The Statewide Title Newsletter and Legal Memorandum

View Current Newsletter - Search The Archive 
Sign UpPrint

Issue  207  Article  341
Published:  8/1/2013

View the Entire Newsletter


2013 Legislative Update
Chris Burti, Vice President and Senior Legal Counsel

We will summarize a number of bills that we believe will be of interest to real property professionals that passed in the North Carolina Legislature this session. The text of these bills is a bit too lengthy for an article of this nature and they may be found under the Session Laws menu or Bill Look up menu on the North Carolina General Assembly website. http://www.ncga.state.nc.us

We will be discussing the ramifications of the enacted Session Laws in greater depth during our 22nd annual Continuing Legal Education Real Estate seminar series. We will be presenting this series at eleven locations across the North Carolina beginning in September and winding up in late February. More information is available under the Seminars menu on our website. www.statewidetitle.com/seminars.asp

Ch. 44A Lien Statute Amendments III

Session Law 2013-16 House Bill 180

Legislation adopted in 2012 and effective April 1, 1013 made extensive changes to lien laws in North Carolina. The following legislation made technical changes to address some of the issues that became apparent after adoption. There are few in the way of substantive changes. The changes primarily clarify the exemptions for owners' contracts that do not exceed $30,000 including ones where no building permit is required, clarifies provision for what happens when a lien agent no longer exists, permits lien agents to utilize websites, clarifies application of the MLA provisions to providers of materials, rental equipment, or professional design or surveying services, clarifies that the contractor cant waive liens of subcontractor who registers with MLA, and the way custom builders are defined. A substantive change in the statute clarifies common law issues as to when the first furnishing occurs among the respective claimants by providing that a first, second, or third tier subcontractor may use either the subcontractor's dated of first furnishing of labor or materials on the real property or that of the contractor through which the claim of lien on real property is being asserted. The provisions are effective for controlling dates on 4/1/13

Lien Agents Technical Corrections

Session law 2013-117 House Bill 88

The following legislation made technical changes to address some of the issues that became apparent after adoption. There are few corrections that would be considered in the way of substantive changes. The changes primarily clarify the exemptions for owners' accessory buildings what happens when a lien agent resigns, clarifying the application of the statute to labor, materials, rental equipment, or professional design or surveying services, defining custom builders and permitting them to designate the MLA. The text of the statute as rewritten follows and it becomes effective after September 30, 2013.

Notary, JTWROS, POA and Satisfaction Changes

Session Law 2013-204 House Bill 332

This comprehensive legislation makes numerous corrections, adds or updates curative provisions in the Notary Act, addresses the JTWROS issues raised by Countrywide Home Loans, Inc., v. Reed, provides for an alternative procedure for satisfaction of security instruments to replace exhibition satisfaction and makes other conforming changes. The bill brings the effective date of the material curative provisions of N.C.G.S. Chapter 47 down to April 1, 2013. Part I changes are effective on July 1, 2013 the remainder of the bill is effective after September 27, 2013.

The bill amends N.C.G.S. Section 10B-20(c5), to clarify that notaries are not disqualified because of their employment by a party to the instrument to be notarized or because they own stock in an entity which is a party of the instrument to be notarized. It amends N.C.G.S. Section 10B-65(b) to add a new subsection (5) to cure notarial errors such as where date of acknowledgment states the correct day and month but lacks a year or states an incorrect year, will be valid as if the errors had not occurred. The bill validates all notary acknowledgments with errors remedied by the statute that were performed before December 1, 2005 (was, January 1, 1953). It amends N.C.G.S. Section 10B-68, to expand the provisions that make corrections to technical errors that are cured automatically to not affect the validity of a document. To provide an automatic cure for: the affixation of the notary's seal near the signature of the party acknowledging rather than near the notary's signature; for minor typographical mistakes in the spelling of the party's name; the failure to acknowledge the principal's name exactly as signed by including or omitting initials. It also introduces a reporting mechanism by the Secretary of State to the North Carolina State Bar where an attorney at law acting as a notary public violates certain provisions of the Notary Act. Finally the bill brings down the effective date of virtually all of the curative provisions to April 1, 2013.

Under the common law, a Joint Tenancy with Right of Survivorship could be unilaterally severed by any of the joint tenants. Countrywide Home Loans, Inc., v. Reed applied this doctrine for the first time to a party executing a deed of trust because North Carolina is a title theory jurisdiction that holds that the trustee holds legal title and the conveyance thus severs the Joint Tenancy with Right of Survivorship. This bill addresses the issue by adding new subsection (a1) to N.C.G.S. Section 41-2 to provide that upon conveyance to the trustee of a deed of trust by any or all of the joint tenants, the joint tenancy will not be deemed to be severed. Upon satisfaction of the deed of trust, legal title to the property would revert to the grantors as joint tenants with right of survivorship in the respective shares as owned by respective grantors.

The bill makes major substantive changes with respect to the application of Powers of Attorney to real property transactions. It amends N.C.G.S. Section 47-28 to provide that before any instruments transferring real property are executed by an attorney-in-fact empowered by a power of attorney, the power of attorney must be registered in the county where the principal is domiciled or where the property lies. If the principal is not a North Carolina resident, the power of attorney or a certified copy of the power of attorney may be recorded in any county where the principal owns real property or has a significant business reason for registering in that County. If the real property lies in more than one county or is in a county other than where the principal is domiciled, the power of attorney or a certified copy may be registered in any one of the relevant counties, and the conveyance must then refer to the book, page, and county where it was recorded. If there is a valid Power of Attorney in existence, a failure to comply with the provisions of this statute will not affect its validity but "shall constitute an infraction".

If the conveyance is recorded prior to the registration of the power of attorney, the power of attorney or a certified copy of the power of attorney may be subsequently registered and no conveyance shall be rendered invalid by the recordation of the power of attorney after the conveyance, and the subsequent registration will relate back to the date and time of registration of the conveyance.

The recording requirements apply to all applicable real property transfers made on or after April 1, 2013, and the validation provisions of subsection (b) of the statute will apply to all real property transfers utilizing an authority under any power of attorney whether made at any time.

This bill would amends North Carolina 47-36.1 (Corrections) to expressly provide that when a correction is inconsistent with the original, any notice of the correction pursuant to the statute will be deemed to have been given as of the time of registering the corrective affidavit. The bill eliminates the need for any affidavit where an instrument is unaltered but simply re-recorded.

Of significant note, the statute codifies existing case law in the context of this statute by expressly permitting a notary public to complete a corrective affidavit identifying the correction of a notary certificate error in a document, attaching a new acknowledgment, with no change in priority of the original. In addition, the bill enacts new sections N.C.G.S. Section 47-108.18A and N.C.G.S. Section 47-108.18B to codify the common law of North Carolina by providing that notarial jurat are a sufficient for all instruments accepted for registration and that acknowledgments constitute a jurat in due form for registration under Chapter 47 or which relate to real estate in North Carolina.

Part II of the bill ameliorates the problems created by the elimination last year of the ability to satisfy deeds of trust by exhibition. Previously, if the only evidence of satisfaction is a note and deed of trust properly marked paid and satisfied and the beneficiary could not be located, the only way to have the deed of trust satisfied of record (other than by declaratory action) was to have an attorney agree to act as a satisfaction agent under N.C.G.S. Section 45-35-13 et. seq. and proceed after due notice. This bill would amend N.C.G.S. Section 45-36.15 to permit attorneys acting as a satisfaction agent to sign and submit an affidavit of satisfaction when the agent has possession of the originals properly endorsed for payment and satisfaction; or has the original security instruments that are more than 10 years old at the time the affidavit of satisfaction is to be signed; or the satisfaction agent has the original bearer security instrument marked paid and satisfied in full and signed by the bearer or holder thereof; and after diligent inquiry, the satisfaction agent has been unable to determine the identity or whereabouts of the secured creditor.

Estates, Trusts, Guardianships, Powers of Attorney

Session Law 2013-91 Senate Bill 279

This bill updates and clarifies certain provisions of the laws governing estates, trusts, guardianships, powers of attorney, and other fiduciaries. Section 1(d) of this act is effective October 1, 2013, and applies to estates of decedents dying on or after that date. The remainder of this act is effective September 27, 2013.

Section 1.b of the bill expands the list parties who may publish claims of creditors without a Personal Representative being appointed. Note that this does not expand the options for heirs to be able to safely sell real property within two years of the death of the decedent as the protection of N.C.G.S. Section 28A-17-12 for sales by the heirs within that period are not available "unless the personal representative joins in the sale, lease or mortgage."

Section 1.d makes significant changes to the N.C.G.S. Section 30-3.1 right of elective share. The existence of offspring is no longer a consideration and applicable share of the Total Net Assets is as follows when the surviving spouse was married to the decedent:

(1) For less than five years, 15%.

(2) For at least five years but less than 10 years, 25%.

(3) For at least 10 years but less than 15 years, 33%.

(4) For 15 years or more, 50%.

Section 1.f loosens the requirements for self proving requirements for Wills pursuant to N.C.G.S. Section 31-11.6 providing validity as long as they are in the statutory form or "or in a similar form showing the same intent " (emphasis added). In addition foreign an military will requirements have likewise been eased by the addition of the following two subsections:

"(d) Any will executed in another state and shown by the propounder to have been made self-proved under the laws of that state shall be considered as self-proved.

(e) A military testamentary instrument executed in accordance with the provisions of 10 U.S.C. § 1044d(d) or any successor or replacement statute shall be considered as self-proved."

Section 1.g further eases the requirements for validity of a will in North Carolina by full recognition of the validity of a will lawfully created in other states or the military. The new language is italicized:

§ 31-46. Validity of will; which laws govern.

A will is valid if it meets the requirements of the applicable provisions of law in effect in this State either at the time of its execution or at the time of the death of the testator, or if (i) its execution complies with the law of the place where it is executed at the time of execution; (ii) its execution complies with the law of the place where the testator is domiciled at the time of execution or at the time of death; or (iii) it is a military testamentary instrument executed in accordance with the provisions of 10 U.S.C. § 1044d or any successor or replacement statute."

Trust Code amendments are found in the Section 2 changes. Section 2.a clarifies the law with respect to the insurable interest of a trustee in the life of the settlor and other defined parties. Section 2.b clarifies that "settlors spouse" in an irrevocable trust refers to the "person to whom the settlor was married at the time the irrevocable inter vivos trust was created, notwithstanding a subsequent dissolution of the marriage." The remaining trust amendments clarify trustee powers with respect to tax issues. Section 3 changes to fiduciary, matters are also primarily tax centered clarifications..

Business Corporation Act Revisions

Session Law 2013-153 Senate Bill 239

There were significant changes to the North Carolina Business Corporation Act made in this Bill updating and modernizing the Act. Of particular interest to real property professionals are the changes involving sales of property. It should be noted that N.C.G.S. Section 47-18.3 deals with the form of execution of corporate conveyances and creates certain presumptions of due authority created by the use of particular forms. As the changes define the authority of directors and in this regard they are particularly significant. These revisions conform to some of the changes promulgated in the Model Business Corporation Act and this act becomes effective January 1, 2014.

SECTION 12.  G.S. 55‑12‑01 reads as rewritten:

"§ 55-12-01.  Disposition of assets requiring shareholder approval and mortgage of assets.

(a)        A mortgage of or other security interest in all or any part of the property of a corporation may be made by authority of the board of directors without approval of the shareholders, unless otherwise provided in the articles of incorporation or in bylaws adopted by the shareholders.

(b)        Unless otherwise provided in the articles of incorporation or in bylaws adopted by the shareholders, a corporation may, on the terms and conditions and for the consideration determined by the board of directors, and without approval by the shareholders, do any of the following:

(1)        Sell, lease, exchange, or otherwise dispose of all, or substantially all, of its property in the usual and regular course of business.

(2)        Transfer any or all of its property to a corporation or an unincorporated entity all the shares or ownership interests of which are owned by the corporation.

(3)        Sell, lease, exchange, or otherwise dispose of any of its property, not in the usual and regular course of business, if the sale, lease, exchange, or other disposition is of less than all, or substantially all, of the corporation's property. If the sale, lease, exchange, or other disposition would leave the corporation with a continuing business activity that represented at least twenty-five percent (25%) of total assets at the end of the most recently completed fiscal year and at least twenty-five percent (25%) of either (i) income from continuing operations before taxes or (ii) revenues from continuing operations for that fiscal year, in each case of the corporation and its subsidiaries on a consolidated basis, the sale, lease, exchange, or other disposition will conclusively be deemed to be of less than all, or substantially all, of the corporation's property. "

SECTION 13.  G.S. 55-12-02 reads as rewritten:

" § 55-12-02.  Disposition of assets requiring shareholder approval.

...

(b)        The following requirements shall be met for a transaction to be authorized:

(1)        The board of directors shall recommend to the shareholders that the proposed transaction to the be approved unless one of the following circumstances exist, in which event the board of directors shall communicate the basis for not recommending approval of the proposed transaction to the shareholders at the time it submits the proposed transaction to the shareholders:

a.         The board of directors determines that, because of conflict of interest or other special circumstances, it should not make a recommendation that the shareholders approve the proposed transaction.

b.         G.S. 55‑8‑26 applies.

(2)        The shareholders entitled to vote must approve the proposed transaction.

NC LLC Act Revised and Restated - Chapter 57D

Session Law 2013-157 Senate Bill 439

This bill repeals Chapter 57C and adopts an entirely overhauled LLC Act as Chapter 57D and while it can be stated that the changes introduced by the legislation are more clarifying and curative than substantive, it will require close reading for those dealing with transactions by LLC's in the future. The Act is effective on January 1, 2014 and as it runs to 50+ pages, it is too long to include in this manuscript. However, we will summarize some of the changes of particular note to property professionals.

N.C.G.S. Section 57D-1-24 makes provision for a new document issued by the Secretary of State termed a Certificate of Existence for domestic LLC's and a Certificate of Authorization for foreign LLC's. Anyone may apply to the Secretary of State for a certificate. A certificate issued by the Secretary of State may be relied upon as conclusive evidence as to the accuracy of its contents and sets forth the following:

(1) The limited liability company's name and, in the case of a foreign LLC, any different name that the foreign LLC is authorized under Article 3 of Chapter 55D of the General Statutes to use to transact business in this State, as provided in the foreign LLC's certificate of authority.

(2) That (i) the articles of organization for the LLC have been filed and are in effect and the date on which the filed articles of organization became effective or (ii) a certificate of authority has been issued to the foreign LLC and is in effect and the date on which the certificate of authority became effective.

(3) That the articles of organization of an LLC or the certificate of authority of a foreign LLC are not suspended under G.S. 57D-1-32(a) (or for limited liability companies formed before January 1, 2014, former G.S. 57C-1-32(a)) for failure to answer interrogatories propounded by the Secretary of State or under G.S. 105-230 for failure to pay a tax or fee or file a report or return.

(4) That the LLC has not been administratively dissolved under G.S. 57D-6-06 (or for limited liability companies formed before January 1, 2014, former G.S. 57C-6-03) and no decree of judicial dissolution has been filed under G.S. 57D-6-05 (or, for limited liability companies formed before January 1, 2014, former G.S. 57C-6-02) or, with respect to a foreign LLC, no application for a certificate of withdrawal or a certificate of revocation has been filed under Article 7 of this Chapter (or, for limited liability companies formed before January 1, 2014, former Article 7 of Chapter 57C of the General Statutes).

(5) That, in the case of an LLC, articles of dissolution have not been filed nor have articles of merger or conversion been filed causing it to merge or convert into another entity or form of entity.

(6) Other facts of record in the Office of the Secretary of State pertaining to the limited liability company that may be requested by the applicant.

N.C.G.S. Section 57D-2-20(c) modifies the prior corresponding provision by imposing a specific requirement that if the initial members are not identified in the articles of organization of an LLC as provided in N.C.G.S. Section 57D-3-01(a)(1), the organizer or organizers must either identify the initial members of the LLC or dissolve the LLC.

N.C.G.S. Section 57D-2-30(b) limits the scope of operating agreements by prohibiting them from supplanting, varying, disclaiming, or nullifying the provisions of the Act if they:

(1) Concern the functions of, including the filings and payments to be made, and the manner in which they are to be made by or to the Secretary of State, the Attorney General, the courts, or any other governmental official, agency, or authority, including Article 1 of this Chapter, G.S. 57D-2-21(a), 57D-2-22(a), 57D-2-23, 57D-2-24, 57D-2-40, 57D-6-02(1), 57D-6-03(a) through (c), 57D-6-04, 57D-6-05, 57D-6-06, the last sentence of G.S. 57D-6-07(c), 57D-6-09, and 57D-10-01; except, the operating agreement may provide the forum in which disputes concerning the LLC or the rights and duties of interest owners and other parties to the operating agreement are to be resolved.

(2) Apply to persons who are not parties to or otherwise bound by the operating agreement, including the extent to which G.S. 57D-5-03 may be applicable to such persons or for which they may be entitled to recovery or other relief thereunder, or the extent to which G.S. 57D-1-02, 57D-6-08(1), 57D-6-10, 57D-6-11, 57D-6-12, and 57D-6-13 are applicable to creditors or such persons.

(3) Diminish the rights and protections of the LLC under G.S. 57D-4-05 and G.S. 57D-4-06.

(4) Diminish the rights and protections of members under G.S. 57D-3-04(a), except as permitted by and otherwise subject to subsections (b) through (f) of G.S. 57D-3-04.

(5) Eliminate the right of a member to bring a derivative action under Article 8 of this Chapter unless the operating agreement provides an alternative remedy, which may include the right to bring a direct action in lieu of a derivative action or modifying the procedures provided in Article 8 of this Chapter governing derivative actions.

(6) Eliminate the right of a member to bring an action to have the LLC judicially dissolved under clause (i) in G.S. 57D-6-02(2), unless the operating agreement provides an alternative remedy.

(7) Are set forth in this section, G.S. 57D-1-01, 57D-2-01(d), 57D-2-02, 57D-2-03, 57D-2-20, 57D-3-23, 57D-5-01, 57D-6-01, clause (ii) of 57D-6-02(2), 57D-6-07(b) and (f), and all sections and subsections of Article 9 of this Chapter other than G.S. 57D-9-21(b), (c), and (e), 57D-9-22(b), 57D-9-23(b), 57D-9-31(b) through (e), 57D-9-41(b), (d), and (f), and 57D-9-42(b).

N.C.G.S. Section 57D-2-30 (d) provides that in the event of a conflict between the operating agreement and a provision in any LLC document filed with the Secretary of State that the operating agreement controls with respect to members and managers. The document filed with the Secretary of State may be relied upon by persons who are not parties to the operating agreement and are not company officials to the extent that they reasonably rely on the filed document.

N.C.G.S. Section 57D-2-31 makes it clear that parties other than members and officers may have rights under the operating agreement. The LLC is deemed to be a party to the operating agreement, person who owns an interest owner is "deemed to assent to, and is bound by, and, subject to Article 5 of this Chapter, is entitled to the rights applicable to the interest owner's ownership interest provided under, and is otherwise deemed to be a party to, the operating agreement", a party does not have to be an owner to be a party to the operating agreement, non-owners are expressly permitted to have amendment approval rights (e.g. mezzanine lenders) and anyone "bound by the operating agreement is bound by any amendment adopted, as provided in the operating agreement."

N.C.G.S. Section 57D-3-20(d) permits the operating agreement to provide that the LLC may be managed by company officials who are not designated as managers. Thus an LLC might have President or Vice President with managing authority.

N.C.G.S. Section 57D-3-22 expressly authorizes delegation of authority by managers and other company officials to persons other than managers. The delegation of authority may be general. All managers are obligated to fulfill their duties with respect to direction and control in any delegation of any person to whom they delegate any responsibilities.

The rights of members, mangers and creditors and interested parties are clarified and expanded in Article 5. Article 6 deals with dissolution of an LLC and the effect of dissolution upon the LLC. After such dissolution, the LLC is now expressly required to wind up its affairs by the Act. Continuing the business of the LLC for a period of time while winding up is now expressly allowed and the managers or company officials are charged with winding up the LLC after its dissolution. If the dissolved LLC has no managers or other applicable company officials, the person, including a former member, owning or otherwise controlling the ownership interest of the person who was the last member of the LLC may serve or appoint one or more persons to serve as manager to wind up the LLC. The person, including a former member, owning or otherwise controlling the ownership interest of the last member may petition the superior court to wind up the LLC or appoint a receiver under G.S. 57D-6-04 to wind up the LLC. As under prior law, the dissolution of the LLC does not transfer title to the LLC's assets or prevent the transfer of ownership interests.

Article 7 deals with foreign LLC's and within it, N.C.G.S. Section 57D-7-01 governs their authority to transact business in North Carolina. As before, a foreign LLC may not 'transact business' in North Carolina until it properly obtains a certificate of authority from the North Carolina Secretary of State. The statute provides a non-exclusive list of activities that do not, of themselves, constitute transacting business here.

(1) Maintaining or defending any proceeding or effecting the settlement thereof or the settlement of claims or disputes. (access to the courts)

(2) Holding meetings of its members, managers, or other company officials or carrying on other activities concerning its internal affairs. (resort activities)

(3) Maintaining bank accounts or borrowing money in this State, with or without providing security for repayment or other performance and without regard to the frequency of such transactions. (regional finance center in Charlotte)

(4) Maintaining offices or agencies for the exchange or other transfer and registration of all or any class or portion of its membership or other equity or beneficial ownership interests or securities, or appointing and maintaining trustees or depositories with relation to its membership or other equity or beneficial ownership interests or securities.

(5) Soliciting or procuring orders, whether by mail or through employees or agents or otherwise, where the orders require acceptance to be made outside of the territory of this State to become binding contracts.

(6) Making or investing in loans with or without security, including servicing of mortgages or deeds of trust through independent agencies within the territory of this State, conducting foreclosure proceedings and selling or acquiring property in foreclosure sales, and managing or renting property acquired in foreclosure sales in connection with and in furtherance of efforts to sell and otherwise liquidate such property, provided no office or agency of the foreign LLC is maintained in this State. (interstate mortgage securitization)

(7) Taking security for or collecting debts due the foreign LLC or enforcing any rights the foreign LLC may have in property subject to or otherwise providing security with respect to the repayment or other performance of the debt obligations.

(8) Transacting business in interstate commerce.

(9) Conducting an isolated transaction completed within a period of six months but not repeated transactions of a similar nature. (key to sales under 10 below)

(10) Selling property or services through independent contractors.

(11) Owning real or personal property.(key to real property transactions)

Under prior law, it was explicit that the failure to obtain a certificate of authority would not invalidate the acts of the foreign LLC and this protection continues in the new Act in N.C.G.S. Section 57D-7-02.

Article 8 dealing with member derivative action has been substantially expanded. Article 9 governs mergers and conversions and N.C.G.S. Section 57D-9-23(a)(2), N.C.G.S. Section 57D-9-33(a)(2) and 57D-9-43(a)(2) continue to provide that title to all real estate and other property owned by the converting entity continues to be vested in the surviving entity without reversion or impairment. As has been the law, N.C.G.S. Section 55D-26 requires the at an appropriate certificate from the Secretary of State must be recorded when title to real property held by any listed entity is vested by operation of law in another entity upon merger, consolidation, or conversion. The certificate must recite the name change, merger, consolidation, or conversion and must be recorded in the office of the register of deeds of the each county where the property lies

Article 10 makes abundantly clear that the Act is intended by the Legislature to be liberally construed by the courts so as to give effect to all contractual agreements that are not unlawful or against stated public policy.

"§ 57D-10-01. Purpose; public policy.

(a) This Chapter is to be applied to promote its purposes and policies.

(b) The purpose of this Chapter is to provide a flexible framework under which one or more persons may organize and manage one or more businesses as they determine to be appropriate with minimum prescribed formalities or constraints . (emphasis added)

(c) It is the policy of this Chapter to give the maximum effect to the principle of freedom of contract and the enforceability of operating agreements.

" § 57D-10-02. Rules of construction; coordination with other law.

(a) Unless displaced by this Chapter, the rules of law and equity supplement this Chapter.

(b) The rule that statutes in derogation of the common law are to be strictly construed does not apply to this Chapter.

(c) This Chapter modifies, limits, and supersedes the federal Electronic Signatures in Global and National Commerce Act, 15 U.S.C. § 7001 et seq., but does not modify, limit, or supersede section 101(c) of that act, 15 U.S.C. § 7001(c), or authorize electronic delivery of any of the notices described in section 103(b) of that act, 15 U.S.C. § 7003(b).

(d) G.S. 25-9-406 and G.S. 25-9-408 do not apply to any ownership interest or any portion thereof, including any economic interest. To the extent of any conflict or inconsistency between this subsection and G.S. 25-9-406 and G.S. 25-9-408, this subsection prevails. Accordingly, neither G.S. 25-9-406 nor G.S. 25-9-408 will render invalid, unenforceable, or ineffective any contrary or inconsistent provision contained in an operating agreement.

(e) In this Chapter, unless otherwise specified or indicated by the context, including as may otherwise be provided in the operating agreement under Part 3 of Article 2 of this Chapter, without the need for repetitious use of qualifiers, further statement, or clarification in the text of any provision of this Chapter, the following rules of construction shall apply:

(1) The provisions of this Chapter are to be applied in a manner that is reasonable under the circumstances.

(2) References to "members," "interest owners," "managers," "company officials," "operating agreement," "articles of organization," and other terms that relate to limited liability companies are deemed to refer to an LLC or foreign LLC as the context indicates.

(3) The words "this Chapter," "hereof," "hereby," "hereunder," "herein," and words of similar impact are to be read to refer to Chapter 57D of the General Statutes as a whole and not to any particular provision of this Chapter.

(4) The word "including" is to be read as if it is followed by the words "without limitation" and, therefore, denotes examples that are only illustrative and does not narrow or limit the scope of the standard, concept, or other applicable subject being described or illustrated.

(5) The words "or" and "any" are not exclusive.

(6) The captions and headings of provisions of this Chapter are for convenience of reference only and are not to be construed as part of this Chapter or serve to limit or expand the scope of the provisions.

(f) Action validly taken pursuant to one provision of this Chapter is not rendered invalid solely because it is substantively the same or similar to an action that could be taken pursuant to some other provision of this Chapter but fails to satisfy one or more requirements prescribed by that other provision.

(g) An operating agreement that provides for the application of the law of this State is governed by and will be construed under the laws of this State in accordance with its terms.

As would be expected there are innumerable conforming provisions.

DMV MH Title Cancellation Relief

Session Law 2013-79 House Bill 410

This bill makes various clarifying and technical changes, and amends the information to be required in the affidavit provided for in the bill. It would allow the Division of Motor Vehicles to cancel a certificate of title to a manufactured home when the person requesting cancellation does not have the certificate of title. If the owner of the real property where the manufactured home is affixed submits an affidavit to DMV that it meets the definition of real property under N.C.G.S. Section 105 273(13) and submits a tax record showing it listed for ad valorem taxes as real property in the name of the record owner of the real property where it is affixed. This act became effective July 1, 2013.

SECTION 1. G.S. 20 109.2 reads as rewritten:

"§ 20 109.2. Surrender of title to manufactured home.

(a) Surrender of Title. - If a certificate of title has been issued for a manufactured home, the owner listed on the title has the title, and the manufactured home qualifies as real property as defined in G.S. 105 273(13), the owner listed on the title shall submit an affidavit to the Division that the manufactured home meets this definition and surrender the certificate of title to the Division.

(a1) Surrender When Title Not Available. - If a certificate of title has been issued for a manufactured home, no issued title is available, and the manufactured home qualifies as real property as defined in G.S. 105 273(13), the owner listed on the title shall be deemed to have surrendered the title to the Division if the owner of the real property on which the manufactured home is affixed (i) submits an affidavit to the Division that the manufactured home meets the definition of real property under G.S. 105 273(13) and in compliance with subsection (b) of this section and (ii) submits a tax record showing the manufactured home listed for ad valorem taxes as real property pursuant to Article 17 of Chapter 105 of the General Statutes in the name of the record owner of the real property on which the manufactured home is affixed.

(b) Affidavit. - The affidavit must be in a form approved by the Commissioner and shall include or provide for all of the following information:

(1) The manufacturer and, if applicable, the model name of the manufactured home affixed to real property upon which cancellation is sought.

(2) The vehicle identification number and serial number of the manufactured home affixed to real property upon which cancellation is sought.

(3) The legal description of the real property on which the manufactured home is affixed, stating that the owner of the manufactured home also owns the real property or that the owner of the manufactured home has entered into a lease with a primary term of at least 20 years for the real property on which the manufactured home is affixed with a copy of the lease or a memorandum thereof pursuant to G.S. 47 18 attached to the affidavit, if not previously recorded.

(4) A description of any security interests in the manufactured home affixed to real property upon which cancellation is sought.

(5) A section for the Division's notation or statement that either the procedure in subsection (a) of this section for surrendering the title has been surrendered and the title has been cancelled by the Division or the affiant submits this affidavit pursuant to subsection (a1) of this section to have the title deemed surrendered by the owner listed on the certificate of title.

(6) An affirmative statement that the affiant is (i) the record owner of the real property on which the manufactured home is affixed and the lease for the manufactured home does not include a provision allowing the owner listed on the certificate of title to dispose of the manufactured home prior to the end of the primary term of the lease or (ii) is the owner of the manufactured home and either owns the real property on which the manufactured home is affixed or has entered into a lease with a primary term of at least 20 years for the real property on which the manufactured home is affixed.

(7) The affiant affirms that he or she has sent notice of this cancellation by hand delivery or by first-class mail to the last known address of the owner listed on the certificate of title prior to filing this affidavit with the Division.

(c) Cancellation. - Upon compliance by the owner with the procedures in subsection (a) or (a1) of this section for surrender of title, the Division shall rescind and cancel the certificate of title. If a security interest has been recorded on the certificate of title and not released by the secured party, the Division may not cancel the title without written consent from all secured parties. After canceling the title, the Division shall return the original of the affidavit to the affiant, or to the secured party having the first recorded security interest, with the Division's notation or statement that the title has been surrendered and has been cancelled by the Division. The affiant or secured party shall file the affidavit returned by the Division with the office of the register of deeds of the county where the real property is located. The Division may charge five dollars ($5.00) for a cancellation of a title under this section.

(f) No Right of Action. - A person damaged by the cancellation of a certificate of title pursuant to subsection (a1) of this section does not have a right of action against the Division."

CSC to Determine Attorney Fees in Foreclosure

Session Law 2013-104 House Bill 407

This legislation remedies the holding of Blue Ridge Sav. Bank, Inc. v. Mitchell , (COA 11-289) and will now permit the Clerk of Superior Court in a foreclosure proceeding to exercise discretion to allow reasonable counsel fees to an attorney serving as a trustee in addition to the compensation allowed to the attorney as the trustee provided that the attorney, on behalf of the trustee, renders professional services as an attorney that are different from the services normally performed by a trustee and which would reasonably justify the retention of legal counsel by a trustee who is not licensed to practice law. Counsel fees are presumed reasonable if they comply with the requirements of N.C.G.S. Section 6-21.2. The Clerk of Superior Court may award deeming a higher fee if reasonable and the bill will go into effect on September 27, 2013.

Uniform HOA Lien Enforcement Procedure

Session Law 2013-202 House Bill 331

The stated purpose of this act is to stabilize titles to condominium and subdivision lots by providing a uniform procedure to enforce sums due condominium and planned community associations using claims of lien and a statutory enforcement procedure. It also. This act becomes effective October 1, 2013

Voluntary Pre-litigation HOA Mediation

Session Law 2013-127 House Bill 278

This bill makes provision for voluntary pre-litigation mediation between a HOA and the owners for community association disputes was ratified effective July 1, 2013 and applies to most community association disputes (except for a few exempted ones). There was no prior prohibition of mediation in community association disputes, whether by statute or typical governing documents. As a result, the new legislation seems targeted at providing owners awareness that they have the right to request mediation, rather than creating any new rights. The bill provides that in the event of a dispute, the HOA or owner may contact the N.C. Dispute Resolution Commission or the Mediation Network of North Carolina for a referral to a mediator or community mediation center. The mediator must then contact the other party, who can decline voluntary mediation. If both parties agree to mediate, the mediation must be scheduled within 25 days. The costs of mediation are shared equally between the parties regardless of the outcome, unless agreed otherwise.

Children Born Out of Wedlock to Inherit

Session Law 2013-198 House Bill 219

This act is intended to modernize the manner in which children born out of wedlock are referenced in the North Carolina General Statutes by removing references to "illegitimate" when used in connection with an individual and to "bastardy". The major substantive change is to allow a child born out of wedlock to inherit from a person who died prior to or within one year after the birth of that child if paternity can be established by DNA testing.

The section with the substantive change follows:

"Article 6.

Children Born Out of Wedlock."

SECTION 9. G.S. 29-19 reads as rewritten:

"§ 29-19. Succession by, through and from children born out of wedlock.

(a) For purposes of intestate succession, a child born out of wedlock shall be treated as if that child were the legitimate child of the child's mother, so that the child and the child's lineal descendants are entitled to take by, through and from the child's mother and the child's other maternal kindred, both descendants and collaterals, and they are entitled to take from the child.

(b) For purposes of intestate succession, an illegitimate a child born out of wedlock shall be entitled to take by, through and from:

(1) Any person who has been finally adjudged to be the father of such the child pursuant to the provisions of G.S. 49-1 through 49-9 or the provisions of G.S. 49-14 through 49-16;

(2) Any person who has acknowledged himself during his own lifetime and the child's lifetime to be the father of such the child in a written instrument executed or acknowledged before a certifying officer named in G.S. 52-10(b) and filed during his own lifetime and the child's lifetime in the office of the clerk of superior court of the county where either he or the child resides.

( 3) A person who died prior to or within one year after the birth of the child and who can be established to have been the father of the child by DNA testing .

Notwithstanding the above provisions, no person shall be entitled to take hereunder unless the person has given written notice of the basis of the person's claim to the personal representative of the putative father within six months after the date of the first publication or posting of the general notice to creditors.

(c) Any person described under subdivision (b)(1), (2), or (3) of this section and the person's lineal and collateral kin shall be entitled to inherit by, through and from the illegitimate child.

(d) Any person who acknowledges that he is the father of a child born out of wedlock in his duly probated last will shall be deemed to have intended that such the child be treated as expressly provided for in said the will or, in the absence of any express provision, the same as a legitimate child."

HOA Revisions

Session Law 2013-34 Senate Bill 228

AN ACT providing that a unit owner in a condominium and a lot owner in a planned community shall afford access through the limited common element assigned or allocated to the owner's unit or lot to the association and, when necessary, to other unit or lot owners for the purpose of conducting maintenance, repair, or replacement activities and providing that a unit or lot owner is legally responsible for damage to a limited common element caused by the unit or lot owner and clarifying the laws regarding the powers and duties of a planned community and amending the procedures regarding amendment of a recorded declaration.

Recording Fees Effective July 1, 2013

Session Law 2013-225, House Bill 385

The following schedule of fees was originally enacted effective October 1, 2011, with a sunset provision as of June 30, 2013. This Act removes the sunset effective as of July 1, 2013. A fee summary is set forth on the following pages. Asterisks indicate that additional fees must also be added to determine the final recording cost total, i.e. $4.00 each additional page, $10.00 multiple document fee, excise tax (all counties), local transfer taxes (certain counties), $25 penalty for nonconforming document and any other charges that apply.

Fees for Real Estate Instruments
(Originally Effective 10/1/2011 and Current as of 7/1/2013)

Recording

  • Instruments (Except deeds of trust and mortgages)..$26 first 15 pages, $4 each additional page
  • Deeds of trust and mortgages................................... $56 first 15 pages, $4 each additional page
  • Plats...........................................................................$21 each sheet
  • Nonstandard document............................................. $25
  • Multiple instruments as one, each............................ $10
  • Satisfaction instruments............................................ No fee
  • Additional subsequent instrument, each................... $25

UCC Records

  • One or two pages in writing..................................... $38
  • More than two pages in writing................................ $45 up to 10 pages, $2 each page over 10
  • Filed electronically if permitted............................... $30
  • Response to written request for information............ $38
  • Response to electronic request if permitted............. $30
  • Copy of statement..................................................... $2 each page

Marriage Licenses

  • Marriage license....................................................... $60
  • Delayed certificate, one certified copy..................... $20
  • Application or correction w/one certified copy........ $10
  • Marriage license certified copy................................ $10

Birth Records

  • Birth certificate, certified copy................................. $10 (Register may waive for persons over 62 years old)
  • Registration of Birth certificate one year after birth
    Same County with one certified copy....................... $20
    Prepare papers for registration in another County.... $10
    Papers prepared in another County w/certified copy $10
  • Birth record amendment........................................... $10

Other Records

  • Military discharge..................................................... No fee
  • Military discharge certified copy as authorized........ No fee
  • Death certificate certified copy................................. $10
  • Death record amendment.......................................... $10
  • Legitimations............................................................ $10
  • Certified copies unless statute otherwise provides... $5 first page, $2 each additional page
  • Uncertified copies..................................................... Cost as posted

Other Services

  • Notary public oath.................................................... $10
  • Notarial acts.............................................................. $5 each signature
  • Comparing copy for certification............................. $5
  • State vital records search.......................................... $10
  • State vital records for network access...................... $24 first copy, $15 each additional copy
  • Miscellaneous Services............................................. Cost as posted

Notes on Recording fees

Nonstandard Documents.

There is a $25.00 additional fee for recording documents not in compliance with standards specified by N.C.G.S. Section 161-14(b):

  • (a) 8.5" x 11" (if 8.5" x 14" paper, it will be reduced to 8.5" x 11", thereby reducing font size)
  • (b) 3" blank margin at top of first page
  • (c) 1/4" blank margins on remaining sides of first page and all subsequent pages
  • (d) Typed or printed in black on white paper in legible font no smaller than 9 points. Blanks in an instrument may be completed in pen.
  • (e) Text typed or printed on one side of paper only.
  • (f) State the type of instrument at top of first page.

Excise and Land Transfer Taxes.

N.C.G.S. Chapter 105, Subchapter 1, Article 8E, imposes an excise tax on all conveyances payable by the seller at time of recording.

"The tax rate is one dollar ($ 1.00) on each five hundred dollars ($ 500.00) or fractional part thereof of the consideration or value of the interest conveyed. The transferor must pay the tax to the register of deeds of the county in which the real estate is located before recording the instrument of conveyance. If the instrument transfers a parcel of real estate lying in two or more counties, however, the tax must be paid to the register of deeds of the county in which the greater part of the real estate with respect to value lies.

The excise tax applies to all conveyances, other than:

  • Transfer by a governmental unit or an instrumentality of a governmental unit.
  • Transfers of an interest in real property
    • (1) By operation of law.
    • (2) By lease for a term of years.
      e.g.: An interest in a lease for a term of years.
      e.g.: Conveyance by of leasehold improvements to a purchaser
    • (3) By or pursuant to the provisions of a will.
    • (4) By intestacy.
    • (5) By gift.
    • (6) If no consideration in property or money is due or paid by the transferee to the transferor.
      e.g.: Deed by an individual to a wholly-owned corporation for "business convenience" and "without consideration"
    • (7) By merger, conversion, or consolidation.
    • (8) By an instrument securing indebtedness.

The excise tax will apply in the following transfers:

  1. To each grantor in an exchange for other real property.
  2. For a deed in exchange for personal property.
  3. For a deed with an assumption of seller's mortgage debt by buyer
  4. For timber deeds and contracts to convey standing timber

The following counties require an additional 1% Land Transfer Tax, payable at time of recording, under local bills (below).

Dare S.L. 1985-525 (some leases)
Currituck S.L. 1985-670 (some leases)
Chowan S.L. 1985-881
Camden S.L. 1985-954
Pasquotank S.L. 1989-393
Perquimans S.L. 1989-393
Washington S.L. 1989-393

Failure to disclose and pay the tax is subjects the filer to a $1,000 penalty and punishment as a misdemeanor. Pasquotank, Perquimans and Washington Counties exempt conveyances as the result of foreclosure or in lieu of foreclosure to the holder of the security interest being foreclosed; and conveyance of an interest in real property transferred by a person who, within the last two years, held a mortgage on the property and received the property in an exempt transfer.


View the Entire Newsletter -  Search

Follow Statewide_Title on Twitter       View Statewide Title's profile on LinkedIn