real estate closings

FNF challenges FinCEN Rule and ALTA concurs

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In our previous blog entry, Jennifer Stone did a great job of summarizing FinCEN’s new Anti-Money Laundering Rule that is scheduled to go into effect as of December 1, 2025. In short, the Rule will generally require South Carolina real estate attorneys to make reports to FinCEN concerning every residential (1-4 Family property) transaction where 1) the grantee is an entity or trust and 2) there is no financing provided by a lender that is subject to federal anti-money laundering reporting obligations. 

The closing attorney will be on the hook (under threat of civil and criminal liability) to collect extensive information from the parties to the transaction, including the names and addresses of every person or entity who has a beneficial interest in or control over the grantee entity. Generally speaking, the collection of information is well outside the scope of the usual real estate closing and places the burden on attorneys and title companies to collect information from third parties who may not be willing to share that information.

However, there is still the possibility that the Rule will not go into effect as scheduled in December. This past May, Fidelity National Financial, Inc. (“FNF”), the parent corporation of Chicago Title, filed suit in federal court challenging the Rule and thereby taking the lead role in speaking up on behalf of attorneys and title agents in advocating for more measured, less burdensome requirements and reporting.

In the lawsuit, FNF has requested an injunction suspending FinCEN’s enforcement of the Rule. A hearing is currently scheduled to be heard on September 30, 2025.

FNF also filed a Motion for Summary Judgment to which the American Land Title Association (ALTA) recently expressed its support by filing an amicus brief. ALTA, of course, is the most prominent trade association of title insurance companies and title agents in the United States.

While FinCEN asserts that the cost to the title industry (including closing attorneys) of meeting the reporting requirements could reach as high as $600 million annually, ALTA’s brief argues that FinCEN has significantly underestimated the training and collection time necessary to comply and that the true cost to the industry will be significantly higher. ALTA argues that the this significant burden cannot possibly be outweighed by the corresponding benefit to law enforcement. ALTA points out that FinCEN drastically reduced the scope of the reporting of Beneficial Ownership Information (BOI) under the Corporate Transparency Act (which we wrote about here) in part because the new administration believed that reporting on American formed entities was of limited value to law enforcement.

ALTA further argues that the reporting burden under the Rule will disproportionately fall on small businesses that are “ill equipped” to absorb the additional costs and regulatory burden of reporting in an industry with already thin margins. I think many South Carolina residential real attorneys with already thinly stretched teams would agree wholeheartedly with ALTA in that statement. 

Certainly, there are quite a few miles to go with this lawsuit before a final verdict is rendered concerning the new Rule. We will continue to keep an eye on the progress of this case, but for now South Carolina attorneys must continue to develop procedures for complying with this Rule when it goes lives on December 1. 

SC Supreme Court clarifies realtor liability under Disclosure Act

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Call me a little strange, but I am always interested to read about real estate contract disputes. An odd fact of my career is that my trial history is bookended by Magistrate Court-level trials involving real estate contract disputes. The first was a seriously thrilling fight (to a baby lawyer) over $1500 in earnest money on a flat fee that certainly did not reflect the legal hours expended. My final was in defense of a client’s failure to disclose “mold” around a leaky water heater. For the record, I am undefeated in Magistrate’s Court, despite it being the only Court a judge has ever demanded I produce my bar card. I was wearing a suit and had a briefcase and everything!   

The Supreme Court recently issued an opinion that may be interesting to real estate attorneys and litigators concerning the liability of real estate agents. The Court’s opinion in Isaacs v Onions held that there is no right of private action against a seller’s real estate agent under the South Carolina Residential Property Condition Disclosure Act for the seller’s failure to disclose a property defect. The Court also made a finding that the buyer could not have reasonably relied upon general statements made by the seller’s agent concerning the findings of a prior CL-100. 

The facts of the case were as follows: The Onionses (“Sellers”) listed their home in Litchfield Plantation with the Selling Agent (“Agent”), and filled out a Residential Property Condition Disclosure denying any “present wood problems caused by termites, insects, wood destroying organisms, dry rot[,] or fungus.” The property was listed and promptly came under contract. During the course of the due diligence, the first contract buyers obtained an inspection report revealing the absence of a vapor barrier in the crawl space in some areas and noted damp soil conditions. That report recommended further inspection.

In response to the buyers’ inspection, the Oniones retained a pest control company to inspect the crawlspace.  The company issued a report finding elevated moisture readings, wood destroying fungi, and some moisture damage. They recommended installation of vapor barrier, a dehumidifier, and coverage of the outside vents, and treatment for mold, for an estimate of $4,595.00. Instead, the Sellers retained a handyman to address the vapor barrier, replace insulation, remove debris, and install a crawl space fan for $706.00. The first buyers had separately commissioned a CL-100 which showed lesser moisture readings, no active wood destroying fungi, but recommended a fan.

The first contract ultimately fell through, the property was re-listed, and the Isaacs became interest in the property ultimately entering into a contract to purchase it. Early in the transaction, Agent provided copies of the Property Condition Disclosure Form, the prior inspection reports, disclosed the scope of repairs.  Agent sent an email to the Isaacs sharing that the first buyers “CL-100 was done yesterday and from what I understood it was good, but I can obtain the report if/when necessary as the sellers paid for it.”  

The Isaacs declined to request a copy of the prior CL-100 as they intended to commission their own CL-100. The Isaac’s CL-100 revealed significantly diminished moisture levels and no evidence of any issues.  The Isaacs proceeded to closing.

Two days after closing, the crawl space flooded after heavy rains.  A week later inspection reports revealed standing water, very high moisture readings, and active fungi. The Isaacs filed suit against the Sellers, Agent, and their CL-100 inspector. They specifically alleged fraud and misrepresentation against Agent, as well as violations with regard to misinformation on the Property Condition Disclosure Form.

The Court found that while the South Carolina Residential Property Condition Disclosure Act creates a private right of action against the sellers for violations, it does not create a private right of action against real estate agents. The Court pointed out that there would be other causes of action available to the buyer in that situation.

The Court also noted that the Isaacs had been provided reports that provided ample evidence of a possible issue in the crawl space and that the real estate agent’s statement that she had heard that the CL-100 was “good” could not have been something that the Isaacs reasonably relied upon in their decision to purchase the home. In fact, the Isaacs testified that they did not request the prior CL-100 because they intended to obtain their own. 

The Court’s ruling seems to resolve (for now) that real estate agents are not subject to suit under the Act and that vaguely encouraging comments from selling agents are not to be relied upon by buyers, particularly when there is evidence of potential issues with the property. Perhaps the Isaacs faired better against the Sellers in this action on better facts.

Charleston County finally agrees to implement an e-filing system

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For many years, Charleston County’s Register of Deeds Office has refused to join the growing list of South Carolina counties that offer electronic filing for land records. Dirt lawyers have scratched their heads wondering when this large county will implement a system that has proved in other counties to be efficient and economically advantageous.

Finally, Charleston ROD has announced that it has entered into a contract with a vendor to implement an electronic filing system. Initial projections are that the new system will be in place in late 2025.

Charleston has also announced that it will provide property owners the opportunity to sign up for fraud prevention services that will notify owner of any filings that may affect their properties. Similar services have been offered by national companies at a price. Other counties in South Carolina have offered similar services free of charge.

Register of Deeds Karen Hollings said in a press release that the electronic filing system will make the Register of Deeds office better organized and more efficient for the people of Charleston County.

Merry Christmas to all!

Court grants nationwide injunction against enforcement of CTA

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The Corporate Transparency Act, which went into effect January 1, 2024, requires many companies to report beneficial ownership information to the United States Treasury Financial Crimes Enforcement Network (FinCEN). Beneficial ownership information is defined as identifying information about the individuals who directly or indirectly own or control a company. The deadline for entities created before January 1, 2024 is January 1, 2025.

Lawyers have been scrambling to grasp the intricacies of the new law and to assist their corporate clients, including homeowners’ associations, in compliance.

But we have a huge development.

On December 3, the United District Court for the Eastern District of Texas granted a nationwide preliminary injunction that prohibits the federal government from enforcing the new law.

Six plaintiffs filed the lawsuit in May challenging the constitutionality of the law. The decision is based on the Commerce Clause, and the statute is based on national security and aimed at enforcing laws against money laundering. This case will surely go to the Supreme Court, and we will have to wait to see how that Court reacts. It is possible that the rationale for the legislation holds for some but not all entities. Homeowners’ associations seem to be likely candidates to dodge this particular bullet.

Department of Justice takes last-minute action against NAR Settlement

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On November 24, just 48 hours before the National Association of Realtors’ settlement agreement headed to final approval, the Department of Justice filed a statement of interest in the lawsuit.

The filing indicated that the DOJ did not participate in the underlying litigation, but it challenged the settlement’s provision that requires buyers and buyers’ agents to enter into a written agreement before touring a home. This provision raises concerns under antitrust laws that could be addressed in multiple ways, according to the DOJ’s statement.

The DOJ suggested rectifying the issue by eliminating the buyer broker agreement requirement or to disclaim that the settlement creates any immunity or defense under the antitrust laws. Otherwise, the court could clarify that the settlement approval affords no immunity or defense for the buyer-agreement provision. The DOJ believes the settlement could limit the ways buyer brokers compete for clients.

The final hearing is scheduled for November 26 in Missouri. The NAR said in a statement that it will advocate for a final settlement that day. The statement suggested that the settlement is not what the NAR wants, but that it is preferable to continued litigation and the uncertainty of a jury verdict.

We’ll see lots of news on this topic this week and next week!

In the meantime, Happy Thanksgiving wishes for you and your family!

Secret Service issues new Advisory

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Real estate impersonation scams have “evolved”, it says

In September, the United States Secret Service issued an update to its “Real Estate Scam – Vacant Properties” Advisory (v. 1.1) The original Advisory was issued in Spring of 2022.

The current Advisory warns that the Secret Service has become aware of an increase of instances where criminals are impersonating title companies to steal real estate funds. Remember that “title companies” actually close transactions in many states. In South Carolina, the bad actors would impersonate law firms and banks.

Now more than ever, it is important for everyone involved in a real estate transaction to validate wires before they are sent. The last thing you need is for your law firm to have to provide funds to replace lost closing proceeds!

Often, the perpetrator impersonates the title holder and negotiates to sell unoccupied property to an unsuspecting buyer. Once the contract is signed, the criminal directs the buyer or realtor to the criminal’s account, impersonating a title company or law firm. The perpetrator impersonates the closing office by purchasing fake domains, similar to the closing office’s domain. (Such as me@lawfiirm.com vs. me@lawfirm.com.)

Red flags are identified by the Advisory:

  • Communications are primarily by email and communications contain poor grammar.  (This is from me, not the advisory. If you ever seen the word “kindly”, such as “kindly wire the funds to….” Remember we don’t typically talk that way! Any twisted language or bad grammar may indicate the communication is coming from someone and some place with a first language other than English. Always use common sense!)
  • Wiring instructions are sent over standard email instead of a secure email platform.
  • The listing is below market value and the “seller” is looking for a cash buyer or quick closing.
  • The “seller” wants to use its preferred closing office.
  • The closing office is outside of the area where the real estate is located.

The Advisory suggests the following avenues of prevention:

  • Conduct an online independent search of the entity to which the funds are to be wires.
  • With a known phone number (from a trusted website or previous contact) CALL and verify the wiring instructions and names on accounts.
  • If possible, visit a local branch of the entity to which the funds are to be wired.
  • Obtain a government issued ID from each party, and evaluate IDs for abnormalities.
  • Consider a form of multi-factor authentication with your clients. For example, send an overnight letter to the mailing address on the tax bill asking the property owner to call you with a one-time code embedded within the letter.

To read more, visit http://www.secretservice.gov. And be careful out there!

SC Real Estate Commission begins enforcement of new “wholesaling” law

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Chicago Title sent out a memorandum to its agents on September 27 that I want to bring to the attention of those who read this blog.

South Carolina’s Real Estate Commission has begun to send out enforcement letters to investors the Commission believes are participating in illegal “wholesaling.” One of those redacted letters is attached.

On May 21, Governor McMaster signed into law former bill HB 4754, which requires a real estate broker’s license for those engaging in wholesaling. The new law defines the term “wholesaling” as “having a contractual interest in purchasing residential real estate from a property owner, then marketing the property for sale to a different buyer prior to taking legal ownership of the property.” The definition further states that “wholesaling does not refer to the assigning or offering to assign a contractual right to purchase the real estate.”

The question has become whether an investor can avoid the technicalities of the statute by marketing an assignment of a contract rather than directly marketing the underlying real estate. Investors appear to be taking the position that this activity is not prohibited, but the Real Estate Commission appears to disagree.

Investors are apparently being reported to the Real Estate Commission for potential violations of the new statute, and the Real Estate Commission is purportedly sending out letters to enforce the statute.

It is likely that our courts will become involved in resolving this question.

Anyone who has been involved in attempting to pass legislation will understand that drafting, redrafting, and amending bills often leads to tricky language. My guess is that most dirt lawyers could have drafted a clearer statute, but the bargaining and back-and-forth nature of drafting legislation has likely resulted in the complicated language we have.

Stay tuned as the Real Estate Commission and our courts deal with this issue.

You have to love amusing HOA stories from Florida

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Lots of entertaining real estate stories arise in the Sunshine State, and I say that fondly because I spent my middle school and high school years there. In fact, I’m heading down to Panama City for a milestone high school reunion in September.

This story was reported by ABC News and other sources. Florida passed legislation this year affecting homeowners’ associations that, among other consumer-protection efforts, prohibited associations from limiting the rights of owners to park personal vehicles, work vehicles, and assigned first responder vehicles in their driveways.

One news story I saw related the excitement of one resident of a restrictive HOA who was elated he could begin to park his work truck in his driveway. His alternative had been to park his truck almost a mile away from his home in a rented storage area and walk the distance in the Florida heat twice each workday.

But the legislation contained a “loophole” that allowed the HOA to keep the parking restrictions in place. The resident was crestfallen when he learned his neighborhood could keep rules in place that were effective when the legislation was enacted. He still has to park his truck a mile away and walk.

Another resident said she was upset because she must continue to pay $1,000 to park her Mercedes Sprinter that contains her mobile spa (the Maui Skin Bus) in a remote location and walk home after each break in her appointment schedule.

The goal of the HOA, according to its manager, is to keep the vision of the developer of the neighborhood in place. The developer saw beautiful homes, well-manicured lots, and only nice, personal vehicles parked in driveways.

The State reports Zillow is suing Richland County

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The State newspaper reported on July 2 that the home-buying site Zillow is suing Richland County. The claim is that the County is violating public records laws by failure to reply to a Freedom of Information (FOIA) request for property tax data.

The article reports that in May, Zillow requested property assessment data from Richland County by submitting multiple FOIA requests. The County first responded that it did not have any records matching the request. Then, the County denied the request because the requested information is available online and argued that state law does not require the County to create new documents to fulfill a FOIA request.

Zillow argued, according to the article, that not all the assessment information for every parcel in the County is available online. Zillow had apparently requested an electronic copy of the assessment files for all the parcels instead of the option to search parcels one by one. The company apparently didn’t want to have to search titles in the manner of South Carolina real estate professionals.

Zillow also argued that it had received the requested information in prior years. Before 2022, the company said it had received the assessment date from the County each year in the format the company requested, which was an electronic file that contained all assessment information. The lawsuit claims the company paid about $8,800 per year for that information.

Zillow is now suing for the requested information and demanded that the County pay Zillow’s legal fees if the lawsuit is successful. We’ll see what happens with this one!

SC Legislature provides fix for MV Realty problem

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This blog has previously discussed MV Realty, as title examiners reported finding “Homeowner Benefit Agreements” or “Exclusive Listing Agreements” filed in the public records as mortgages or memoranda of agreement. The duration of the agreements purported to be forty years, and searches revealed hundreds of these unusual documents filed in South Carolina. The documents state they create liens against the real estate in question.

The company behind these documents is MV Realty PBC, LLC which appeared to be doing business in the Palmetto State as MV Realty of South Carolina, LLC. The company’s website indicated the company would pay a homeowner between $300 and $5,000 in connection with its Homeowner Benefit Program. In return for the payment, the homeowner agreed to use the company’s services as listing agent if the decision was made to sell the property during the term of the agreement. The agreements typically provided that the homeowner may elect to pay an early termination fee to avoid listing the property in question with MV Realty.

The company has been the target of litigation and legislation in many states, and, thankfully, Governor McMaster signed South Carolina Code §27-28-10, et seq., into law on May 20. This legislation effectively bans these long-term listing agreements.

The legislation defines a real estate service agreement as a “written contract between a service provider and the owner or potential buyer of residential real estate to provide services, current or future, in connection with the maintenance, purchase, or sale of residential real estate.” Under the new law, a real estate service agreement is “unfair” and void if it is intended to be effective for more than one year; 1) expressly or implicitly purports to run with the land and bind future owners of the property; 2) allows for the assignment of the services contract without notice or consent of the owner; or 3) creates a lien, encumbrance, or security interest on the property.

Under the legislation, any recorded unfair real estate services contract is no longer effective as a lien, encumbrance or security interest against property. The recording of this type of document no longer serves as constructive notice to any interested party in the real estate. And no additional filing is necessary to void the unfair agreements or to clear the public records.

Further, the property owner of the real estate may collect actual damages, costs and attorneys’ fees resulting from the filing of the contract. Such contracts are expressly stated to be in violation of the South Carolina Unfair Trade Practices Act.

Contact your friendly title insurance company underwriter if you have questions about these documents, but these documents should no longer create title problems for South Carolina dirt lawyers. Some things do work out as they should!