Volume 14 Number 2
Title Tips by Tute
Tute recently reviewed a collection of court decisions from the last year dealing with real estate issues. I am pleased to report that only a tiny minority of them implicated title examination and examiners. Since the claims department hosted by my august employer reports no shortage of work, it may be that our errors are not making it into the judicial system, but one must take their blessings where they can. Amongst the issues litigated were zoning, subdivision, leases, eminent domain, burden of proof when challenging tax assessments, the constitutionality of the additional grantor’s tax for transportation authorities, expanded billboards, and a host of other topics which just don’t affect title examiners.
On the list was one topic upon which Tute has already expended ink. In the last issue of the EXAMINER was a discussion of indexing errors, and I would like to think I adequately covered the topic. One can’t help but remember fondly printed paper indices, where the instrument missed during the title examination leading to the transaction being litigated would, at least as I remember the layout, would have jumped out at the examiner.
Another case topic that reminded Tute of how things have changed involved a question of entity authority to enter a transaction. At the heart of the suit was whether or not the entity’s charter even allowed it to act. That is beyond the ken of most title examiners, but reminded me of an entirely separate issue. Back in the dark ages of your humble correspondent’s infancy, entities recorded resolutions authorizing a transaction and appointing officers to sign documents as exhibits to the instruments. Seldom is that seen today. One reason is certainly the statutory presumption of authority embodied in Virginia Code § 55-119, which states: “All deeds made by corporations shall be signed in the name of the corporation by the president or acting president, or any vice-president, or by such other person as may be authorized thereunto by the board of directors of such corporation . . . .” Obviously, if such an “other person” is signing the instruments you are reviewing; it seems it would be a legitimate question to ask by what authority. Another aspect of such a default rule is that it is intended to cover transactions in the ordinary course of business, which, one suspects, does not include extraordinary events like deeds in lieu of foreclosure.
Are there still investors for rental residential properties in resort communities in today’s economy? If you’re examining title and find a restrictive covenant stating “no lot shall be used except for residential purposes,” the Virginia Supreme Court ruled that language did not prohibit short term rentals. At issue was a claim of ambiguity as to the application of the restriction, but after reading the opinion, Tute is led to conclude ambiguity is not within the sole jurisdiction of real estate developers. Diagonally across the Commonwealth, a covenant stating a structure was not to exceed two and one half stories in height proved the subject of litigation in a residential community with a “sloping topography.”
The next case brings back memories of English class and memorization drills.
By Joyce Kilmer
I think that I shall never see
The Supreme Court of Virginia said this year that “encroaching trees and plants may be regarded as a nuisance when they cause actual harm or pose an imminent danger of actual harm to adjoining property.” Removal of the offending tree may now be an appropriate remedy. Should you see on a survey of the property under examination a note stating “nuisance tree,” you may want to bring it to the attention of the underwriter.
Out in the western part of the Commonwealth, a federal court found that an easement, made explicitly subject to the terms of an unrecorded federal license agreement, put the easement holder on notice of the existence of that regulatory document. Inquiry notice has been a recurring topic for several years.
If your title examination reveals a serial bankruptcy filer transferring property to an unemployed, still in school, minor, run, do not walk, to your underwriting counsel and dump the file in their lap. If the topic of the Magnuson Moss Warranty Act comes up over the water cooler, you can amaze your friends and acquaintances by reporting that the United States District Court for the Western District of Virginia found the Act inapplicable to modular homes because they are not a “consumer product.” A Fairfax circuit court ruled modular homes were “goods” under the uniform commercial code, opening a door for litigation against the manufacturer.
I couldn’t tell if a title examiner had a finger in the problem, but a settlement agent who paid off the wrong deed of trust managed to establish for the court that a HUD-1 was not a contract, and that there was no implied cause of action in the West Settlement Act, CRESPA or the Consumer Protection Act. However, the basic negligence cause of action remains.
In a case that flies in the face of current headlines, a “foreclosure prevention/credit repair” service lived up to its obligations and the sale/leaseback with option to purchase did not violate the Truth in Lending Act or the Mortgage Lender and Broker Act. Tute suspects this is an exception to the rule, and urges caution when that particular fact pattern is evident.
If examining title to an Episcopal Church parish property, the title examiner might want to make sure the parish is not trying to secede from the local diocese. There is a case pending in Fairfax trying to sort out property issues in this division of the Anglican Communion. An initial order found the Virginia statute (Virginia Code § 57-9) would be applicable, but no specific property issues had been litigated.
Mechanics lien litigation seems to be making a comeback as well. In northern Virginia, a lien waiver for a condominium unit was found not to release the lien against the common elements of the condominium. In western Virginia, a court corrected the claimant’s math and reapportioned the lien among the benefited lots.
An option to repurchase contained in a deed of trust, which was specifically not released when the deed of trust was refinanced, survived the foreclosure of the new deed of trust. The holder of the option could not exercise the option as a result of the foreclosure, but may exercise the option against the purchaser.
Aren’t you glad you didn’t go to law school? Let’s All be careful out there.
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