Senate Bill 408 becomes effective October 1, 1995.
G.S. 45-81(a)(1) has been amended effective October 1, 1995 to change the 15 year period to 30 years.
G.S. 45-82.1 has been added effective October 1, 1995.
G.S. 45-82.1(a) states that the period for advances in G.S. 45-81(a)(1) may be extended by written agreement between the lender and borrower executed before termination of the equity line of credit or the borrowers obligation to repay any outstanding indebtedness. Any extended period shall not exceed 30 years from the end of the preceding period for advances. It should be noted that, apparently, there is no limitation on the number of extensions.
G.S. 45-82.1(b) states that an instrument to which the lender and borrower have agreed to an extended period for advances shall have priority with respect to advances made after the preceding loan period from a date "not later than the date of registration of the certificate described in" G.S. 45-82.1(c).
G.S. 45-82.1(c) states that the priority in G.S. 45-82.1(b) shall apply only if the grantor of the instrument securing the obligation and "other record owners" of the real property conveyed in the instrument execute a certificate evidencing the extension and register the certificate in the office of the register of deeds where the original instrument is registered. The failure of any record owner to execute the certificate shall affect only that record owners interest in the property and executions by other owners shall have full effect to the extent of their interests in the property. "Record owner" is defined by G.S. 45-82.1(c) to mean "any person owning a present or future interest of record in the real property which would be affected by the lien of the mortgage or deed of trust, but does not mean the trustee in a deed of trust or the owner or holder of a mortgage, deed of trust, mechanics or materialmens lien, or any other lien or security interest in the real property."
G.S. 45-82.1(d) states that any certificate complying with G.S. 45-82.1(c) is satisfactory. G.S. 45-82.1(d) sets forth a new form as follows:
"Certificate of Extension of Period for Advances Under Home Equity Line of Credit
Please take notice that the borrower and lender under the home equity line of credit secured by the (deed of trust) (mortgage) recorded on __________ in Book ___, at Page ___, records of this County, have agreed to extend the period within which the borrower may request advances as set forth in G.S. 45-82.1. The borrowers obligations to repay advances and related undertakings are secured by the (deed of trust) (mortgage).
WITNESS the signatures and seals of the undersigned, this ___ day of _______, ____.
(Other record owner(s))
(Mortgagee or Beneficiary)
(Acknowledgment as required by law)."
1. General Comments
A "purchase money mortgage" or "purchase money deed of trust" presents certain interesting problems pertaining to joinder and priority.
2. Joinder Of Non-owner Spouse
While the spouse who is not in title (the non-owner spouse) might be an obligor on the secured promissory note, at times that spouse will not want to join in the deed of trust. However, instead of that situation arising, the purchaser will be separated and will want to acquire title in the purchasers name only and execute the purchase money mortgage or deed of trust without the joinder of the non-owner spouse. Absent a separation agreement which dispenses with the necessity of such joinder (see G.S. 52-10; G.S. 52-10.1; G.S. 39-7; and G.S. 39-13.4), the following doctrine can be relied upon.
G.S. 39-13 applies to mortgages and deeds of trust securing payment of purchase money. It specifically states that joinder of the non-owner spouse is not required. However, arguably, the statute only applies to such an instrument when the lender is the seller.
G.S. 29-30 provides for elective life estate rights. Our long standing interpretation of G.S. 29-30(g)(2) is that G.S. 29-30(g)(2) clearly eliminates the requirement for joinder of the non-owner spouse in any purchase money mortgage or purchase money deed of trust, including those securing a third party lender.
Under G.S. 39-13 or G.S. 29-30(g)(2), since "purchase money mortgage or deed of trust" is undefined, it would seem that all loan proceeds must go to pay the seller or to pay closing costs. Neither statute requires simultaneous recordation of the deed and purchase money instrument.
3. Purchase Money Mortgages and Deeds of Trust - Priority
If a judgment or mechanics lien is incurred by a party before the party acquires title to real property and that party gives a deed of trust to secure all or part of the purchase price and the deed and deed of trust are executed, delivered and recorded as close to simultaneous as possible as part of one transaction, the purchase money deed of trust will have priority over the otherwise prior lien and that is true if the lender is a seller or third party. See Carolina Builders, infra.
However, an eleven day delay in the deed of trusts recording precluded application of the doctrine. Pegram-West, Inc. v. Hiatt Homes, Inc., 12 N.C. App. 514, 184 S.E. 2d 65 (1971).
Also, a construction loan deed of trust recorded between the recording of the deed and purchase money deed of trust precluded application of the doctrine. Carolina Builders, Corp. v. Howard-Veasey Homes, Inc., 72 N.C. App. 224, 324 S.E. 2d 626, cert. den., 313 N.C. 597, 330 S.E. 2d 606 (1985).
In addition, to the extent that the proceeds of the deed of trust funded construction advances, the doctrine did not apply, resulting in a "divided priority" for the deed of trust. Dalton Moran Shook, Inc. v. Pitt Development Co., 440 S.E. 2d 585 (N.C. App. 1994).
While the doctrine applies to prior judgments and federal tax liens, it might not apply to the federal judgments having a twenty year duration. See 28 U.S.C. Secs. 3003(d) and 3201(b).
These rules apply to a mortgage as well as a deed of trust.
4. Title Reporting
The title examining attorney should report a lien that is subordinate to a purchase money mortgage or deed of trust under the rules discussed in 3. above so that the lien can be pointed out in and insured against by any loan policy insuring such purchase money instrument, since the lien pre-dates the policys effective date. Also, such a lien, if reported, should be listed in the purchasers owners policy.
The North Carolina Court of Appeals handed down an opinion in August the main thrust of which was to further define what constitutes an unenforceable assessment provision of a set of restrictive covenants. However, in an interesting aspect of the opinion, authored by Honorable John B. Lewis Jr., the Court held that an action to enforce a restrictive covenant was governed by the six year period of limitation under NCGS Sec. 1-50(3). The Court relied on the holding in Hawthorne v. Realty Syndicate, Inc., 43 N.C. App. 436 (1979), affd, 300 N.C. 660 (1980) in which that court found an action enforceable when filed within six years of the violation, reasoning that a restrictive covenant was a negative easement, and that easements are incorporeal hereditiments and therefore NCGS Sec. 1-50(3) applied. The Court in this decision found that summery judgment was appropriate as to violations occurring outside of the six year period.
It would seem that this holding would also apply to violations of setbacks on plats and even potentially to encroachments in reserved easements. It should be noted that the holding applies the six year limitation to an action to enforce a violation and not as to the validity of the restriction itself. As a result if a violation had occurred more than six years prior to the action to enforce the restriction, it would then be permitted to remain but if the old violation ceased and a new violation occurred while the restrictions were viable it seem that the statute should begin to run anew from the time of the subsequent violation.
An interesting question arises from the reasoning presented. If a prescriptive easement takes twenty years to ripen, can it be cut off by six years of obstruction?