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Issue  97  Article  173
Published:  8/1/2003

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Recent Legislation
Chris Burti, Vice President and Legal Counsel

Priority Legislation

Senate Bill 629 should go a long way in cleaning up priority issue arising from subordination and simultaneous recording. This has been adopted as Session Law 2003-219 and will become effective for simultaneous recording after October 1, 2003. The subordination provisions apply to subordinations recorded after that date even though they affect instruments recorded prior to it. Subordination agreements will not need to be signed by the trustee and will not be required to state financial terms. Article 1 of Chapter 39 of the General Statutes is amended by adding a new section that reads:

"§ 39-6.6. Subordination agreements.
(a) A written commitment or agreement to subordinate or that subordinates an interest in real property signed by a person entitled to priority shall be given effect in accordance with its terms and is not required to state any interest rate, principal amount secured, or other financial terms. For purposes of this section, an "interest in real property" shall include all rights, title, and interest in and to land, buildings, and other improvements of an owner, tenant, subtenant, secured lender, materialman, judgment creditor, lienholder, or other person, whether the interest in real property is evidenced by a deed, easement, lease, sublease, deed of trust, mortgage, assignment of leases and rents, judgment, claim of lien, or any other record, instrument, document, or entry of court.
(b) The trustee of a deed of trust shall not be a necessary party to a subordination agreement unless the deed of trust provides otherwise.
(c) For purposes of G.S. 1-47, a commitment or agreement described in subsection (a) of this section is deemed a conveyance of an interest in real property.
(d) The section is not exclusive. No agreement that is otherwise valid shall be invalidated by failure to comply with the provisions of this section."

Two Deeds of Trust recorded at the exact same time have equal priority (unless second priority or subordination is specified in the junior instrument) as a result of the holding in Hood Comr. Of Banks v. Landreth 207 N.C. 621 (1935). Logic would suggest that the instrument recorded first in page order would have priority, but while this case referred to the order of indexing, it contains this statement, “ Obviously two entries could not occupy the same space at the same time on the records, and consequently it is necessarily apparent that in the act of entering a list of names on a record that one name had to come first”. It would seem that the inescapable conclusion would be that this holding must be applied to page order as well as indexing. These simultaneous recording issues have been addressed to a certain extent by amending N.C.G.S. Section 47-18(a) and N.C.G.S. Section 47-20(a).

N.C.G.S. Section 47-18(a)

" (a) No
(i) conveyance of land, or
(ii) contract to convey, or
(iii) option to convey, or
(iv) lease of land for more than three years shall be valid to pass any property interest as against lien creditors or purchasers for a valuable consideration from the donor, bargainor or lessor but from the time of registration thereof in the county where the land lies, or if the land is located in more than one county, then in each county where any portion of the land lies to be effective as to the land in that county. Unless otherwise stated either on the recorded instrument or on a separate recorded instrument duly executed by the party whose priority interest is adversely affected, instruments registered in the public record shall be presumed to have priority based on the order of recordation as determined by the time of recordation. If instruments are recorded simultaneously, then the order of recordation shall be presumed as follows, in order of priority:
(1) The earliest document number set forth on the recorded instrument.
(2) The sequential book and page number set forth on the document if no document number is set forth on the recorded instrument. The presumptions created by this subsection are rebuttable."

N.C.G.S. Section 47-20(a)

" (a) No deed of trust or mortgage of real or personal property, or of a leasehold interest or other chattel real, or conditional sales contract of personal property in which the title is retained by the vendor, shall be valid to pass any property as against lien creditors or purchasers for a valuable consideration from the grantor, mortgagor or conditional sales vendee, but from the time of registration thereof as provided in this Article; provided however that any transaction subject to the provisions of the Uniform Commercial Code (Chapter 25 of the General Statutes) is controlled by the provisions of that act and not by this section. Unless otherwise stated either on the recorded instrument or on a separate recorded instrument duly executed by the party whose priority interest is adversely affected, instruments registered in the public record shall be presumed to have priority based on the order of recordation as determined by the time of recordation. If instruments are recorded simultaneously, then the order of recordation shall be presumed as follows, in order of priority:
(1) The earliest document number set forth on the recorded instrument.
(2) The sequential book and page number set forth on the document if no document number is set forth on the recorded instrument. The presumptions created by this subsection are rebuttable."

Internet Property Tax Certification Procedure

HOUSE BILL 972 has been ratified and sent to the Governor for signature. A Committee Substitute was submitted 4/24/03 and we expect it to be adopted before the session ends. If adopted, this act will permit internet tax listings to have the effect of a Tax Collector’s certification pursuant to N.C.G.S. Section 105-361(a). In order to be able to utilize this procedure,
(a) the taxing unit must maintain an Internet web site with current information on the amount of taxes, special assessments, penalties, interest, and costs due on any real or personal property.
(b) the governing body of the taxing unit must adopt a resolution allowing a person to rely on the information.
(c) the web site must state the date that the information is current.
(d) the person relying on the web site information must keep a copy.

As the Tax Collectors are still liable on their bond, it seems unlikely that they will initiate implementation of this procedure and may well resist it. In areas where attorneys regularly obtain certificates under N.C.G.S. Section 105-361, the reduced workload may encourage support from the Tax Office.

SECTION 1. G.S. 105-361 is amended by adding a new subsection to read:

"(e) Internet. - If the taxing unit maintains an Internet web site on which current information on the amount of taxes, special assessments, penalties, interest, and costs due on any real or personal property is available, the governing body of the taxing unit may adopt a resolution to allow a person to rely on information obtained from the web site as if it were a certificate issued pursuant to this section as of the date stated on the web site. The web site must clearly state the date as of which the information is current. The person who relies on the web site information must keep and present a copy of the information as necessary or appropriate, as if the copy were a certificate issued under subsection (a) of this section. The tax collector shall be liable on the tax collector's bond for any loss to the taxing unit arising from an understatement of the tax and special assessment obligations contained in the information available on the web site."

SECTION 2. This act is effective when it becomes law.Priority Legislation

Senate Bill 629 should go a long way in cleaning up priority issue arising from subordination and simultaneous recording. This has been adopted as Session Law 2003-219 and will become effective for simultaneous recording after October 1, 2003. The subordination provisions apply to subordinations recorded after that date even though they affect instruments recorded prior to it. Subordination agreements will not need to be signed by the trustee and will not be required to state financial terms. Article 1 of Chapter 39 of the General Statutes is amended by adding a new section that reads:

"§ 39-6.6. Subordination agreements.
(a) A written commitment or agreement to subordinate or that subordinates an interest in real property signed by a person entitled to priority shall be given effect in accordance with its terms and is not required to state any interest rate, principal amount secured, or other financial terms. For purposes of this section, an "interest in real property" shall include all rights, title, and interest in and to land, buildings, and other improvements of an owner, tenant, subtenant, secured lender, materialman, judgment creditor, lienholder, or other person, whether the interest in real property is evidenced by a deed, easement, lease, sublease, deed of trust, mortgage, assignment of leases and rents, judgment, claim of lien, or any other record, instrument, document, or entry of court.
(b) The trustee of a deed of trust shall not be a necessary party to a subordination agreement unless the deed of trust provides otherwise.
(c) For purposes of G.S. 1-47, a commitment or agreement described in subsection (a) of this section is deemed a conveyance of an interest in real property.
(d) The section is not exclusive. No agreement that is otherwise valid shall be invalidated by failure to comply with the provisions of this section."

Two Deeds of Trust recorded at the exact same time have equal priority (unless second priority or subordination is specified in the junior instrument) as a result of the holding in Hood Comr. Of Banks v. Landreth 207 N.C. 621 (1935). Logic would suggest that the instrument recorded first in page order would have priority, but while this case referred to the order of indexing, it contains this statement, “ Obviously two entries could not occupy the same space at the same time on the records, and consequently it is necessarily apparent that in the act of entering a list of names on a record that one name had to come first”. It would seem that the inescapable conclusion would be that this holding must be applied to page order as well as indexing. These simultaneous recording issues have been addressed to a certain extent by amending N.C.G.S. Section 47-18(a) and N.C.G.S. Section 47-20(a).

N.C.G.S. Section 47-18(a)
" (a) No
(i) conveyance of land, or
(ii) contract to convey, or
(iii) option to convey, or
(iv) lease of land for more than three years shall be valid to pass any property interest as against lien creditors or purchasers for a valuable consideration from the donor, bargainor or lessor but from the time of registration thereof in the county where the land lies, or if the land is located in more than one county, then in each county where any portion of the land lies to be effective as to the land in that county. Unless otherwise stated either on the recorded instrument or on a separate recorded instrument duly executed by the party whose priority interest is adversely affected, instruments registered in the public record shall be presumed to have priority based on the order of recordation as determined by the time of recordation. If instruments are recorded simultaneously, then the order of recordation shall be presumed as follows, in order of priority:

(1) The earliest document number set forth on the recorded instrument.
(2) The sequential book and page number set forth on the document if no document number is set forth on the recorded instrument. The presumptions created by this subsection are rebuttable."

N.C.G.S. Section 47-20(a)

" (a) No deed of trust or mortgage of real or personal property, or of a leasehold interest or other chattel real, or conditional sales contract of personal property in which the title is retained by the vendor, shall be valid to pass any property as against lien creditors or purchasers for a valuable consideration from the grantor, mortgagor or conditional sales vendee, but from the time of registration thereof as provided in this Article; provided however that any transaction subject to the provisions of the Uniform Commercial Code (Chapter 25 of the General Statutes) is controlled by the provisions of that act and not by this section. Unless otherwise stated either on the recorded instrument or on a separate recorded instrument duly executed by the party whose priority interest is adversely affected, instruments registered in the public record shall be presumed to have priority based on the order of recordation as determined by the time of recordation. If instruments are recorded simultaneously, then the order of recordation shall be presumed as follows, in order of priority:

(1) The earliest document number set forth on the recorded instrument.
(2) The sequential book and page number set forth on the document if no document number is set forth on the recorded instrument. The presumptions created by this subsection are rebuttable."

Internet Property Tax Certification Procedure

HOUSE BILL 972 has been ratified and sent to the Governor for signature. A Committee Substitute was submitted 4/24/03 and we expect it to be adopted before the session ends. If adopted, this act will permit internet tax listings to have the effect of a Tax Collector’s certification pursuant to N.C.G.S. Section 105-361(a). In order to be able to utilize this procedure,

(a) the taxing unit must maintain an Internet web site with current information on the amount of taxes, special assessments, penalties, interest, and costs due on any real or personal property.
(b) the governing body of the taxing unit must adopt a resolution allowing a person to rely on the information.
(c) the web site must state the date that the information is current.
(d) the person relying on the web site information must keep a copy.

As the Tax Collectors are still liable on their bond, it seems unlikely that they will initiate implementation of this procedure and may well resist it. In areas where attorneys regularly obtain certificates under N.C.G.S. Section 105-361, the reduced workload may encourage support from the Tax Office.

SECTION 1. G.S. 105-361 is amended by adding a new subsection to read:

"(e) Internet. - If the taxing unit maintains an Internet web site on which current information on the amount of taxes, special assessments, penalties, interest, and costs due on any real or personal property is available, the governing body of the taxing unit may adopt a resolution to allow a person to rely on information obtained from the web site as if it were a certificate issued pursuant to this section as of the date stated on the web site. The web site must clearly state the date as of which the information is current. The person who relies on the web site information must keep and present a copy of the information as necessary or appropriate, as if the copy were a certificate issued under subsection (a) of this section. The tax collector shall be liable on the tax collector's bond for any loss to the taxing unit arising from an understatement of the tax and special assessment obligations contained in the information available on the web site."

SECTION 2. This act is effective when it becomes law.


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