How to cure a defective deed

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Why South Carolina should consider a legal specialty in real estate.

The Real Estate Practices Council of the South Carolina Bar is considering petitioning our Supreme Court to create a specialty for the practice of real estate law. Two committees have been formed, one to consider residential real estate as a specialty and the other to consider commercial real estate as a practice specialty. If you have ideas that may help, please pass them along to me!

One reason for consulting a real estate lawyer might be for assistance in curing a defective deed. It is impossible to list all the types of defects that appear in deeds of record. The list grows every day! Some of the most common defects are property description discrepancies, grantor and grantee name discrepancies, out-of-state forms that do not comply with South Carolina statutory requirements, right of survivorship attempts that fail, discrepancies in ownership percentages, failure to recite consideration, grantor signature discrepancies, and authority issues of seller entities.

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Curing defective deeds will often require corrective deeds or quitclaim deeds from parties with outstanding interests. Note that corrective deeds are exempt from the deed recording fees imposed by §12-24-10 et seq. of the Carolina Code. See, specifically, §12-24-40(12). With corrective deeds, it may be necessary to obtain a deed back from the grantee. An example would be a deed from the developer to Richard Roe for lot 35, where Mr. Roe actually bought and occupied lot 34. To cure this problem, in addition to obtaining a deed from the developer to Mr. Roe of lot 34, Mr. Roe would need to convey lot 35 back to the developer. I continue to be amazed at the number of real estate professionals who think this step can be skipped, and that a corrective deed will somehow get the title back for the other lot. Also remember that mortgages may have to be re-executed or otherwise corrected once the deed issue is cured.

I am often asked whether the lawyer can “fix” the problem on the original deed and re-record it without the involvement of the parties. The answer is a strong “no”. The grantor must at least initial any changes. The more serious the problem, the more likely it will be that a corrective deed will be needed and that the grantor as well as the grantee will have to be involved.

When a deed discrepancy is discovered after the title has been conveyed again, the question often arises whether the corrective deed should run to the original grantee, and whether that would create the necessity for deeds from each grantor to each grantee in the chain of title after the problem. I often suggest that the corrective deed be given to the current property owner. The participation of intervening property owners is not needed.

Deed reformation actions are possible, and foreclosures often include additional causes of action for deed reformation to correct legal descriptions and other mistakes. Title insurance companies are often responsible to pay for these additional causes of action.

With these difficulties to be faced, don’t you think real estate practice as a specialty is a good idea?

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A Short Time Ago in a Revenue Office Not Far Away …

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Check them out in DOR Information Letter #15-20

The South Carolina Department of Revenue (DOR) issued a Revenue Ruling and an Information Letter in 2015 addressing deed recording fees and the affidavits that must accompany deeds.

Revenue Ruling #15-3, issued earlier this year, contains a comprehensive treatment of the subject, and Information Letter #15-20, issued on December 11, creates new affidavit forms, the Affidavit for Taxable or Exempt Transfers and the Affidavit for Exempt Transfers. Former affidavits, created in 1996, and using the term “arm’s length transaction” were decertified.

darth vader

“Luke … I am your lawyer.”

Deed recording fees of $1.35 (state) and $.55 (county) per $500 or any fractional part of $500 of the value of the real estate are imposed by §12-24-10 of the South Carolina Code for the “privilege” of recording a deed. This has not changed. Also unchanged is the list of 15 exemptions, and the statement that deeds of distribution and deeds transferring property from a trust to a trust distributee upon the settlor’s death are not subject to the fees.

One statutory change from 2015 was addressed in the Information Letter. Code §2-59-140 was amended in June to provide in subjection (E) that deductions from “value” include “any lien or encumbrance on realty in the possession of a forfeited land commission which may subsequently be waived or reduced after the transfer under a signed contract or agreement between the lienholder and the buyer existing before the transfer.” This change was added to Item 5 of the Affidavit for Taxable and Exempt Transfers.

Real estate practitioners can find the Revenue Ruling and the Information Letter at www.dor.sc.gov. Be sure to use the new forms!