Chicago Title SC

SC Supreme Court disbars two lawyers

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red card - suit

On June 24, the South Carolina Supreme Court issued two disciplinary opinions that both resulted in disbarment. Both involved interesting fact patterns, and I invite you to read  them as cautionary tales.

In the Matter of Brooks* involved a lawyer who was sworn in on February 19, 2019. Her application had been based on the Uniform Bar Exam score from Wyoming. One day after her admission, the Office of Bar Admissions learned that the lawyer had knowingly provided false or misleading information in her application.

She failed to disclose information about 2005 and 2014 arrests for driving under the influence (DUI), a resulting license suspension, use of cocaine and marijuana during her release as well as issues with Character and Fitness Boards in bar applications in other jurisdictions.

Bottom line: do not lie or omit facts on bar applications if you seek to practice in other jurisdictions. And advise potential South Carolina lawyers in your life to tell the truth and the whole truth on their applications.

The other case** is interesting only because of an underlying criminal conviction. The lawyer stole about $440,000 from trust accounts and was sentenced to probation. Never having worked in the criminal law arena, this sentence sounds unreasonably lenient to me. The disbarment makes complete sense though.

Bottom line: do not ever touch client funds for your own use!  Don’t borrow client funds, planning to replace them. Remove from your thought processes the idea that client funds are available to you for any reason other than to protect them for your clients.

 

*South Carolina Supreme Court Opinion 27983 (June 24, 2020).

**In The Matter of Collins, South Carolina Supreme Court Opinion 27984 (June 24, 2020).

The Episcopal Church property saga continues

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We have a new circuit court order

This is my third blog about the controversy surrounding the properties of various Episcopal churches in South Carolina. I previously said I am thankful to be a real estate lawyer as I attempt to decipher these issues.

charleston episcopal churches

St. Philip’s and St. Michael’s Episcopal Churches, Downtown Charleston, SC 

In August of 2017, the South Carolina Supreme Court issued a 77-page opinion in this litigation. We now have a new circuit court order, and I am confident we will hear more at a later date.

I don’t have to solve the mystery of the rights of gays in churches. I don’t have to ascertain whether the “liberal mainline” members or the “ultra-conservative breakaway” members make up the real Episcopal Church.  I don’t have to delve into the depths of neutral principles of law vs. ecclesiastical law. I don’t have to figure out who will own the name “Episcopal Diocese of South Carolina.”

The real estate issues are sufficiently thorny to occupy our collective real estate lawyer brains. The South Carolina Supreme Court seemed to indicate that the 29 breakaway churches had to return their properties to the national church under the “Dennis Canon”. But the Supreme Court left open the possibility that the lower court might clarify the position, and clarify Circuit Court Judge Edgar Dickson did.

He wrote that state law, not church law, requires the transfer of real property by deed. He said that no parish expressly acceded to the Dennis Canon. He said, “This is a property case. A decision on property ownership is usually governed by the title to real estate—the deed. In this case, all the plaintiff parishes hold title to their property in fee simple absolute.”

News articles refer to the properties as being valued at hundreds of millions of dollars. The historic value of the properties, including St. Michael’s and St. Philip’s of Charleston, is also quite significant. Future appeals are almost guaranteed. Nothing is settled at this point. Let’s not try to insure these titles anytime soon.

The controversy began more than five years ago when local parishes in eastern South Carolina left the Episcopal Church over, among other issues, the rights of gays in church. Since then, the two sides have been involved in a battle over the church’s name, leadership and real estate.

Interestingly, the national church had offered a settlement to the breakaway parishes that would have allowed them to retain their properties if they gave up the name and leadership issues. That settlement offer was apparently summarily rejected.

The South Carolina Supreme Court’s ruling upheld the Episcopal Church’s position that it is a hierarchal church rather than a congregational church in which the vote of church membership can determine the fate of real property. The new circuit court order begs to differ.

I continue to be thankful that I am a real estate lawyer!

*The Protestant Episcopal Church in the Diocese of South Carolina v. The Episcopal Church, South Carolina Supreme Court Opinion 27731, August 2, 2017.

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?

Homeowners’ Association information at your fingertips

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The South Carolina Department of Consumer Affairs announced on May 12 the availability of its website containing a wealth of information about homeowners’ associations. Check out the website here.

The site includes frequently asked questions about homeowners’ associations as well as an outline of South Carolina law, contact information of individuals who may be able to help and other resources.

If you represent homeowners’ associations, you probably have this information at your fingertips, but if you are a dirt lawyer who infrequently gets asked questions like, “Can my homeowners’ association impose a fine or file a lien if my renter….

  • Drives a motorcycle into the neighborhood;
  • Hangs towels to dry on the deck;
  • Parks an RV in the driveway;
  • Let’s too many kids use the pool?”

Or, “can I withhold the payment of assessments to my homeowners’ association because it refuses to enforce the prohibition against the chickens my neighbor maintains?”

Or, “I want to paint my front door fuchsia. There are a variety of crazy colors in the neighborhood, but the homeowners’ association guidelines say only a set of approved colors can be used on the exterior of residences. Can they enforce that rule?”

Have you heard questions like this? I certainly have.

Use this website to be able to communicate the answers to your clients in a succinct way, without a lot of legal research.

iBuyers are jumping back into the water: does that mean the market is safe?

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In March, the disruptive iBuyers announced that they were no longer buying homes in the midst of the pandemic. They said they were unable to pinpoint house values to the extent to make them comfortable in proceeding with their market model. And they said they were unable to insure the health and safety of their employees, partners and customers.

Some economists projected these companies would completely go out of business after losing such substantial momentum in the midst of the various shelter-in-place orders.

But now, just weeks later, the iBuyers say they’re back!

Offerpad, Redfin, Zillow, Opendoor and others have announced plans to resume operations after verifying health safety procedures. More of the processes will be handled remotely, and, as we are all doing, there will be more sanitizing, mask and glove wearing, and hand washing. They will likely offer digital methods for appraisals and for home viewing by potential buyers. Some will offer self-service listings.

One of the companies has discussed a safe, on-demand, and fully digital experience to buy and sell homes. They believe the experience is needed now more than ever.

As this blog has discussed previously, although these market disrupters have made it to markets in Georgia and North Carolina, we have not seen them announce operations in The Palmetto State. But my colleague, Martha McConnell, said she saw a Redfin “for sale” sign in her neighborhood in southeast Columbia last week.

So the iBuyers may be closer to us than we think!

Are RON closings now allowed in South Carolina?

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After a tease from our Supreme Court on Friday, the answer is still “no”

For about 15 minutes on Friday afternoon, May 1, those of us involved in real estate transactions in South Carolina got excited. An Order* from the South Carolina Supreme Court hit our in-boxes. The order was entitled “RE: Participation in Closings of Real Estate Transactions”. We collectively thought South Carolina may have moved into the 21st Century with an authorization for Remote Online Notarization (RON) closings.

Then we read the order.

You can read it here.

By way of preamble, the Court said, “we find that the public health emergency created by COVID-19 requires changes in the usual operation of the Rules of Professional Conduct in terms of the normal functioning of real estate transactions.”

Then the order stated that until August 1, lawyers may “participate in and supervise the closing of a real estate transaction by way of a video conference.”

Fair enough, but I think most South Carolina transactional lawyers believed they could already ethically handle closings via video conference.

Most lawyers definitely believed they can ethically handle “mail away closings.” Were we wrong? Ethics Advisory Opinion 05-16 states that an attorney may ethically conduct real estate closings by mail as long as it is done in a way that: (1) ensures that the attorney is providing competent representation to the client; (2) all aspects of the closing remain under the supervision of an attorney; and (3) the attorney complies with the duty to communicate with the client so as to maintain the attorney-client relationship and be in a position to explain and answer any questions about the documents sent to the client for signature.

To meet this test, according to the EAO, clients must have reasonable means to be in contact with the attorney, by telephone, facsimile, or electronic transmission. The EAO further states that there is no legal requirement that a client attend the closing, but that it must be the client’s decision not to attend the closing.

Ethics Advisory Opinions are, of course, not binding on the South Carolina Supreme Court. But if we rely on the EAO and handle mail-away closings, why can we not also handle closings via video conference, as long as we comply with all of our ethical obligations to properly represent our clients? Technology has changed since 2005!

Setting that issue aside, let’s look at the real problem. The primary obstacle to any closing that is not conducted strictly in the presence of the lawyer is the proper notarization of the recordable documents. According to South Carolina Code §26-1-5, the notary must be in the physical presence of the signatory. For this reason, clients and their lawyers must employ notaries in the client’s location when the client and the lawyer are not in the same location.

Did the May 1 Supreme Court order fix the notary problem at least temporarily? Lawyers who have spent the last four days debating this question via listserv and Facebook have decided that it does not. But did the Court try to help? Maybe.

The Order goes on to say, “necessary persons to a real estate transaction may, under the direction of the supervising attorney, similarly participate in the real estate closing by way of a video conference, provided any necessary person so consents; further, the supervising attorney shall ensure that the attestation of a recordable instrument is accomplished, which may be satisfied by use of real-time audio-visual communication technology, provided the identity of the necessary person is confirmed and a notary attests the signature of any necessary person.” (Emphasis added.)

Giving the Court the benefit of the doubt, perhaps the Justices did not attempt to fix the notary problem but, instead, believed they must address the professional responsibility aspects of the closing process to allow the legislature and governor address the statutory notary issue.

I think I am going to go with that interpretation. Otherwise the Order is useless.

And, I have another concern. Anyone of us who has read and struggled with the facts in the notorious Quicken** case knows that the Court by implication blessed dividing the various aspects of the closing that must be handled by an attorney among many attorneys. But the final sentence of this Order reads, “This order does not suspend any other provisions of the Rules of Professional Conduct, and nothing in this order is intended to relieve an attorney of his or her obligation to assume the full professional and direct responsibility for the entire transaction.” (Emphasis added.)

I am so confused!

 

*Order 2020-05-01-01, South Carolina Supreme Court.

**Boone v. Quicken Loans, Inc., 420 S.C. 452, 803 S.E.2d707 (2017).

Can non-citizens receive the owner-occupied tax ratio?

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Interesting question discussed on SC Bar’s Real Estate Law Listservundefined

The South Carolina Bar maintains a great listserv for members of the Real Estate Practices Section through which lawyers can ask questions and share information via email. I recommend that South Carolina real estate practitioners join the section and the list. Both provide opportunities for staying in touch with fellow practitioners and keeping up with news and trends.

Last week, a practitioner from the Fort Mill area was advised that the county would not allow the 4% owner-occupied assessment ratio for his clients who had Hispanic names but who presented South Carolina driver’s licenses and vehicle registrations as evidence of their permanent addresses. He asked other practitioners how to appeal.

Several lawyers, mostly from the Charleston area, responded that they were well aware of this issue. Apparently, Charleston County takes a hardline approach on the issue and requires that persons who are not United States citizens be resident aliens/permanent residents to obtain the 4% ratio.

My friend and excellent Charleston real estate practitioner, Beth Settle, pointed us to this Attorney General’s opinion on the topic.

The opinion is dated June 21, 2019 and is addressed to Jerry N. Govan, Jr., a member of the South Carolina House of Representatives. Mr. Govan’s question noted that some county offices are requiring individuals to present proof of U.S. citizenship as a requisite of receiving the special ratio and asked whether South Carolina law, specifically §12-37-10 et seq., requires proof of citizenship. The legislator then asked whether counties are authorized to use investigative methods to determine citizenship.

The opinion agreed with the questioner that South Carolina law provides no “bright line” rule to determine whether a non-citizen is or is not a domiciliary for the purposes of the special ratio and pointed to court decisions from multiple jurisdictions with varying results on this issue. Some courts have held that illegal aliens cannot form the requisite intent to achieve domicile in the United States. Other courts have indicated the determination must be made on a case-by-case basis. Some aliens, according to an opinion from Alaska, are allowed in the country only if they do not intend to abandon their foreign residence. Those restricted aliens would jeopardize their legal presence in the United States if they seek to establish domicile here. Others are not so restricted and may be able to form the intent to remain here without jeopardizing their legal alien status.

No decisions from South Carolina appellate courts have addressed this issue, but the Administrative Law Court considered the question* and concluded that establishing domicile is ultimately a question of fact and largely one of intent. A distinction was drawn between “actual residence” and “legal residence”, and the court stated that an individual remaining in the United Stated without documentation cannot form the requisite intent to make property in South Carolina the domicile for the purposes of the discount.

The burden of proof on this issue falls on the taxpayer. The Attorney General’s opinion concluded that in order to receive the four-percent special assessment ratio, the property in question must be the legal residence of the taxpayer. The determination must be made on a case-by-case basis after investigation by the county officials and ultimately the courts. Generally speaking, the opinion continued, those aliens who are here illegally are deemed unable to establish domicile in the United States. Where the alien is in the United States as a result of DACA, that person cannot qualify. And a tourist without a permanent visa cannot be a permanent resident.

*Richland County Assessor v. Herrera, 2018 WL 5114185 (18-ALJ-17-0006-cc)(October 9, 2018).

Flat recording legislation passes!

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August 1, 2019 is the effective date for this time-saving law

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On May 16, 2019, Governor Henry McMaster signed House Bill 3243 into law. You can read the short but effective statute here. House Bill 3243, better known as the Predictable Recording Fee Act (S.C. Code §8-21-310), will streamline the filing of documents in the register of deeds offices across the state by creating predictable fees for many commonly recorded documents such as deeds and mortgages. The new law will take effect on August 1, 2019. You and your staff will no longer have to count pages for documents to be recorded!

My friend and colleague, Jennifer Rubin, began work on this predictable recording Bill in the fall of 2016 when she was the President of the Palmetto Land Title Association. Our Agent and friend, Cynthia Blair, who is currently the American Land Title Association President, asked for Jennifer’s help in crafting, drafting and helping to turn the idea of predictable filing fees into law. Accepting that challenge and with the help and support of Chicago Title and PLTA, Jennifer began work on the Bill and began coordinating with the various stakeholders who were: The American Land Title Association, The South Carolina Association of Clerks of Court and Register of Deeds, The Association of Counties, The South Carolina Association of Realtors, The South Carolina Bankers Association, The Mortgage Bankers of the Carolinas, The South Carolina Bar Association, and the American Resort Developers Association on various versions of the Bill.

Jennifer said she was particularly thankful for the efforts of PLTA’s Legislative Committee led by attorney John Langford and the major contributions of her friend Julie Stutts, the deputy RMC for Aiken County.  She also appreciated the advocacy, guidance and support of lobbyists James Knox, Sharon Wilkerson, Neil Rashley, and Kali Turner and their respective groups.  Without everyone pushing this bill forward along and along, the creation of this law would not have been possible.

This new law will finally allow South Carolina real estate attorneys to fully comply with TRID regulations, provide clients and other parties with accurate final closing costs, and keep our bank accounts orderly. Please note that while the new law does not go into effect until August 1st, there is no grace period. So if you have closings on or near the first of August, please be sure to review the new statute to ensure that you’ve collected the correct amount for recording fees.