There were numerous statues and amendments passed in this year's legislative session that will directly affect real property practitioners. There were too many, in fact, to include in a single issue of our Newsletter. Therefore, we will publish a series on legislative updates and start with those legislative and regulatory changes directly affecting recording in the Register of Deeds. Underlined text reflects the new statutory language in quoted sections and repealed language has been redacted. Readers interested in comparing the new and old language in revised sections of the statutes discussed below are encouraged to go the North Carolina General Assembly website and view the Session Laws directly.
Session Law 2011-296, House Bill 384
Recording Fees (schedule sheet appended)
This revision modifies the fees for recording of instruments in the Register of Deeds and is effective beginning on October 1, 2011. These changes will sunset on July 1, 2013, unless subsequently extended by the General Assembly. The new recording fee schedule imposes a fixed charge for registering instruments up to a maximum of fifteen pages. This will standardize recording fees in many cases eliminating the need to calculate the recording fees based on the number of pages. The base fee for registering a deed of trust is $56.00 and for other instruments, it is $26.00. There is an additional charge of $4.00 per page for any document that includes more than fifteen pages. The higher fee for a deed of trust incorporates the expense for subsequently recording of a satisfaction which will continue to be registered without further charge. This legislation also eliminates the current $2.00 charge for verification (probate).
Other than with regard to the higher base fee for registering a mortgage, this revision also eliminates the need to distinguish a deed from other instruments such as easements. Professor Charles Szypszak of the UNC School of Government suggests that the increased fee for mortgages may be applied to the rerecording of a deed of trust. "The rerecording presumably is in connection with the valid creation of a security interest, and its legal effect is therefore indistinguishable from another deed of trust or mortgage. Similarly, the higher fee reasonably can be applied to an amended deed of trust or mortgage, a supplemental deed of trust or mortgage, a restated deed of trust or mortgage, or something else to that effect. Such an instrument may or may not create a new security interest (it would create one in part, for example, if it adds additional land to the property description of the previous instrument). Registers cannot be expected to determine a complex legal instrument's intended legal effect and may therefore appropriately treat such an instrument the same way they would treat any other deed of trust or mortgage." UNC School of Government, Land Records Bulletin, No. 35, July 2011. This analysis seems reasonable and should be assumed to be correct until explicit guidance is provided by the Legislature or the Attorney General.
N.C.G.S. Section 161-14.1(b)(3) supplanted the marginal notation requirement of the older statutes and it provides with respect to indexing subsequent instruments that if " the subsequent instrument states the recording data for the original instrument, reference the recording data of the original instrument as that recording data is stated in the subsequent instrument to each name so indexed." Session Law 2011-296, effective October 1, 201,1amends G.S. 161-10(a)(1) so that when a subsequent instrument refers to more than one original instrument for which recording information is required to be indexed, the fee is $25 for each additional reference. This would apply to modifications, releases, satisfactions and corrective affidavits attempting to address multiple instruments. This additional fee would not apply referenced information that is not required to be indexed pursuant to N.C.G.S. Section 161-14.1(b)(3), such as chain of title references in deeds or descriptions.
This revision to N.C.G.S. Section 161-14(b) makes changes to the margin and font requirements in documents recorded after October 1, 2011, side margins may now be at least one-quarter inch down from the current requirement of one-half inch and the font size may be nine points down one point from the current requirement of no smaller than 10 points being considered legible.
Session Law 2011-351, Senate Bill 519
Non North Carolina preparers must be identified on deeds or deeds of trust recorded after June 27, 2011. This amendment to N.C.G.S. Section 47-17.1 adds to the requirement for the identification of the person or law firm that drafted a deed or deed of trust to include those prepared outside North Carolina. Law firms are the only entities entitled to be listed as a preparer; otherwise a natural person's name must appear as draftsperson.
Memorandum of Contract
Contracts to convey real estate may now enjoy the protection of the Recording Acts by registering a memorandum of contract to purchase real estate. The amendment applies to all memoranda recorded prior to and on or after the date this act becomes effective.
Chapter 47 of the General Statutes is amended effective June 17, 2011 by adding a new section to read as follows:
"§ 47-119.1. Form of memorandum for contract to purchase real estate.
A contract to convey real estate may be registered by registering a memorandum thereof which shall set forth all of the following:
(1) The names of the parties thereto.
(2) A description of the property which is subject to the contract.
(3) The expiration date of the contract.
(4) Reference sufficient to identify the complete agreement between the parties.
The memorandum may be in substantially the following form:
(Name and address of person contracting to sell real estate)
(Name and address of person contracting to purchase real estate)
have entered into a contract to sell and purchase the following property:
(Here describe property)
This contract provides for a closing date of the _____day of _______, ________.
The provisions set forth in a written contract to convey real estate between the parties dated the day of ________________, __________, are hereby incorporated in this memorandum.
Witness our hand(s) and seal(s) this _______ day of ______________, ______
[Acknowledgement notarial certificate by all parties, as provided by applicable law in order to register in the office of the register of deeds of the county in which the property is located.]
The titles of the contract and the parties thereto, as contained in the original written contract, may be substituted in lieu of the above references."
SECTION 2. G.S. 47-120 reads as rewritten:
"§ 47-120. Memorandum as notice.
Such memorandum of a lease, an option to purchase real estate, or a contract to convey real estate as proposed by G.S. 47-118, 47-119, or 47-119.1 when executed, acknowledged, delivered and registered as required by law, shall be as good and sufficient notice, and have the same force and effect as if the written lease, option to purchase real estate, or contract to convey had been registered in its entirety. However, it shall be conclusively presumed that the conditions of any contract to purchase that is the subject of a recorded memorandum under this section have been complied with or have expired and are no longer enforceable as against creditors or purchasers for valuable consideration who have recorded their interests after the memorandum from and after the expiration of 60 days from whichever of the following events occurs first:
(1) The closing date stated in the memorandum, or any recorded extension or renewal of the memorandum, signed by the parties and acknowledged before an officer authorized to take acknowledgements.
(2) The date when the conditions of the contract to convey, including payment of the last installment of earnest money or balance of purchase price (other than a purchase money note or deed of trust), and delivery of the deed from the seller to buyer were required by the terms of the recorded memorandum to have been performed, or the date of any recorded extension or renewal thereof signed by the parties and acknowledged before an officer authorized to take acknowledgements."
Real Property Indexing
Revised Minimum Standards for Indexing Effective January 1, 2012
The North Carolina Secretary of State administers the Land Records Management Program for the purpose of advising Registers of Deeds about sound management practices and establishing greater uniformity in our land records systems. Registers of Deeds follow the Minimum Standards for Indexing Real Property Instruments, which are approved jointly by the North Carolina Association of Registers of Deeds and the North Carolina Bar Association and formally adopted by the Secretary of State. The last revision in the published standards was effective October 1, 2006. The newest standards have been adopted and are generally effective January 1, 2012 (effective on January 1, 2014 in Wake County). Though not new legislation, the following directly affects title examination and is a new development. This is not an exhaustive analysis of the changes, but rather is a summary of some of the more significant changes. The old rules required substantial reformatting of the names to be indexed and searchers have been required to be familiar with those rules in order to formulate correct search queries. The new rules will essentially eliminate reformatting and permit more intuitive searches to produce more significant results.
Under the new standards, the rule for searching and indexing the names of parties in a document is to key them in all capitals exactly as they appear on the instrument. The index entry will contain all of the recognized characters in the name without any abbreviations being made by the indexer. The indexing system must allow a minimum of seventy characters in each of the fields for non-human names, human surnames, and human given names. The Register of Deeds may adopt a system that allows more characters in any given field. Non-human names will be indexed, in full, in a single field. The Register of Deeds may not break up a name or change it by abbreviating parts. If the name is too long to fit in the field, the field will accept as many characters as permitted and a search will be found in the same fashion.
Under the old rules, the indexer made two entries of hyphenated last names. One indexing is entered with the latter name as the surname and one with both names indexed as the surname, but with no hyphen. Under the new standards, there will be multiple entries with hyphenated surnames. The name will appear in both ways as formerly and exactly as it is entered with the hyphen. For example, Jane Smith-Doe will be indexed as: SMITH-DOE JANE, DOE JANE SMITH, and SMITH DOE JANE.
When instruments contain referential phrases such as 'nee', 'formerly known as', 'also known as' or 'doing business as' or their acronyms such as 'FKA', 'AKA' or 'DBA or what otherwise clearly appears to be an additional surname in parentheses before or after the surname, the name indexed according to the surname and also according to the surname in parentheses, but without keying in the parentheses. Only the names are indexed, not the referential phrases or acronyms. When indexing the surname not in parentheses, the surname that was in parentheses is treated as the last given (middle) name and entered in the given name field. Suffixes such as Sr. and III are indexed after the last given name, with no comma. Titles such as Mr., Ms., Mrs., Dr., Hon., Reverend, etc., are not indexed as part of the human name unless it is with a surname. In these instances the title is necessary to distinguish the name. Professional certifications or degrees showing a certain level or type of education, such as CPA or MD, are also not indexed.
Under the new rules, the following six forms are to be included in an index entry with whom one applies if the capacity is clearly indicated and the status field entry will not be part of the sort order:
The index entry for an estate name will be the human name. Where the names of trusts contain human names, they will be indexed both as a non-human name and by the human names in the title of the trust. When indexing the human name for a trust, references to the trust are optional. When included, they are to be entered in the status field and will not affect the sort order.
Part 7 of the new rules will impose functional standards that require the systems to provide searchers with the use of some of the most common archival search tools. They are intended to produce more likely variations of the names entered into the search fields. These include equivalencies that return results that automatically associate characters with certain abbreviations and the opposite and optional auto-completion drop-down menus that suggest names from the database that begin with the entered characters. The rules suggest that system provide Soundex suggestions of names from the register's record database that may be pronounced similarly to the name entered. Rule 7.09 requires that the system be capable of enabling a searcher to match names with or without the punctuation, symbols, and spaces within them. The system will strip these out of entries in the database and the name in the query and provide a list of matches to what remains.
The standards adopt a new Rule 1.01which provides as follows:
These rules are intended to promote predictability in the appearance and sorting of names in alphabetical indexes. Reliance on the procedures in these rules is not intended to define the standard of care for a reasonably careful and prudent user of a register's index. Users may be expected to search for names according to variations in appearance that should reasonably be anticipated.
This essentially articulates the standard of care articulated in Hinnant v. Philips, 184 N.C.App. 241, 645 S.E.2d 867 (N.C.App. 2007), interpreting the application of the standard of care to N.C.G.S. Section 161-22(h), which provides: "No instrument shall be deemed registered until it has been indexed in a manner to put a reasonably careful and prudent examiner on notice upon inquiry and, if upon inquiry, the instrument would have been found." Thus, title examiners must look for names in the index using a careful and prudent approach. Documents that can be found this way will be deemed properly registered and the users will be held to have constructive knowledge of them.
Of course, no computerized search tools can suggest all appropriate variations of a name, and searchers will need to continue to craft search parameters that include common variations and to carefully examine instruments to determine relevance. In drafting conveyances, attorneys can enhance the indexing and search process by using the same document titles as listed as common document types in the local Register of Deeds posted rules, by using all capital letters for the names of the parties and indicating their capacities as Grantor or Grantee. Problems can be further avoided by naming all of the parties to the document in the beginning of the document and by clearly separating any name to be indexed from any additional referential information. Do not use symbols or non-standard punctuation if it can be avoided. If an instrument references a prior recorded instrument, insure that the original document's recording information and the names of parties to that prior instrument with their original capacities as grantors or grantees are clearly and correctly identified.