Are you up for some haunted entertainment?

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…or do you think 2020 has been frightening enough?

“It’s got great curb appeal!”

This article entitled “Would You Buy a Haunted House?” by Amanda Farrell at PropLogix caught my eye this morning. A real estate lawyer might face a challenge or two closing a haunted house!

And it’s Halloween week! Let’s entertain ourselves.

If you and your kids are up for some in-person creepy places, try Sweet Dreams Scare House in Easley, Madworld Haunted Attraction in Piedmont, Dark Castle Haunted Attraction in Elgin, Nightmare Haunted House in Myrtle Beach or Ripley’s Haunted Adventure in Myrtle Beach.

If your family prefers to check-out real haunted sites in South Carolina, check out this article.  Even the names of “Greenville Tuberculosis Hospital” and “South Carolina Lunatic Asylum” are menacing!

I grew up in the Low Country (otherwise known as “God’s Country), and the story of Alice Flagg, a ghost in Murrells Inlet, is considered fact.

The story, according to this article, is that in 1849, a wealthy doctor named Allard Flagg moved into The Hermitage and invited his beautiful sister, Alice, to live with him. (They’re always beautiful.) Alice, of course, falls hopelessly in love with an unsuitable man, who is sent away by her brother.

Alice continued to see her suitor secretly. When her brother discovered the assignations continued, he sent sweet Alice off to a boarding school in Charleston. She contracted malaria, and just before she died, her brother brought her home. After her death, he found an engagement ring on a ribbon around her neck and furiously threw it into the marsh. Beautiful Alice has spent the last 150+ years clutching her chest while walking around All Saints Cemetery. 

I bet that story would scare your kids, especially if you tell it after dark in the cemetery!

If you’re like me, though, 2020 has been scary enough. “Casper, The Friendly Ghost” is pretty much the most my family can handle this year. I wish you and your family more treats than tricks this weekend. Stay safe and Happy Halloween!

Boeing to move all Dreamliner production to North Charleston

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This is the time of the year when many of us are feverously working on budgets. My own crystal ball is particularly murky this year as COVID-19 has created more uncertainty than usual about the future of the real estate market in South Carolina.

Our state received excellent economic news on October 1, however, when Boeing issued a press release announcing the company will consolidate the production of its widebody jet in North Charleston.  Our gain is Washington State’s loss.  This move seeks to improve efficiencies during the market downturn caused by the pandemic to position the company for recovery and long-term growth.

The change won’t happen immediately. The press release indicated Boeing will continue to manufacture its 787-8 and 787-9 jets in Everette, Washington until it reaches its previously announced rate cut to six jets per month, which will probably occur sometime in mid-2021.

The release said that a company study confirmed the feasibility and efficiency gains created by consolidation will enable the company to accelerate improvements and target investments to better support customers. The North Charleston plant has lower production costs because labor is less expensive in South Carolina, and it’s a non-union plant.

Anyone who has driven from Columbia to Charleston has witnessed the extensive growth in the North Charleston area of not only Boeing, but the industries and housing developments that support Boeing. This is excellent news for us at a time when we need it!

Lawyers: Help Get the Vote Out

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South Carolina licensed lawyers have been nudged by our Supreme Court to provide assistance with our greatest responsibility as citizens: voting!  See the attached Order of the Court granting CLE credit to lawyers who work the polls on November 3. 

There are, of course, guidelines. You must work the entire day, for example, and you can’t get paid. Pay attention to the details if you seek the credit.

What a great way for lawyers to demonstrate we are leaders in our communities! And in this problematic political environment, the more clear-headed, logical, calm lawyers who can be present, the better!

In other election news, the United States Supreme Court held on Monday that South Carolina mail-in ballots must be witnessed. Help get that word out to your family, friends and clients.

Thank you to all lawyers who stand and lead!

How does the rest of 2020 look in South Carolina housing?

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We have had an incredible year in real estate in South Carolina!

Mortgage rates are at historic lows resulting in a refinance boom. Home sales have also been strong. We have seen a steady stream of migrations to our beautiful state from less desirable locations. We have seen folks tire of being stuck inside their homes by COVID looking for larger and more modern residences. And the low interest rates have assisted in those moves, too.

And commercial real estate has remained strong for us. We’ve seen the due diligence periods of some commercial projects slowed by COVID uncertainty, but these transactions appear to be closing, even if later than expected.

Real estate closing attorneys and their staff members have worked at a frenzied pace this year! They have tried to keep up with the whirlwind of activity while sanitizing between closings, performing closings on porches, in tents and in parking lots. They’ve worn masks and given away the used pens. It has taken a great deal of innovation to run a closing law firm in this environment, and they have succeeded!

It’s almost October, and we haven’t yet seen a slowdown. I point you to this article, however, written by Warren L. Wise for Charleston’s Post and Courier newspaper. The article points to a slip in the numbers of real estate sales in August as compared to August of 2019. Sales seem to have been slowed by inventory. We are still experiencing a desire for new and improved housing, but the houses aren’t available. It’s a true seller’s market.

I doubt these numbers will result in a huge slow-down between now and the end of the year. Perhaps we will see something akin to the seasonal slowdowns we have historically seen toward year-end. And if things go well, spring will give us the typical increase we are accustomed to in housing sales. Hang on for the ride!

CDC announces COVID eviction moratorium through the end of 2020

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On Tuesday, September 1, the CDC announced a temporary eviction moratorium through December 31, 2020. The order applies to all rental units nationwide and goes into effect immediately. Treasury Secretary Steven Mnuchin said that the order applies to around 40 million renters.

The CDC announced the action was needed to stop the spread of the coronavirus and to avoid having renters wind up in shelters or other crowded living conditions. This order goes further than the eviction ban under the CARES Act which covered around 12.3 million renters in apartment complexes of single-family homes financed with federally backed mortgages.

The Order, entitled, “Temporary Halt in Residential Evictions to Prevent the Further Spread of COVID-19, does not suspend mortgage foreclosures. To take advantage of the suspension, the tenant must sign a declaration form alleging:

  1. The individual has used best efforts to obtain all available government assistance for rent or housing;
  2. The individual either (i) expects to earn no more than $99,000 in annual income for Calendar Year 2020 (or no more than $198,000 if filing a joint tax return), (ii) was not required to report any income in 2019 to the U.S. Internal Revenue Service, or (iii) received an Economic Impact Payment (stimulus check) pursuant to Section 2201 of the CARES Act;
  3. The individual is unable to pay the full rent or make a full housing payment due to substantial loss of household income, loss of compensable hours of work or wages, a lay-off, or extraordinary out-of-pocket medical expenses;
  4. The individual is using best efforts to make timely partial payments that are as close to the full payment as the individual’s circumstances may permit, taking into account other nondiscretionary expenses; and
  5. Eviction would likely render the individual homeless— or force the individual to move into and live in close quarters in a new congregate or shared living setting— because the individual has no other available housing options.

The order specifically does not excuse rent, it just delays eviction. There is a substantial body of depression -era caselaw that holds this type of governmental action is permissible because it does not impair the contract, it only delays the remedy, and it is not a taking because the rent is still due. Lawsuits are likely to follow regardless of this old caselaw.

Many would argue that a temporary ban on eviction for non-payment burdens landlords with the cost of rental delay. Many landlords are individuals or small businesses that cannot spread the losses and cannot pay maintenance costs, mortgages and property taxes without the benefit of rental income.

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!

Excellent forbearance and CARES Act information from our company

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CARES act

Diana Hoffman, Corporate Escrow Administrator with our company recently wrote an excellent article about mortgage forbearance that I am sharing with South Carolina closing attorneys in its entirety:

“Forbearance does not erase what the borrower owes. The borrower will have to repay any missed or reduced payments in the future. Borrowers able to keep up with their payments should continue to make payments. The types of forbearance available varies by loan type.

At the end of the forbearance, the borrower’s options can include paying their missed payments:

  • At one time
  • Spread out over a period of months
  • Added as additional payments, or
  • Added as a lump sum at the end of their mortgage

The CARES Act requires servicers to grant forbearance up to 180 days, with a one–time extension of 180 days for borrowers experiencing a hardship due to COVID–19 issues, such as, loss of income, unemployment, illness or caring for a sick relative.

The CARES Act also provides protection against derogatory marks against the borrower’s credit. However, the servicer can report notes to the credit bureau that can be seen by any future creditor that could prevent the borrower from obtaining any type of new financing for a 12–month period.

When the Federal Housing Finance Agency reports servicers who collect payments on mortgages backed by Fannie Mae and Freddie Mac, they will only be required to cover four months of missed payments on loans in forbearance.

The big question is what happens when that four–month period is over? As it turns out, the Government Sponsored Entities (GSEs) themselves are preparing to cover any remaining advances for as long as those loans remain in forbearance.

What does this mean to the title industry? To prevent payoff losses due to deferred payments, settlement agents should:

  • Ask borrowers if they have entered into a forbearance or loan modification agreement with their lender at the opening of the transaction
  • Review the preliminary report or commitment for title insurance for junior liens, securing the deferred payments
  • Ensure the payoff request includes the following language:
    • Please furnish to us a statement of the amount necessary to pay in full including any amounts deferred due to a forbearance or modification agreement.
      If the borrower entered into a forbearance agreement and you are not the entity servicing any deferred amounts, please provide the contact information for the entity who is.
  • Review the payoff statement for deferred principal balance amounts

The last item is important. If the deferred amounts are not contained in the payoff statements, it is likely the amounts are being serviced by another loan servicer and a separate payoff statement will need to be requested”

NC title agent fakes title insurance policies and gets fourteen month sentence

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A North Carolina title agent was sentenced this month for selling fake title insurance policies. Ginger Lynn Cunningham owned Blue Ridge Title Company, a title insurance agency located in Buncombe County, North Carolina.

The title insurance company that had done business with Cunningham had canceled the agency in March of 2016, but Cunningham continued through October of 2017 to represent herself as being a title insurance agent. During this time, she purportedly sold falsified title insurance policies, retaining 100% of the premium.

The court records reflect that at least 973 counterfeit title insurance policies were sold to the tune of around $400,000 in bogus premiums. Cunningham pleaded guilty to wire fraud on October 28, 2019.

Cunningham was sentenced to fourteen months in prison and three years of court supervision. She was also ordered to pay restitution.

I would love to say this is a novel case and that these facts don’t make my skin crawl, but former attorney, Brian Davis, was disbarred in South Carolina in 2015 for the same activity.*

By way of background, the vast majority of real estate lawyers in South Carolina are also licensed as title insurance company agents.  In other parts of the country, lenders receive title insurance documents directly from title companies’ direct operations.  In South Carolina, title companies run agency operations, supporting their networks of agents, almost all of whom are South Carolina licensed attorneys.

Lenders require closing protection letters for closings involving agents.  Stated simply, these letters inform lenders that the insurer may be responsible in the event a closing is handled improperly by the closing attorney.

Title insurance company agents also produce title insurance policies and commitments, following the guidelines of their insurance underwriters, and using software programs designed to support the production of these documents.

Some closing attorneys are not agents but instead act as approved attorneys for title insurance companies. Approved attorneys can obtain closing protection letters from their title companies, but they are not able to issue their own title insurance documents. Instead, they certify title to a title insurance company or to a title company’s agent.

If an attorney cannot provide lenders with closing protection letters, that attorney generally cannot close mortgage loans in South Carolina.

In 2007, Mr. Davis was canceled as an agent by his title insurance company**.  After that cancellation, he was able to legitimately obtain title insurance commitments and policies through an agent. In 2011, however, Mr. Davis was canceled as an approved attorney.  He didn’t let that fact stop him though. He began to fraudulently produce title insurance documents, making it appear that the title insurance company was issuing closing protection letters, commitments and policies for his closings.  He also collected funds designated as title insurance premiums, but he never paid those premiums to the title insurance company.  He continued to handle closings using fraudulent title insurance documents until his actions were discovered and he was suspended from the practice of law by the South Carolina Supreme Court in 2013. In 2015, Mr. Davis was disbarred.

I supposed I should close by saying don’t do this!  Please!

 

* In the Matter of Davis, S.C. Supreme Court Opinion 27480 (January 21, 2015)

** In the interest of full disclosure, I work for that company.

Court of Appeals decides same-sex common law marriage case

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In a same-sex common law marriage case, our Court of Appeals recently weighed in on the applicability in South Carolina of Obergefell v. Hodges*, the 2015 United States Supreme Court case that held same-sex couples may exercise the fundamental right to marry and that state laws challenged in that case were invalid to the extent they exclude same-sex couples from civil marriage on the same terms and conditions as opposite-sex couples.

In an appeal from the family court’s dismissal of Cathy Swicegood’s complaint alleging the existence of a common-law marriage with her same-sex partner, Polly Thompson, Swicegood argued the family court erred by dismissing the case for lack of subject matter jurisdiction**.

The family court case was filed in 2014. While Swicegood’s appeal was pending, the Supreme Court of the United States decided Obergefell.

The case sought an order recognizing the existence of a common-law marriage, a decree of separate support and maintenance, alimony, equitable division of marital property and related relief. Swicegood alleged she and Thompson cohabited as sole domestic partners for over thirteen years, until December 10, 2013, agreed to be married and held themselves out as a married couple. She also alleged the couple exchanged and wore wedding rings, co-owned property as joint tenants with the right of survivorship and included each other as devisees in their wills. She also alleged they shared a joint bank account and that Thompson listed her as a “domestic partner/qualified beneficiary” on Thompson’s health insurance and as a beneficiary on her retirement account.

Thompson moved to dismiss the action, alleging the family court lacked subject matter jurisdiction over Swicegood’s complaint because the parties were not married and lacked the capacity to marry.

Swicegood submitted the affidavits of two individuals who each attested they witnessed a wedding ceremony between Swicegood and Thompson in Las Vegas on February 12, 2011.

Thompson submitted a memorandum and several exhibits in support of her motion to dismiss. She argued that in August 2012 and September 2013, she and Swicegood signed affidavits of domestic partnership in which they acknowledged they had “a close personal relationship in lieu of a lawful marriage,” were “unmarried” and “not married to anyone.”

Thompson contended these documents indicated the parties did not hold themselves out as a married couple. In her affidavit, Thompson attested Swicegood knew they were not married. She stated she and Swicegood participated in a “commitment ceremony” in Las Vegas “on a lark,” but they knew it was not a wedding and that they could not legally marry in Nevada. Thompson attested she gave Swicegood several rings during their relationship, but she intended none of these to signify they were married. She stated she was not and never had been married to Swicegood: “We both knew that if we wanted to get married, we could go to a state that allowed same-sex marriage. It was not our intent to enter into marriage, and we did not”.

The family court dismissed Swicegood’s complaint, concluding it lacked subject matter jurisdiction to adjudicate the issues because a common-law marriage was not legally possible pursuant to section 20-1-15 of the South Carolina Code (2014), which was still in force at the time. That statute read: “A marriage between persons of the same sex is void ab initio and against the public policy of this State.”

The Court of Appeals issued an unpublished opinion remanding the case to the family court with instructions to “consider the implications of Obergefell on its subject matter jurisdiction.” The family court again concluded it lacked subject matter jurisdiction, finding that although Obergefell applied to common-law marriages, it could not retroactively create a common-law marriage between the parties.

The court concluded Obergefell could not “logically be read to exclude common-law marriages,” and so long as South Carolina continued to recognize the validity of common-law marriages for opposite-sex couples, it had “a constitutionally mandated duty to recognize the validity of common-law marriages for same-sex couples.” The court did not expressly resolve the question of whether Obergefell applied retroactively, but it concluded the couple could not have formed a common-law marriage because section 20-1-15 was in place throughout the couple’s thirteen-year period of cohabitation, and they believed they lacked the legal right to be a married couple.

The Court of Appeals applied Obergefell retroactively, but held that retroactive application of the decision did not require them to ignore the fact a state statute operated as an impediment to the formation of a common-law marriage between same-sex couples when it was still in force. Our state law concerning impediments to marriage was held to be “a pre-existing, separate, independent rule of state law, having nothing to do with retroactivity,” which formed an “independent legal basis” for the family court’s dismissal of Swicegood’s complaint.

 

*135 United States Supreme Court 2584 (2015).

**Swicegood v. Thompson, South Carolina Court of Appeals Opinion 5725 (July 1, 2020)