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).
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.
In a March 17 case*, the South Carolina Supreme Court made a thought-provoking comment on easement law through a footnote.
As with most real estate cases involving neighbors, the facts in this case are interesting. (I should probably admit the facts may only be interesting to dirt lawyers.) Paul and Susan McLaughlin bought Lot 22 in Seabrook Island and spent the next six years meeting and negotiating to build on the lot because of the existence of a pipe and an easement they were told had been abandoned.
The backstory involves a draining pipe and easement running through the backyards of seven lots. The easement and pipe were originally owned by Seabrook Island Property Owners Association (SIPOA). Over the years, the pipe degraded and became porous such that, aside from carrying away stormwater from the road, as intended, it also drained standing water from the lots. Nearly 20 years later, SIPOA installed a new draining system for the road, rendering the old one obsolete. At a property owner’s request, SIPOA abandoned the easement, but left the porous pipe in place.
After six excruciating years, the McLaughlins received home design and location approval from SIPOA, including the right to build on a former “no-build area” occupied by the abandoned easement. They removed the pipe and built their new home.
Neighbors Richard and Eugenia Ralph owned Lot 23 and sued claiming their backyard flooding became even worse as a result of the pipe removal. The jury awarded the Ralphs $1,000 in “nominal” damages. The Court of Appeals reversed and remanded for a new trial on damages alone, and the Supreme Court reversed the Court of Appeals and reinstated the jury’s verdict.
I won’t dwell on the remainder of the opinion, which deals mostly with litigation issues, but I wanted to point dirt lawyers specifically to footnote 5.
The Ralphs claimed some sort of ownership right in the abandoned easement, which the Supreme Court did not feel the need to address. But the Supreme Court did express concern over the Court of Appeals discussion of a seminal easement case in South Carolina, Blue Ridge Realty Co. v. Williamson**.
Blue Ridge is the case we rely upon for the right of property owners who buy lots with reference to a plat to use the roads shown on that plat. Without that case, many properties would have access issues.
The Supreme Court voiced concern over the alteration of a quote from the Blue Ridge case by the Court of Appeals. The Court of Appeals quoted the case: “It is generally held that when the owner of land has it subdivided and platted into lots and (easements,) and sells and conveys the lots with referenced to the plat, he hereby dedicates said (easements) to the use of such lot owners (and) their successors in title…”
Blue Ridge actually said, “It is generally held that when the owner of land has it subdivided and platted into lots and streets and sells and conveys the lots with reference to the plat, he thereby dedicates said streets to the use of such lot owners, their successors in title, and the public. (Emphasis added by the Supreme Court in the current case.)
The Supreme Court said the scenarios presented by the current case and the Blue Ridge case were fundamentally different. Blue Ridge involved the claim of a property owner to use a public street shown on a recorded plat. In the current case, lot owners whose property contains an easement intended for the benefit of the HOA claims an ownership interest because the easement inadvertently benefits the property owner as well.
In Blue Ridge, the property owner and its successors in title were the intended beneficiaries. Here, the opposite is true. The owners of Lots 22 – 28 were never intended to benefit directly from the easement. The fact that they did so, according to the Supreme Court, was a pure accident, caused by the unexpected degradation of the pipe. In short, Blue Ridge does not stand for the proposition for which it was cited by the Court of Appeals, according to the Supreme Court.
This distinction might be significant in many of the title scenarios real estate practitioners face routinely.
Interesting indeed! I also find it interesting that the Supreme Court refers to the Blue Ridge case, as we dirt lawyers refer to it, as the Williamson case, but that’s a blog for another day.
*Ralph v. McLaughlin, South Carolina Supreme Court Opinion 28015, March 17, 2021.
The State Newspaper reported on April 13 that Lexington County Council plans to suspend subdivision developments for the next six months. The proposed ordinance had its first reading that day, and The State, in an article written by Bristow Marchant, reported that County Council invoked a “pending ordinance rule”, which will require staff to refrain from accepting applications immediately.
County Council indicated it plans to review its standards during the six-month moratorium. The State reports that the ordinance will affect 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.”
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.
The Consumer Financial Protection Bureau (CFPB) issued a notice on April 5 proposing an Amendment to Regulation X that would require a temporary COVID-19 emergency pre-foreclosure review period until December 31, 2021, for principal residences. This amendment would, in effect, stall foreclosures on principal residences until January of 2022. The press release, which can be read here, requests public comments on the proposal through May 10, 2021.
The press release states nearly three million borrowers are delinquent in mortgage payments and nearly 1.7 million will exit forbearance programs in September and the following months. The rule proposes to give these borrowers a chance to explore ways to resume making payments and to permit servicers to offer streamlined loan modification options to borrowers with COVID-related hardships.
Under current rules, borrowers must be 120 days delinquent before the foreclosure process can begin. Anticipating a wave of new foreclosures, the CFPB seeks to provide borrowers more time for the opportunity to be evaluated for loss mitigation.
Many provisions of the CARES Act apply only to federally backed mortgages, but the CFPB seeks, by this proposed rules change, to set a blanket standard across the mortgage industry.
Job losses during the pandemic have caused many Americans to be behind in their rent, and the Centers for Disease Control and Prevention announced on Monday, March 29, that the federal moratorium on evictions has been extended through June 30. The announcement was made just two days before the moratorium was set to expire.
The theory behind the moratorium is that the pandemic severely threatens individuals in crowded settings like homeless shelters. Keeping those individuals in their homes is a step toward stopping the spread of COVID, according to the theory. The moratorium was initially issued in September of 2020 and has been extended twice previously.
Renters must invoke the protection by completing a form available from the CDC website, by signing the form under penalty of perjury, and by delivering the form to the landlord. The form requires the renters to state that they have been financially affected by COVID-19 and can no longer pay rent. Legal aid attorneys have argued that this process is too difficult and that landlords are able to exploit loopholes. For example, if a lease has expired, a landlord might argue that eviction is not a result of non-payment of rent. Legal aid attorneys prefer that the moratorium be automatic.
Landlord trade groups have been opposed to the moratorium, stating that landlords should have control of their properties.
The CFPB and Federal Trade Commission issued a statement announcing that they will be monitoring and investigating eviction practices considering the extended moratorium. The agencies’ indicated they will not tolerate illegal practices that displace families and expose them and others to grave health risks.
More than $45 billion in rental assistance has also been set aside by Congress. This money will benefit landlords as well as tenants. Renters are now able to apply for federal rental assistance through application portals opened in March.
Golf course redevelopment is clearly a hot topic in the real estate industry, and this is my fourth blog on the topic. The first blog discussed the decade-long litigation surrounding two golf courses in Myrtle Beach that eventually allowed for redevelopment despite strenuous objections of neighbors. The second blog discussed the national trend of neighbors objecting to golf course redevelopment on “NIMBY” (not in my back yard) grounds. This blog discusses a golf course closer to home, in Blythewood, The Golf Club of South Carolina at Crickentree.
An article in The State newspaper by Jeff Wilkinson discussed the bankruptcy, foreclosure and eventual planned redevelopment of Crickentree. The article states that E-Capital, the national investment firm that owns the mortgage on the golf course, announced this bad news by email to the neighboring homeowners. A public meeting followed where an attorney for that firm told neighbors that the intent is to subdivide the golf course into small lots and build 450 homes. Basic math would indicate the planned density will be much greater than that in the surrounding neighborhood.
The property had to be purchased through the bankruptcy proceeding and then rezoned in order to accommodate a residential subdivision on property now zoned for recreational use. And, of course, the neighbors are quite concerned about potentials hits on their property values.
According to Mr. Wilkinson’s article, the Columbia area may suffer from an oversaturation of the market with golf courses. Recently, he said, the former Rawls Creek of Coldstream golf course in Irmo closed, and its owner, the Mungo Homes Co., donated the 116-acre property to the Irmo Chapin Recreation Commission. The commission plans to link the 4.5 miles of cart paths to the Three Rivers Greenway river walks in Columbia and Lexington County. Donating golf courses for recreational purposes avoids possible rezoning and litigation issues that neighbors may raise.
Many golf communities were built in areas with good schools and work opportunities, making them particularly valuable for residential redevelopment. Developers generally do not want to walk away from that value.
So, what prohibits the development of these properties into residential subdivisions? Zoning is one of the challenges. Many golf courses are zoned for commercial uses to accommodate clubhouses, restaurants, pro shops and bars. Some, like Crickentree, are zoned for recreational purposes. But the main stumbling block may be the NIMBY attitude of neighbors. Residents near golf courses prefer that the properties be turned into parks, open spaces and natural preserves.
In the Deerfield Plantation cases in Myrtle Beach, the golf courses and surrounding residential subdivisions were originally developed beginning in the late 1970’s. The plats contained notes to the effect that the streets were dedicated for public use but the golf courses were to be maintained privately and were specifically not dedicated to public use.
The covenants gave the lot owners no rights, property, contractual, or otherwise, in the golf courses. A Property Report that was delivered to all prospective lot purchasers described the costs of golf memberships, which were not included in lot prices, and stated that to be allowed to use the golf courses, members would be required to pay initial dues and annual dues and fees. The real estate agents made it clear during the sales program that the mere purchase of a lot did not give a lot owner any right or entitlement to use the golf courses. The deeds of the lots did not convey any easements or other interests in the golf courses.
One plaintiff, who was also a real estate agent, testified that he was never told the golf courses would operate in perpetuity and that the real estate agents never told other potential purchasers that the golf courses would always exist on the properties.
What caused the golf courses to fail? When the golf courses opened, there were 30 – 40 golf courses in the Myrtle Beach area. By the time the golf courses closed, there were nearly 125 courses. Property taxes in the golf courses increased from $7,800 per year to $90,000 per year. And then the economy tanked. These three factors have occurred across the country to varying extents.
Now, let’s look at South Carolina law. In one of the Deerfield orders, Thomas J. Wills, Special Referee, examined the law of implied easements in South Carolina. I’m summarizing and eliminating the citations for this brief discussion. The Order states that implied easements are not favored by the courts in South Carolina and must be strictly construed. The intent of the parties controls the existence and scope of implied easements, and the best evidence of that intent is the recorded documents. While case law in South Carolina is clear that lot owners in subdivisions hold easements in streets shown on plats by which their lots are sold, the order states that this rule does not extend beyond access, which is necessary and expected for residential purposes. Finally, the order states that no implied easements in views, breezes, light or air exist in this state.
After many years, these Myrtle Beach golf courses will be redeveloped into new residential subdivisions. It may take many years before the Crickentree property will be in a position to be redeveloped. Will we see more of this litigation in South Carolina? Probably. While the law in South Carolina appears generally to favor redevelopment in these cases, there is no doubt that the facts in some of the situations may give rise to implied easements in adjacent lot owners, even in the face of our law. As long as we have NIMBY attitudes of those who live near defunct golf courses, we will continue to see litigation in this area.
Recently, there has been news that Indian Wells Golf Course in Garden City may be replaced with 488 new homesites in the near future. Founders Group International plans to built 150 duplexes in the area, in addition to single family homes. Stay tuned!
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.
Early in my legal career, I searched a title prior to contentious litigation surrounding a commercial tract in Horry County. I was eight months pregnant with my son at the time. Title examiners as old as I am will remember we used to pull huge books down from high shelves to search titles in South Carolina. I remember this project so well not because of the difficult work in my puffy condition, but because of the time it took to resolve the litigation. When we finally received the final order, my son was in the second grade.
That timing may not hold a candle to the case decided last year in The United States District Court for South Carolina surrounding a tract in Dorchester County. Dudek v. Commonwealth Land Title Insurance Company* is the culmination (I hope) of what the court calls a “long- standing and enduring legal battle” over an eight-acre tract that was divided into two parcels of six and two acres, respectively.
Summarizing the almost undisputed facts as briefly as possible, plaintiffs Stephen Dudek and Doreen Cross entered into a contract to purchase the six-acre tract in 2012. A third party, Molly Morphew, entered into a back-up contract with the sellers to purchase the property in the event the plaintiffs’ purchase fell through. Both parties ultimately sued the seller for specific performance, and the plaintiffs in this case prevailed.
Dudek and Cross purchased the property in 2017 and obtained a title insurance policy from Commonwealth. The litigation with Morphew continued with two subsequent suits, the first alleging fraud and abuse of process in the purchase, and the second seeking to enforce a contract provision setting up a water and sewer easement in favor of the two-acre tract, which by this time had been purchased by Morphew. Dudek and Cross filed a title insurance claim on the easement issue, and Commonwealth denied the claim relying on an exception for easements and the exclusion for risks created by or known to the insured prior the policy date.
The Court held Commonwealth had no duty to defend the insured property owners, relying on the fact that they knew about the easement before they closed. Simple enough, right?
The more convoluted and interesting discussion revolves around the treatment of the policy of the easement issue. The covered risk in question in the policy was that “someone has an easement on the Land”. The policy contained two exceptions, however, one for unrecorded easements and one for recorded easements. The court stated that the policy simultaneously extended and eliminated coverage for easements, rendering the policy provision meaningless and illusory.
Title insurance agents routinely add specific exceptions to title insurance policies to limit coverage. This case cautions against adding exceptions that operate to prevent all coverage from a covered risk. We will all need to be careful about this holding as time progresses.
I love the topic of common law marriage because it because it reminds me of the movie “The Big Chill”. “The Big Chill” is one of my husband’s favorite movies, in fact, it’s up there with “Brave Heart” and “Casablanca”. Several years ago, we celebrated a milestone birthday by inviting two couples who were friends from law school to the mountains for a “Big Chill Weekend” of eating great food, playing great music* and reminiscing about the old days. We did agree to eliminate drugs and spouse swapping from the Big Chill agenda.
Effective July 24, 2019, the South Carolina Supreme Court abolished common law marriage in South Carolina.** This rule will be prospective only. Parties may no longer enter into a valid marriage in South Carolina without a license.
Hang on. I will explain how the movie and common law marriage in South Carolina connect for those two young to remember the news. (And the connection has nothing to do with our Big Chill weekend.)
When the movie was being filmed in the winter of 1982-83 in Beaufort, actor William Hurt was living with Sandra Jennings, a former dancer in the New York City Ballet. Ms. Jennings became pregnant with Mr. Hurt’s son, Alexander Devon Hurt, who was born in 1983. The couple lived together in New York and on the road from 1981 – 1984.
When the couple split, Ms. Jennings brought suit in New York claiming a share of Mr. Hurt’s substantial assets, based on the theory that they had established a common law marriage during the few months they lived in South Carolina. She sought a divorce. Child support was not an issue because Mr. Hurt was paying $65,000 per year to support the couple’s son. Common law marriages hadn’t been recognized in New York since 1933, so the claim was based on South Carolina law and the short time the couple lived together in Beaufort.
Ms. Jennings was not successful in the lawsuit, but litigation is very expensive, and the story got lots of mileage in South Carolina. The standing line was that actors had to be careful in this state! Maybe the cast can finally return for a sequel.
The Supreme Court stated that the time has come to join the overwhelming national trend, despite our legislature’s failure, to abolish common law marriage. The court said, “The paternalistic motivations underlying common-law marriage no longer outweigh the offenses to public policy the doctrine engenders.”
I know some other outdated ideas I’d like to see abolished in South Carolina.
The Revenue Ruling acknowledged the abolishment of common law marriage and stated that any couple living in South Carolina in a common law marriage established prior to July 24, 2019 is married for federal and state income tax purposes and must file their returns using the filing status “married filing jointly” or “married filing separately”. They cannot file using the filing status “single”.
On or after July 24, 2019, according to the Revenue Ruling, unmarried South Carolina couples must obtain a marriage license to use the filing status “married filing jointly” or “married filing separately”.
If a couple entered into a valid common law marriage in another state, , South Carolina continues to recognize the couple as married when they establish their domicile in South Carolina, according to the Revenue Ruling.
Dirt lawyers recognize that common law marriage can make a huge difference in title and probate matters, so this Revenue Ruling is a good reminder for us.
* Favorite lines from the movie which demonstrate, in part, why it’s a favorite: Michael: “Harold, don’t you have any other music, you know, from this century?” Harold: “There is no other music, not in my house.” There is no other music in the Manning house either.
Favorite movie trivia: The dead guy, the corpse being dressed for his funeral in the opening scenes, was played by none other than Kevin Costner. There were plans to have flash-back scenes to the characters’ college antics, but those scenes were later eliminated.
**Stone v. Thompson, South Carolina Supreme Court Opinion 27908 (July 24, 2019).