Landrecs.com - Land Title Consulting & Education

New Jersey Court Deciding Title Company Liability for Attorney Closings

Jeanne — Wed, 10 Mar 2010 04:38:28 +0000

Law.com has an important article for anyone using an outside attorney that handles closing funds.

The New Jersey Supreme Court is deciding if a title insurer can be held liable for a lawyer’s theft of a home buyer’s funds if it fails to tell the buyer directly it is not responsible for the lawyer’s misdeeds.

The case, [...]

Walking the Social Media Tightrope

Jeanne — Tue, 09 Mar 2010 19:17:00 +0000

by Darity WesleyBeing on the tightrope is living. Everything else is just waiting- Karl WallendaThe skill that is absolutely essential to walking a tightrope is balance. Balance is also the key to approaching the social media milieu. It’s pretty tricky right now to figure out how to participate successfully both professionally and personally in the [...]

New York Looks at State Run Title Insurer

Jeanne — Fri, 05 Mar 2010 01:25:57 +0000

Is it the End of the World as We Know It? New York is considering a state run “Title Guarantee Department” that would appoint directors who in turn would appoint and hire “officers and agents as it may require,” according to PRNewswire.com

In response, a new lobbying group has taken the initiative to attempt to stop [...]

Title Companies Have Private Information: Is it Safe When Sent Over Social Media?

Jeanne — Thu, 04 Mar 2010 17:10:23 +0000

Companies that deal with sensitive information, such as Title Insurance Companies have need to take particular attention to the new social media, especially with the use of confidential information being sent via I-Phones and Blackberries.

According to Darity Wesley of Privacy Gurus, here are some guidelines in that regard.

The skill that is absolutely essential to [...]

FDIC Closes Four More Lenders

Jeanne — Sun, 28 Feb 2010 21:21:38 +0000

DSNews reports the closure of four more lending banks: La Jolla Bank, FSB in La Jolla, California; George Washington Savings Bank, Orland Park, Illinois; Marco Community Bank, Marco Island, Florida; and The La Coste National Bank, Lacoste, Texas. This brings the number of failures on the FDIC list to 20 for this year. Nearly all [...]

Freehold Licensing, NKA Freehold Capital Partners, At It Again

Robert Franco — Sat, 27 Feb 2010 22:02:09 +0000

For more than two years, I have been blogging about private transfer fee covenants and the group that is promoting them, Freehold Licensing. Freehold has actually attempted to patent their business strategy of creating private transfer fee covenants (a separate act that I find offensive). The group now has a new name and a new strategy, all evolving while several states and trade organizations are trying to put a stop to private transfer fee covenants.

To summarize, a private transfer fee covenant is a covenant that purports to run with the land and bind subsequent owners of property to pay a 1% fee to the original covenantor. Freehold, of course, gets to share in the fee for their assistance in setting up the covenant. To briefly recap my previous blogs, In Patently Stupid, I explained the covenant and my opinion of their attempt to patent the practice as a "business strategy." In Freehold Licensing Defends Covenants, I addressed comments posted by a representative of Freehold and the Texas legislation aimed at banning private transfer fee covenants. And in a third blog, To Touch and Concern, I hypothesized that such covenants are unenforceable under common law.

After I suggested in my blog that states should pass legislation, as they had in Texas, to ban private transfer fee covenants, four states did just that - Florida, Missouri, Kansas and Oregon. I followed up with a blog about Ohio's pending legislation, Banning Transfer Fee Covenants in Ohio.

After the blog about Ohio's legislation, I started to get calls from people across the country with an interest in these covenants. I was contacted by an attorney in South Carolina who was referred to me by a national underwriter that issued a bulletin stating that they would no longer insure property subject to a private transfer fee covenant. He was representing an organization of homeowners' associations concerned about transfer fee covenants commonly used to fund their members' associations. I responded with a blog about the importance of legitimate uses of transfer fee covenants to fund homeowners associations and not-for-profit groups that actually provide a benefit to the property and their communities, Underwriters Refuse to Insure Transfer Fee Covenants.

I was later contacted by the American Land Title Association (ALTA) which is working with the National Association of Realtors (NAR) on model legislation to assist states with banning the Freehold-type covenants. (See The American Land Title Association Opposes Private Transfer Fee Covenants).

Just last week, I was interviewed by a journalist with the Washington Post who is working on an article for consumers about private transfer fee covenants.

With all the activity centered around prohibiting private transfer fee covenants, I thought I'd see what Freehold was up to these days. I was surprised to find out that they are still quite active and even more aggressive in their marketing of private transfer fee covenants.

Freehold Licensing issued a press release a couple of weeks ago to announce the move of its corporate offices from Austin, Texas to Midtown Manhattan.

Bringing the Freehold team to the heart of the financial markets is important for the Company's continued growth. The move will provide close proximity to major investment banks, will allow the Company to attract top talent, and further illustrates Freehold's focus on strengthening its growing portfolio of financial instruments.

It has also apparently changed its name to Freehold Capital Partners. Maybe because of the extensive bad press associated with "Freehold Licensing." If you Google Freehold Licensing, the search results include such listings as "Closing the Door on Freehold Licensing" and "Is this a scam..." In fact, when you enter the search term "Freehold Licensing" in Google, they suggest the search term "Freehold Licensing Scam."

But, the name isn't all that has changed. What Freehold used to refer to as "Transfer Fee Instruments" on its old Web site is now called "Reconveyance Fee Instruments" on its new Web site. Again, could this possibly be because of the negative press associated with the former?

If this isn't enough to make you cringe, Freehold is now touting the benefits of pooling and securitizing the covenants into securities that can be sold to provide a lump sum payment to the covenantor, usually a developer, of the present value of the covenants. We are now familiar with Mortgage Backed Securities (MBS) that contributed to the financial crisis. It was once thought that there was no risk associated with MBS. Freehold makes the bold statement that "Reconveyance Fee Instruments represent a fully-collateralized financial instrument with no meaningful risk of default... Investors acquiring shares of the pool would own a long-term income-producing asset secured by a real property interest, and which carried no meaningful risk of default."

Of course, it states in the small print that "this is not an offer to sell, buy, market, offer, broker or securitize Reconveyance Fee Instruments. There is no assurance that any particular Instrument will be suitable for sale or securitization or that public market for Reconveyance Fee Instruments will develop, mature or persist." Even so, I think the Securities and Exchange Commission should keep a close eye on Freehold's marketing material.

And what of their claim that there is "no meaningful risk of default" on such instruments? Could that be true? I don't think so. In fact, in my opinion there is a very real and substantial risk of default. A handful of states have already banned private transfer fee covenants. Though they only apply to attempts to create such covenants after the passage of the legislation, there seems to be a general sense that private transfer fee covenants violate public policy and there is a concern that they may be held unenforceable under common law. Should that happen, investors would likely stand to lose their entire investment.

Freehold realizes the controversy surrounding private transfer fee covenants and has provided a page in its brochure dedicated to "Reconveyance Fees Rights & The Law: A Primer for Lawyers."

Filing the Freehold Reconveyance Fee Instrument in the public records obligates future sellers to pay a 1% fee at the time of sale. The process is analogous to deed restrictions and common subdivision restrictions, though the Freehold instrument has been crafted with particularity to Reconveyance Fees.

In order to constitute an UNREASONABLE RESTRAINT ON ALIENATION, the restraint must (a) be unreasonable and (b) actually restrain alienation. The mere obligation to pay money will generally not suffice to unreasonably restrain alienation because the sales price will adjust to account for the restraint. This is particularly true when the restraint is limited to a de minimus fee (e.g. 1%).

The Freehold Reconveyance Fee Instrument does not violate the RULE AGAINST PERPETUITIES because the term is limited of 99 years and because the rights VEST immediately upon recording.

If a state passes laws to ban Reconveyance Fees, not only must they ban them for charitable purposes (or run afoul of the constitution) but they must "GRANDFATHER" existing Reconveyance Fee Instruments or it would be an impermissible "TAKING."

Freehold also provides several "representative cases" and claims that "the Freehold system is based upon sound legal principals." Poppy-cock! Freehold cites cases and picks precise quotes that appear to support its position. However, the cases are not "representative" of the Freehold system. All of the cases clearly involve covenants that "touch and concern" the land in some way. Some involve restrictive covenants prohibiting certain types of buildings (e.g. multi-family), fences or tree lines. Others deal with affirmative covenants requiring the payments of fees for recreational purposes (e.g. to support a recreational facility), upkeep of dams, roads and other improvements, or homeowner's association dues. All of these clearly touch and concern the land and benefit the property owners in some fashion.

By contrast, the Freehold covenant does not provide any benefit to the property owners or their community. It is, as Freehold says, "a mere obligation to pay money." The only party that benefits from the fee is the original covenantor/developer, who is likely to be out of the picture before the payments are due. The funds collected do not go toward supporting common areas, recreational facilities, or homeowner's associations; it merely creates "a long-term income stream" for the covenantor or investors.

The Supreme Court of Florida explained this distinction in Palm Beach County v. Cove Club Invs., 734 So. 2d 379 (Fla. 1999).

A covenant running with the land differs from a merely personal covenant in that the former concerns the property conveyed and the occupation and enjoyment thereof, whereas the latter covenant is collateral or is not immediately concerned with the property granted. If the performance of the covenant must touch and involve the land or some right or easement annexed and appurtenant thereto, and tends necessarily to enhance the value of the property or renders it more convenient and beneficial to the owner, it is a covenant running with the land.

. . .

A personal covenant creates a personal obligation or right enforceable at law only between the original covenanting parties whereas a real covenant creates a servitude upon the reality for the benefit of another parcel of land. A real covenant binds the heirs and assigns of the original covenantor, while a personal covenant does not.

See also, Regency Homes Ass'n v. Egermayer, 243 Neb. 286, 295 (Neb. 1993).

Generally, in the United States the three essential requirements for a covenant of any type to run with land are (1) the grantor and the grantee intend that the covenant run with the land, as determined from the instruments of record; (2) the covenant must "touch and concern" the land with which it runs; and (3) the party claiming the benefit of the covenant and the party who bears the burden of the covenant must be in privity of estate.

. . .

If the covenant at issue is personal, it is not binding on [subsequent owners]; if the covenant is real, it runs with the land, and the [subsequent owners] are bound by the terms of the Declaration.

And, to put it even more simply, see Beeter v. Sawyer Disposal LLC, 2009 ND 153, P9 (N.D. 2009).

If a covenant or deed restriction benefits the grantor personally, and serves no real benefit to the land, then the covenant is personal in nature and does not 'run with the land' upon a subsequent sale of the property.

Of course, none of these case, including those cited by Freehold, are exactly on-point. I have not been able to find a published case that has addressed the type of covenant being promoted by Freehold. That will not likely happen for some time. It will take a property encumbered by a Freehold covenant transferred to a subsequent purchaser who desires to challenge it in court. These covenants are still fairly new and there haven't likely been many re-sold yet.

It will be interesting to see what legislation develops and the effect that has on transfer fee covenants. With the new efforts of ALTA and NAR to raise awareness among state legislators, it is likely that the bans will spread to more states soon. Of course, most of the laws on this issue, including those proposed by ALTA and NAR, contain exceptions for non-profit organizations. Freehold contends that this "runs afoul of the constitution." We could see some litigation in the near future, but I suspect that such laws would be upheld.

Whether Freehold calls them "transfer fee instruments" or "reconveyance fee instruments," they just don't pass the smell-test. Clearly, many organizations and state legislatures do not favor them. One state senator called them "sophisticated pyramid schemes which steal equity from the owner." Public sentiment is against Freehold on this one.

Imagine what would happen if everyone were to sell their property with such a covenant? If this type of covenant were allowed, theoretically, any seller who is not satisfied with the sales price he is able to get could just include a covenant in the deed to the buyer that required him to be paid 1% every time the property sells for the next 99 years. And, what would happen when the property had been sold two or three times with each subsequent owner reserving such payment rights by covenant? That would create a terrible mess and would, of course, be absurd. But, what would prevent it from happening (other than common sense)?

But, I digress. Freehold has continued to get my dander up... first by coming up with this ridiculous concept, then by attempting to patent it, and now... trying to securitize the covenants in to an investment. Where will it all end?

Robert A. Franco
SOURCE OF [...]

Coming Soon: The Ohio Association of Independent Title Agents Convention

Robert Franco — Thu, 18 Feb 2010 21:00:47 +0000

Ohio independent title agents and abstractors should give serious consideration to attending the Ohio Association of Independent Title Agents' (OAITA) convention on April 19, 2010. There is finally an association dedicated to addressing the unique concerns of the independent agents and it is worthy of your support. I'll be there this year and I hope to see a strong turn out from Ohioans!

Why is the OAITA so important? Well, I certainly do not speak for the association, but from my perspective many of the changes our industry has seen over the past decade have created an environment that threatens the existence of small, independent title agents. Traditional land title associations are made up of broader members, which includes underwriters and large agents with many affiliated business arrangements. This is not to say that the Ohio Land Title Association is bad - quite to the contrary, they do a fine job in most respects. However, when it comes to issues like AfBAs, they have a conflict of interest; some of their largest members support AfBAs. There are other issues, too; such as the requirement for closing protection coverage and the annual CPA audit.

And... in the words of the OAITA:

OAITA promotes fair standards regarding title insurance in Ohio and advocates for the advancement of issues relevant to the independent settlement service provider. We are participating in private policy change by pursuing litigation to help reinforce existing Ohio law regarding title insurance and real estate settlement services. We also support favorable initiatives relative to the independent title insurance and independent real estate settlement service provider movements in Ohio.

Personally, I think it's great that independent agents have an association that will represent their concerns.

Here are the details for the convention:

OAITA Convention
Monday, April 19, 2010
Crowne Plaza Hotel
Columbus, Ohio

For more information or to register visit www.oaita.org.

8:30am - 9:00am
Opening Remarks
Robert B. Holman, Esq.
OAITA Founder & Organizational Counsel
Cleveland, Ohio

"State of the OAITA: Making the Case for Independence in Ohio"

9:00am - 9:30am
Keynote Address
Charles Proctor, Esq.
President, National Association of Independent Land Title Agents (NAILTA)
Philadelphia, Pennsylvania

9:30am - 9:45am
BREAK

9:45am - 10:45am
Independent Title Agent Panel

Moderator: Kim Himmel - Netwide Title Agency, Inc.

Scott Goldberg, Esq. - Golden Title Agency, Inc.
Susan Happ - American Home & Commercial Title
Jim Lindsay, Esq. - Louisville Title
Amy DeGennaro - Diamond Title
Rachel Torchia - Gateway Title

10:45am - 11:00am
BREAK

11:00am - 12:00am
Paula Knodel, Agency Auditor
General Title Insurance Company
1.0 Hour of CE (pending approval)

"Understanding Escrow"

12:00pm - 1:00pm
LUNCH
Sponsored by Ohio Title Corporation

1:00pm - 2:00pm
Christopher Flowers, Esq.
Ohio Title Corporation
1.0 Hour of CE and CLE (pending approval)

"2010 Industry Caselaw Update"

2:00pm - 2:15pm
BREAK

2:15pm - 3:15pm
Independent Title Closer & Abstractor Panel

Moderator: Rob Holman, Esq.

Robert A. Franco, Esq. - Attorney at Law
Doug Gallant - Independent Examiner
Mary Lou McMahan, Senior Examiner for Ohio Title Corp.

3:15pm - 3:30pm
BREAK

3:30pm - 4:00pm
Richard S. Gordon, Esq.
Quinn, Gordon & Wolf, Chtd.
Baltimore, MD

"Title Industry Class Actions from the Plaintiff's Perspective"

4:00pm - 5:00pm
Kim Himmel, President
Netwide Title Agency, Inc.
Massillon, Ohio

"Understanding the Short Sale Process"

5:00pm
Closing Remarks
Douglas A. King, Esq., President OAITA

Special Guests:
Robert H. Myers, Jr., Esq., OAITA At-Large Trustee
Scott Goldberg, Esq., OAITA Survey Coordinator

The 2010-2011 Board of Trustees

OAITA Honorary Life Membership Award Winner

As you can see, I'll be there and they have asked me to participate as a panelist on the Independent Title Closer & Abstractor Panel. If you make it, hopefully you will get to hear my opinion on the issues facing the independent abstractors and why those issues are important for the industry.

Much like issues that are unique to independent title agents, independent abstractors also have interests which diverge from those of the underwriters and large agents with AfBAs. I don't know exactly what the panel will be asked to discuss, but there are several issues that I think deserve attention.

Abstractor Qualifications - why aren't there any?
Search Standards - why are the underwriters' requirements so different from the Ohio Bar Title Standards?
Vendor Management Companies - faster and cheaper doesn't mean better.
Compensation/Liability - why are abstractors always asked to reduce their fees when their liability and E&O premiums continue to rise?

I'm excited to hear what issues will be discussed at the convention. Anytime agents gather, they ultimately end up discussing problems they face - usually on breaks in the back of the room. Finally, there is a conference devoted to those issues and providing an opportunity for agents and abstractors to vent their concerns to an organization that is actually interested in what they have to say.

I hope to see many of you there!

Robert A. Franco
SOURCE OF [...]

A Dog’s Purpose

Jeanne — Sat, 13 Feb 2010 00:15:23 +0000

Touching story to pass on:

“Being a veterinarian, I once had been called to examine a ten-year-old Irish Wolfhound named Belker. The dog’s owners, Ron, his wife Lisa, and their little boy Shane, were all very attached to Belker, and they were hoping for a miracle. I examined Belker and found he was dying of cancer. [...]

Tri-Star Title Agency Owner sentenced

Jeanne — Sat, 13 Feb 2010 00:09:43 +0000

Roseann Wagner, 45, of Prior Lake, Minnesota was sentenced in federal court for stealing more than $470,000 for payment of title insurance premiums and recording fees. Wagner, a licensed insurance agent, owned and operated Tri-Star Title, a title insurance agency. The investigation also found that Wagner had withdrawn nearly $100,000 from ATMs and cashiers at a [...]

Targeted National Marketing: It beats the Yellow Pages

Robert Franco — Thu, 04 Feb 2010 14:38:37 +0000

It has been a while since my last blog about our enhanced listing services. I still get a lot of questions about how it works and what the benefits are, so I thought it would be a good idea to explain it again. Over the course of the past year, our directory was searched an average of more than 14,000 times each month, proving that Source of Title is still the premier source for finding independent title professionals. But, without an enhanced listing, many of them may not be finding your company.

First, let me point out a few of the reasons to be listed in our directory. Then I'll explain why the enhanced listing is such a great opportunity to promote your business.

POPULARITY OF THE SOURCE OF TITLE DIRECTORY:
The directory was searched more than 14,000 times each month, on average, over the course of the past 12 months. With more than 6,900 companies listed and more than 16,900 registered users with access to the directory, it has become the most popular resource for locating independent title professionals.
NATIONAL EXPOSURE:
A listing on Source of Title provides national exposure for your business. Compare that to a listing in your local Yellow Pages, which only circulates in your local counties. Potential clients from around the country can find your listing on Source of Title.
AVAILABLE 24/7, 365 DAYS A YEAR:
Once listed, your company remains in the directory to be seen by potential clients for as long as it remains active. Compare that to direct mail. Although it can be effective, direct mail is a one-time hit. If a potential client isn't looking for you when they receive your mailing, it most likely gets trashed. With a listing in our directory, your potential clients can find you anytime they are in need of your services.
BASIC LISTINGS ARE FREE!
There is no cost to add your business to our national directory. Of course, enhanced listings provide extra benefit (discussed below) for an annual fee starting at only $99 per year.

Now, I'll explain why you could be getting much more business with an enhanced listing and why upgrading your listing is such a great value.

MORE POTENTIAL CLIENTS HAVE ACCESS TO YOUR LISTING:
With a free listing, only registered users who have purchased a subscription (for $199/year) have access to all of the free listings in our directory. Of our more than 16,000 registered users, only slightly more than 250 have a subscription. If you upgrade to an enhanced listing, all of our registered users can instantly view your contact information at no cost to them. Because there are enhanced listings in every county in the country, many have realized that they can always find someone (one of your competitors, perhaps) for free. If you don't have an enhanced listing, they won't be calling you.
PREFERRED PLACEMENT:
The enhanced listings appear in bold, above the free listings. Being at the top of list means that even companies with subscriptions may be finding competitors before they scroll down far enough to find your listing.
LOW COST OF AN ENHANCED LISTING:
Enhanced listings are based on the number of counties you cover and start at only $99/year. Even a one-time direct mail campaign can cost several hundred dollars with the cost of printing and postage. And, last time I checked a bold, single line listing in the local Yellow Pages was approximately $50/month ($600/year).

So, an enhanced listing could be less than alternative advertising costs and it has the added benefits of being perpetual and targeted to potential clients who are actively looking for independent title professionals, even those located several states away from you.
ONE NEW CLIENT COULD MORE THAN PAY FOR YOUR ENHANCED LISTING:
How much is your average client bill each month? Once you get an order from a new client, you are set up in their vendor list and they are more likely to come back to you again, rather than start the search process over for a new vendor. If you add just one new client from one of those 14,000 searches in a given month, it would quickly pay for the cost of the enhanced listing and potentially provide returns for years to come.
300% MORE LIKELY TO GET NOTICED
Enhanced listings are viewed 300% more often than the average listing for all companies. Your odds of landing a new client are 300% better than average if you have an enhanced listing.

It isn't hard to see why an enhanced listing gives an edge to companies that have taken the step to upgrade. With enhanced listings available in every county in the country, if you don't have one you could be losing business to your competitors.

Those 168,000+ directory searches every year represent a lot of potential clients looking for a title professional to provide services. You can maximize your chances of having them locate your business with an enhanced listing. Odds are that most of those searching the directory don't have a subscription and you have to ask yourself this: Will they be willing to pay $199/year to get your phone number when they can get your competitor's number for free? If you think that is unlikely, you can make your contact information available to all of our users by upgrading to an enhanced listing. In essence, level the playing field between you and your competitors with and enhanced listing.

Hopefully, the worst of the recession is behind us and work will be picking up throughout this year. As your potential clients get more work, it makes sense to do everything you can to grow your business and pick up new work. Many abstractors have gone out of business and new ones are starting new businesses. This means that clients will be looking to update their vendor lists and it is a good time for you to add them as a new client.

For more detailed information on enhanced listings or to upgrade your listing, see http://www.sourceoftitle.com/enhanced.aspx.

Robert A. Franco
SOURCE OF [...]