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!

Court of Appeals sets a timing rule on ATI exemption

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The new rule favors the taxpayer

A case* from the South Carolina Court of Appeals on August 26 concerns South Carolina Code Section 12-17-3135 which allows a 25% property tax exemption when there is an “Assessable Transfer of Interest” of real estate. The issue was one of timing, whether a property owner must claim this exemption during the first year of eligibility.

The Administrative Law Judge had consolidated two cases. In both cases, the property owner had purchased property during the closing months of 2012. Neither taxpayer claimed the ATI Exemption in 2013, but both claimed it in January of 2014. The Dorchester County Assessor denied the requests, but the ALJ decided the exemptions had been timely claimed.

The statutory language in question provides that the county assessor must be notified before January 31 for the tax year for which the owner first claims eligibility. The taxpayers argued that the plain meaning of this language allows them to choose when to claim the exemption. The Assessor argued that the exemption must be claimed by January 31 of the year following the transfers.

The Court looked at taxation of real property as a whole and held that the legislature intended that all purchasers would have a meaningful opportunity to claim the exemption. Under the Assessor’s interpretation, there would be a much less meaningful opportunity for taxpayers who purchase property later in the calendar year.

The Court also stated that the ATI Exemption is not allowed to override the appraised value set in the statutorily required five-year reassessment scheme, so there would be a built-in time limit for claiming the exemption.

 

*Fairfield Waverly, LLC v. Dorchester County Assessor, Opinion 5769 (August 26, 2020)

South Carolina is one of three states without remote online notarization

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This HousingWire article really caught my attention this morning. South Carolina is one of only three states without an online notarization option.

Efforts have been in progress to pass Remote Online Notarization (RON) legislation here for a couple of years, but the Council of the Bar’s Real Estate Section opposed the legislation on the theory that RON would challenge the control South Carolina licensed lawyers currently enjoy. Many other lawyers disagree with that position, but the legislation stalled.

Other states have used a variety of permanent and temporary solutions to allow for remote online notarization during the COVID-19 crisis. But, at this moment, California, Oregon and South Carolina are the only states with no solution.

What’s your opinion, South Carolina real estate lawyers? Would RON be a good solution to facilitate closings in South Carolina or would it erode your control? The legislation is likely going to be discussed in the next legislative session. Your opinion matters!

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.

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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.

Court of Appeals case may affect title search procedures

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I’m going to talk about this case* gingerly for reasons that will become obvious when you read the caption. I won’t express any opinions, but I want to make South Carolina lawyers aware of this South Carolina Court of Appeals case from last week that seems to create a new wrinkle for title examinations.

At issue in this case are a statute, an ordinance and an official county map.

The statute, S.C. Code §6-7-1220, says “Counties and municipalities may establish official maps to reserve future locations of any street, highway, or public utility rights-of-way, public building site or public open space for the future public acquisition and to regulate structures or changes in land use in such rights-of-way, building sites or open spaces….”

The Ordinance of Horry County, 107-98, passed in 1999, established an official county map to “show the location of existing or proposed public streets, highways and utility rights-of-way, public building sites and public open spaces”.  The ordinance provided that “no building, structure, or other improvement, shall hereinafter be erected, constructed, enlarged or placed within the reservation area…without prior exemption or exception….”

In 2002, Horry County Ordinance 88-202 amended the official map to add “the right-of-way identified as Alternative 1 for the proposed Carolina Bays Parkway…”

Both ordinances were recorded in the Register of Deeds and indexed under Horry County.

A developer purchased 131.40 acres in Horry County in 2006 to develop as a residential subdivision. Title insurance was issued to two mortgage lenders through Chicago Title. The developer defaulted in 2007 and the lenders foreclosed. In 2009, the South Carolina Department of Transportation (SCDOT) filed an eminent domain action to take 10.18 acres of the property for the Carolina Bay Parkway. The lenders submitted title insurance claims, which were denied on the basis of the exclusion for zoning restrictions or ordinances imposed by any governmental body.

Summary judgment for Chicago Title was granted at the trial court, but the Court of Appeals reversed, concluding that the ordinance constituted a defect and an encumbrance.

Title examiners do not search ordinances. Should they now? Stay tuned. I hope this case will be appealed!

*Jericho State Capital Corp. of Florida v. Chicago Title Insurance Company, South Carolina Court of appeals Opinion 5731 (June 10, 2020)

Court of Appeals case lets us talk dirt

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In the midst of COVID-19, it’s a pleasure to return to a simple discussion of South Carolina dirt law. A case decided by our Court of Appeals last week* surrounds the rights of a condominium project’s owner’s association and a successor developer.

The Edgewater on Broad Creek is a luxury condominium project in Hilton Head developed beginning in 2002. The developer, Broad Creek Edgewater, L.P. planned to develop the project on 23.65 acres in multiple phases. Phase 1, located on 7.64 acres of the property, consisted of a building containing 23 units and a clubhouse. The developer recorded a master deed in Beaufort County on December 31, 2002. In the master deed, the developer reserved the right to incorporate the remaining 16.01 acres into future phases.

The developer failed in the great recession. Its creditors placed Broad Creek Edgewater, L.P. into involuntary Chapter 7 bankruptcy in May of 2007. The bankruptcy court approved a sale of the additional property to Bear Properties, LLC on May 28, 2008. In addition to the property, the successor developer was given all of the developer’s reserved rights by a quitclaim deed and a bill of sale. Later, Bear Properties assigned all its rights and interests to Appian Visions, LLC, which subsequently assigned its rights and interests to Ephesian Ventures, LLC, the appellant in this case.

While the parties are involved in other litigation, this case involves the attempted construction of a pool and tabby walk by the owner’s association on Phase 1. In March of 2010, the association sought a development permit from the Town of Hilton Head to construct a swimming pool. Following a hearing, the permit was granted and the association began construction. Later, the association began constructing a tabby walk leading from the residential building to the swimming pool. Construction was halted when the Town notified the association that an additional permit was required for the tabby walk.

Ephesian administratively opposed the permit to construct the tabby walk, alleging the master deed required its approval for any construction. The Town rescinded approval for the development permits, stating that it planned to hold the matters in abeyance until the covenant issue was resolved. In 2011, the association brought suit in circuit court seeking a declaratory judgment as to Ephesian’s reserved rights in Phase 1. The association sought an order that it had a right to construct a swimming pool and other amenities on Phase 1, subject only to the land use requirements of the Town, free of any interference by Ephesian.

Although the developer argued that other language created an ambiguity,  language focused on by the Master in Equity and Court of Appeals reads:

“The Declarant expressly reserves the right to improve the aforementioned property by clearing, tree pruning, constructing additional parking and common facilities, including, but not necessarily limited to recreational facilities, draining facilities, lagoons, and the like, pertaining to The Edgewater on Broad Creek Horizontal Property Regime.”

The Master in Equity found, and the Court of Appeals agreed, viewing the facts and inferences in the light most favorable to the successor developer, as is required in considering summary judgment, that the successor developer maintains the right to construct additional amenities in Phase 1, but that this right is not exclusive.

The Court held that the master deed was unambiguous in its reservation of a non-exclusive right in the developer. Litigation between the parties is likely to continue, so we may be able to discuss further developments later.

Talking dirt law is so refreshing!

 

*The Edgewater on Broad Creek Owners Association, Inc. v. Ephesian Ventures, LLC, Opinion 5724, South Carolina Court of Appeals (May 6, 2020).

 

A blog for Thanksgiving Week

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The top ten things this dirt lawyer is thankful for professionally…

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As a happy United Methodist (by virtue of my marriage almost 40 years ago to a P.K.* who refused to be baptized again at a Baptist church) I believe an attitude of thankfulness makes life better.

Our office recently started following author John Fisher’s** lead by starting every business meeting with a positive focus. We circle the table and express one thing we are thankful for either personally or professionally. It’s amazing how much better this exercise makes us feel about the business we are about to discuss.

So, professionally, here are the top ten things for which I’ll give thanks this Thursday:

  1. We live and work in a state where closing real estate transactions is the practice of law and where, by hard work and vigilance, we are in a position to protect the interests of our clients.
  2. We help our consumer clients achieve one of their biggest dreams, home ownership.
  3. We help our commercial clients purchase, lease, finance and refinance properties. These activities allow our clients to make money and allow our communities to thrive.
  4. We don’t ignore title problems. We find them, discuss them, cure them, obtain insurance over them, and, hopefully, make them better for the property owner and lender, and for the next lawyer.
  5. If things go well, everyone involved in the closing is “happy”.
  6. We generally, as a community of real estate lawyers, seek to get along with each other. (Don’t make me point out exceptions to this rule!) Older lawyers mentor younger lawyers. Lawyers ask each other for guidance and, generally, that guidance is given with a smile. We train lawyers and paralegals, we serve on committees, we speak at seminars, write papers and books, participate in the Bar’s and the law schools’ mentorship programs and handle pro bono matters. As lawyers, we try to be good citizens.
  7. Those of us who weathered the financial downturn that began in 2007 encourage those of us who have not that there is life on the other side.
  8. Technology has made our lives easier in the last few years, and improvements in technology will continue to make our lives easier.
  9. I am thankful for the team of dedicated professionals who work with me to take the best care possible of our title insurance agents (dirt lawyers and their staff members.)
  10. I am thankful for our network of attorney agents who ably handle real estate matters throughout the Palmetto State.

 

I know. I know. Many of you are shaking your heads and pointing out that I no longer work “in the trenches” and don’t see the problems that plague real estate lawyers in the form of the constantly changing environment, changing technologies, difficulties in hiring and retaining staff members, increased competition and encroachment into “our” part of the closing by third parties.  I do see those difficulties, I am sympathetic, and my team and I are constantly seeking improvements.

But, for Thanksgiving week, let’s pause for just a moment to be thankful!

 

*I’m guessing most South Carolinians know what a P.K. is, but, just in case you don’t, it’s an acronym for Preacher’s Kid, which I am told means the worst kid in church. My husband tells two stories to demonstrate:  (1) His father once spoke to him from the pulpit and threatened to have him sit with him during the sermon if he didn’t behave; and (2) There are unconfirmed rumors that my husband’s initials have been carved in various church pews across South Carolina.

**John Fisher is a New York medical malpractice attorney who has written two excellent books, The Power of a System and The Law Firm of Your Dreams. I am a huge fan of creating systems in law firms and highly recommend these books, even for dirt lawyers….make that especially for dirt lawyers.

Matthew Cox, notorious fraudster, resurfaces

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Check out the August issue of The Atlantic

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Picture courtesy of The Atlantic, August 2019 issue

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, 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 actually 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.

For a much more colorful account of these criminal activities and Cox’s attempt to write “true crime” stories from the Coleman Federal Correctional Complex in Florida, I refer you to the comprehensive and entertaining article written by Rachel Monroe in the August issue of The Atlantic magazine. Please enjoy the full text of the article here.

Ms. Monroe said she had been contacted by Matthew Cox by email telling her he was attempting to write a body of work that would allow him to exit prison with a new career. He described himself as “an infamous con man writing his fellow inmates’ true crime stories while immersed in federal prison.”

The crimes perpetuated by Cox and Hauck were made easier by the housing bubble itself. Everything was inflated and values were hard to nail down. And closings were occurring at a lightening pace. This excellent article made my heart skip a beat as I was reminded of those times. I hope all of us in the real estate industry have learned valuable lessons that will similar prevent mortgage fraud in the future. Those of us who made it through the economic downturn are certainly older and hopefully wiser!

Connecticut codifies attorney closing requirement

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South Carolina licensed attorneys must close real estate transactions because our Constitution gives our Supreme Court the power to define the practice of law, and that Court, beginning with the 1987 seminal case, State v. Buyers Service, has defined the practice of law to include closing real estate transactions.

No explicit authority has required a similar result in Connecticut, but by custom, lawyers in Connecticut have routinely been involved in real estate closings. Beginning October 1, 2019, however, this long-standing practice will be required by statute as a result of the passage of Connecticut Senate Bill 320 (Public Act 99-88).

The new law defines “real estate closing” as follows:

  • a mortgage loan transaction, other than a home equity line of credit transaction or any other loan transaction that does not involve the issuance of a lender’s or mortgagee’s policy of title insurance in connection with such transaction, to be secured by real property, or
  • any transaction wherein consideration is paid by a party to such transaction to effectuate a change in the ownership of real property in Connecticut.

A violation of the new law will constitute a felony punishable by a $5,000 penalty or five years in jail.

It is interesting to me that a loan not involving title insurance does not require the involvement of an attorney. Why would a lender’s requirement of title insurance be determinative?  I can envision the argument that foregoing title insurance and thereby foregoing the requirement of the involvement of a licensed attorney would greatly decrease closing costs. Both are protective of the interest of the lender. It seems to me that either title insurance OR a closing attorney would be more desirable than neither.

It is also interesting that there is no differentiation between residential and commercial transactions in the new Connecticut statute. All the South Carolina cases in this area have involved residential facts, and at least one well-respected commercial lawyer in Columbia believes the Court may not have intended to include commercial transactions, where sophisticated parties are almost always involved. Most commercial transactional lawyers believe commercial transactions must follow the residential line of cases.  In Connecticut, it seems clear by the statutory definitions that lawyers are required for commercial closings.

Equity lines not being included under the purview of the new law seems counterintuitive. A consumer can get into as much or more trouble with an equity line as with any first or second mortgage.

And my final thought is that the statute doesn’t seem to define who the attorney must represent in the closing. The law states “no person shall conduct a real estate closing unless such person has been admitted as an attorney in this state.” South Carolina cases are clear that the protections are established for the consumer borrower.

In any event, I believe most South Carolina dirt lawyers would agree with me that we like the fact that Connecticut agrees with South Carolina and wish other states would follow suit!

Dave Whitener’s “Palmetto Logs”

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Two weeks ago, this blog paid tribute to the late, great Dave Whitener, a giant among real estate legal professionals in South Carolina. As suggested in that blog about Dave’s “Top Ten You Betters”, I also wanted to share with you Dave’s “Palmetto Logs”.

Several years before his death, Dave was asked to address the American Bar Association. The issue was whether a successful defense might be mounted if a federal agency attacked the rights now existing in South Carolina for lawyers, and only lawyers, to close real estate transactions. In that talk, Dave cited ten areas of defense that he called the Palmetto Logs. For non-South Carolinians, the palmetto log has traditionally been a symbol of protection for South Carolinians in time of war. South Carolina is nicknamed “The Palmetto State”.

Here are Dave’s suggested protections against an attack from outside our state for closings performed by licensed South Carolina attorneys:

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  1. State v. Buyers Service, 292 S.C. 426, 357 S.E.2d 15 (1987). In this case, the South Carolina Supreme Court defined the practice of law in a residential real estate closing to include: certification of the title; preparation of the deed and loan closing documents, closing the transaction and overseeing recording.
  2. Doe v. Condon, 351 S.C. 158, 568 S.E.2d 356 (2002). In this case, the South Carolina Supreme Court reiterated and confirmed that the four protected areas set out in Buyer’s Service would also apply to residential refinances.
  3. Doe v. McMaster, 355 S.C. 306, 585 S.E.2d 773 (2003). In 2003, the South Carolina Supreme Court again reiterated its holding in Buyer’s Service.

Statutes and South Carolina Constitution

  1. C. Code §40-5-310 makes it a felony for an individual to participate in the unauthorized practice of law.
  2. C. Code §40-5-320 makes it a misdemeanor for a corporation or other entity to participate in the unauthorized practice of law.
  3. C. Code §37-10-102 gives a borrower the absolute right to choose the closing attorney in a residential loan closing. The statute provides for a $7,500 penalty if the disclosure is not given.
  4. South Carolina’s Constitution gives the S.C. Supreme Court the exclusive right to define the practice of law within South Carolina

Practical Considerations

  1. The low cost attributable to attorneys’ fees for residential closings in South Carolina. Dave believed the low cost would present a major difficulty if a federal agency argues that South Carolina’s practice is anti-competitive or increased prices.
  2. Major job losses would possibly result from the outsourcing of jobs to closing centers outside of South Carolina
  3. Major risks would be raised in turning over the duties now performed by experienced lawyers to unregulated and inexperienced lay persons.

I’m not sure whether Dave would say differently if he were here to analyze this topic for us today. I fear that the retirement of Chief Justice Jean Toal may have resulted in the loss of the South Carolina lawyer’s strongest advocate in the South Carolina Supreme Court. So far, the Palmetto Logs are holding strong, but some more recent cases from our Supreme Court give me some concern on this topic.

In any event, I am continually thankful for Dave Whitener and his influence, mentorship and friendship to South Carolina dirt lawyers!