 1.15(h) of the Rules of Professional Conduct has been amended to state that every lawyer maintaining a trust account must file a written directive requiring his or her financial institution to report to the Office of Disciplinary Counsel, rather than to the Commission on Lawyer Conduct, when any properly payable instrument is presented for payment against insufficient funds.

In other words, NSF checks must now be reported by your bank to the ODC.

The Court recognized in a footnote that these written directives will take time to update and that lawyers whose written directives currently require reporting to the Commission on Lawyer Conduct are not in violation of the rule. The Court stated that lawyers should update these directives at their earliest convenience.

Most dirt lawyers pay close attention to detail, and I would recommend paying attention to this one sooner rather than later.

The Law Firm of Your Dreams

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Say Goodbye to Your Boss, Say Hello to the Law Firm You’ve Always Dreamed of

JFisher Book 2Readers of this blog know I am prone to write a book report from time to time, but only about books that I think will benefit South Carolina real estate practitioners. I’ve blogged previously (twice!) about John Fisher’s The Power of a System; How to Build the Injury Law Practice of Your Dreams. John Fisher has a new book that I also recommend for dirt lawyers.

By the way, John was a speaker at our Chicago Title annual seminar on October 14, and he did not disappoint. If you missed him, I highly recommend that you begin following what he writes and that you seek out the opportunity to hear him speak.

His 2019 book is entitled The Law Firm of Your Dreams; Say Goodbye to Your Boss, Say Hello to the Law Firm You’ve Always Dreamed of.

In the formative days of his medical malpractice firm, Fisher wished for a step-by-step manual for running a profitable practice because, like the rest of us, he was not taught strategic planning, goal setting, business metrics, managing employees, managing clients, and marketing in law school. He later developed that manual for his firm, not just technical systems for running a business, but also the managerial and entrepreneurial principles to keep a constant stream of new cases and clients coming through the pipeline.

Those systems were covered in his first book, and numerous lawyers have said the book provides a roadmap for accurate and precise business development for any lawyer in any practice anywhere!

The 2019 book starts with the premise that the lawyer’s mindset is the most important aspect of creating the ideal law firm. Without the right mindset, the author says, the best policies and systems won’t do you much good. He recommends becoming a “specialist” even though that word is a “no no” under our ethical rules. John believes that if you don’t specialize in something, you will be marginal in everything.

I have a lawyer friend who has learned to specialize. He practices in the area of residential real estate closings in a coastal area. He is a sole practitioner, and he very narrowly defines the scope of his work. He seeks to make buyers, sellers, real estate agents, and lenders happy in connection with their closings. For that reason, he will not write what I call “nasty lawyer letters”. He refers that work to a friend. He will also not do any kind of work that will slow down the very well-oiled machine that keeps him churning out his closings in a timely and accurate fashion.

He may set up a simple LLC for a closing, but he refers out complicated entity formation, complicated trust formation and anything to do with estate planning. He may draft a simple set of restrictive covenants, but he refers out complicated subdivision development and commercial real estate closings of any type. His clients, lenders and real estate agents are happy and return again and again. Fellow lawyers love that he refers complicated work to them, and they refer residential closings to him in return. Win. Win. Win. John Fisher would approve of his system.

John Fisher recommends that a lawyer should delegate almost everything, both professionally and personally. He says, “your career (and life) will be chaos if you answer every phone call or email during your work day. You will never go home in time for dinner or attend your kids’ ball games if you insist on being everything for your clients. That’s why you have to delegate everything you can and do only those things you cannot delegate.”

And the best thing you can do for your career, according to this author, is to devote as much time and energy as you can to marketing and growing your law practice. A large part of both books is devoted to marketing.

I am a huge fan of the ideas and step-by-step instructions of this thoughtful lawyer and author. I invite you to read his books and follow his advice to improve your practice and your life!

Do you and your employees work remotely?

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Check out these network tips for remote employees

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Our office has been involved in workflow studies for the offices of our attorney agents, and one point that comes up often is that allowing employees to work at home increases employee satisfaction and retention. We’ve witnessed many paralegals permanently move to remote locations and successfully retain their jobs. Telecommuting seems to work successfully in many instances.

In our own office, all our employees have the capability to work remotely. We learned when our office building suffered a fire in 2012 that the ability to access our network from remote locations allowed us to continue our business without interruption. The day after the fire, we disbursed the funds for a large commercial transaction for an agent from my kitchen at home!

And since South Carolina routinely finds itself within the maze of the spaghetti models during hurricane season, the ability to work remotely is important if not necessary to maintain contact while taking care of school children and hunkering down at home.

American Land Title Association (ALTA) published an article on September 5 attaching The Center for Internet Security, Inc. (CIS) Telework and Small Office Network Security Guide.

This 25-page paper provides useful, up-to-date guidance on keeping your networks safe when employees are allowed remote access. The guide provides recommendations for buying equipment, setting up networks, setting up devices, securing home routers and protecting against digital threats.

The ALTA article refers to a Forbes study that found 38 percent of teleworkers lack the technological support they need to do their jobs. Securing devices and networks that allow telecommuting is critical. The guide includes a network security checklist and tells users how to map security configurations to provide cybersecurity protection at remote locations.

Thanks to ALTA for pointing us to this valuable resource, and thanks to CIS for publishing it!