Commercial Title Searches Have Many Caveats
In preparing a zoning report for a proposed ethanol plant, Chicago Title apparently missed the names of several nearby homeowners, who were therefore not served with legal notice of the planned construction. As the construction became more imminent, neighbors found out and quashed the transaction, causing Chicago Title a $48.4 million loss. See more details at Ethanol Producers magazine.
CLAYTON, Mo. (CN) – A St. Louis County jury awarded $48.4 million to an ethanol company against a title company that failed to notify property owners near a site where the ethanol company wanted to build a plant near Wichita. The award, after a 2-week trial, is the largest ever in St. Louis County Court.
Abengoa Bioenergy wanted to build a plant in Colwich, Kan. Chicago Title was supposed to notify nearby property owners in order to obtain zoning to build it, but seven property owners were left off the notification list.
After zoning was granted, the property owners found out and sued in 2008. Abengoa was forced to build a more expensive, less profitable plant in Granite City, which was finished 15 months after the first plant was supposed to be completed.
The award includes the higher cost of building the plant in Granite City, the cost of the 15-month delay and the lower revenue from the plant.
John L. Davidson, Esq.
13975 Manchester, Suite 19
Saint Louis, Missouri 63011
Is it just me, or does this seem ridiculous. Lender accidently files hundreds of satisfactions of mortgages and is allowed by the Court to file one large Public Notice in the Legal Leger to undo the hundreds of errors and reinstate the mortgages??!!. What has happened to using knowledgable and accountable staff who don’t make such mistakes. My guess is that a very inexpensive vendor manager made the error. Similar to the vendor manager who filed hundreds of mortgages in the same county, rather than filing in the county where the land was located. Well, you get what you pay for… I wonder if they will file some sort of Unsatisfaction in the Land Records to match each inadvertent satisfaction…?
A quote from the Riverhead News Legal Leger in NY:
“The plaintiff allegedly filed a numerous number of
satisfactions of mortgages with the Suffolk County Clerk and is now by this
application attempting to undo its error. The defendants number in the hundreds
and therefore service of papers on these defendants seems impractical except as
those where service pursuant to CPLR § 308 was accomplished. Therefore, it is
Ordered That the plaintiff file the above captioned action for one (1) day in
both Long Island Newsday and in a local official paper in each of the 10 Towns
of Suffolk County noticing the application to expunge the erroneously filed
satisfactions of mortgages and advising of the date and place of the hearing
before this Court on July 25, 2011 at 11:00. The plaintiff will provide proof
of filing with the Court on the date of the hearing of publication in Newsday
and one of the official town newspapers for each of the ten (10) towns of
Suffolk County on Long Island, New York…”
Condo and Garage Stall Woes
For those who took the abstracting class May 2-3, here is a classic example that hit my email inbox today. It shows what can happen when legal descriptions intended for sale in a condominium are not carefully described. At the abstractor class we talked about garage stalls and storage spaces in particular, being separately salable units or appurtenances, depending on how they are described in the Declaration and Floor plans. Seems to me the Purchase Agreement in the scenario below was the problem. Maybe the two parking spaces were on the street…? After all, we are not mind readers, how are we supposed to know WHAT you bought if you don’t tell us….
Client purchased a condo unit and (he thought) two parking spaces from the developer. The accepted offer to purchase described the condo unit by number, but referred to the two parking spaces without specific designation. A title company prepared the deed of conveyance describing the unit by number, but omitting any reference to parking. The condo declaration provides that parking spaces are “units” rather than limited common elements, and can be separately conveyed as such. The title company acted as closing agent. What duty does the title company owe to the buyer in this case? Is the buyer entitled to rely on the closing agent to prepare a deed which conveys all of the property described by the purchase contract? Unfortunately for my client, he was not represented by counsel, did not notice any discrepancy in the deed, and has no recourse against the seller who went bankrupt. To further complicate matters, the two parking spaces were subsequently sold by an investor who purchased the unsold units out of receivership to an innocent third party. Any suggestions?
County Websites Being Hacked
Another frightening case for County officials. This time the Ventura County’s Online Credit Card Payment System in the Tax Collector’s office was foiled. It appears to have been hacked from a location somewhere in the Philippines, according to county officials, and it sent out emails to an unknown number of people who had previously paid their taxes online through the system. The Ventura County, CA Tax Collector, Steven Hintz, says received a “phishing” email, as he had previously used the online system to pay his taxes. He knew it hadn’t been sent, and knew enough not to open it. Others who did respond to paying their real estate taxes online may have a problem. Read more at the LA Times and catch the news and video news report at KEYT News
In Illinois, workers couldn’t access the Cook County Recorder of Deeds website on April 12th. Worse, they complained they were being rerouted to sex sites. More at the Chicago Tribune While computers are wonderful and marvelous things, we must all take care when accessing information that was not sought from supposedly “official county sites.”
Time Is Running Out To Register For Land Title Abstracting Class
Don’t forget to Register for the Annual Title Abstracting Class In St Paul, MN on May 2&3. The 200 page “Principles of Abstracting, Searching and Land Records Management” manual has been updated for 2011 to reflect many additional topics including: UCC’s; dealing with Manufactured Housing and Mobile Homes; changes in foreclosure laws; and statute of limitation changes on liens. If you haven’t been to a title abstracting class recently for updates, or if you are looking to obtain your license, this is the time to sign up. Hope to see you there!
Proposal for a Federal Land Title Depository – My Opinion
Having spend most of my adult life working in the land title industry, I was very pleased to find a thoughtful report on the American Land Title Recording System in the Columbia Law review:
Tanya Marsh, Foreclosures and the Failure of the American Land Title Recording System, 111 COLUM. L. REV. SIDEBAR 19 (2011)
I was pleased, not so much because I believed in her suggestion that implementing a Federal System would be an answer to our current system, but rather because I applaud the research, investigation and thought process in analyzing our public recording systems. It makes my brain “tick” – how better could this whole recording system work? It is not often that anyone notices us.
Ms Marsh says:
The recent announcement that major lenders were suspending pending foreclosure actions in the wake of questions about their documentation practices has focused attention on another opaque system that has failed to keep pace with the increasing complexity of the modern real estate industry: the American land title system.
I have mixed feelings on that quote. After all, the system was working quite well before a specific group decided to start a separate system of recording mortgage assignments. But, you say, “times change, and mortgages are no longer mom and dad local customers borrowing from the local bank. Mortgages are now big business commodities, where packages of millions of dollars of mortgages are sold in packages to investors who no longer collect the payments. They do not have a 100% interest in the land – just fractionalized interest in the mortgage. And they certainly have no interest in the local economy.”
I personally, believe that the MERS change was not driven by failure to “keep pace with the increasing complexity of the modern real estate industry,” but was driven rather by a business opportunity for making corporate profits. After all, recording mortgage assignments requires much specialized local knowledge – not the mass handling that big business is used to. Consider the inexperienced staff, asked to record thousands of mortgage assignments. They grouped them by state and sent all mortgage assignments for one state to the same county for filing- OOOPS. Yes, recording requires specific knowledge. It is time consuming. It is expensive, and fees vary from location to location. In theory, recording assignments “under the covers” dozens of times saves lots and time and money. It would be much more efficient. It could be a very profitable business.
As Ms. Marsh points out, land record recording has always been a “local business” meaning that customs, fees, rules and regulations for recording are a hassle. But land titles ARE a “local business” in that each state has it’s own real estate law. Foreclosures are driven by those state laws, and changing to a Federal System would only complicate things even more. A Federal System would require a complete revamping of all existing state laws and possibly the US constitution, as real estate laws currently fall under the auspices of each respective state.
There are other considerations. What about all those judgment searches. State and Federal Tax Liens, Child Support Liens, Court Judgments, etc. They are all maintained in the same local, county systems we know so well. As a title person, we know that those 3000 separate county offices mean that a common name is somewhat manageable when searching those names. After all, we can’t reference their SSN as that would be an identity theft problem. A Federal System would be an absolute disaster. And the States and Feds acknowledge that the only way they are able to collect those State and Federal Liens are through our current recording system.
She Says:
Although many local recorders have viewed MERS with suspicion, a number of state courts have expressly permitted the recording of mortgages with MERS. Some courts and other observers, however, are concerned that the legal fiction of MERS’s status as the “mortgagee of record,” when it holds no beneficial interest in the property, is irreconcilable with [STATE- added for emphasis] mortgage law.
I agree with that statement. MERS did not anticipate the complexity of 50 distinct state foreclosure laws, or the definition, state by state, of “Nominee” vs. “Assignee” or the change in the market. Yes, I agree that … a private MERS-like system is not the answer.
But what is the answer? I can’t agree with the statements that “the federal government should implement a solution that replaces … the existing local land title system…” When has a bigger government done a better job than the locals? But I love the dream ideas that:
- Indexes should not be limited to the names of the parties, the type of conveyance, a legal description, and the date of recording, etc.
- Conveyance documents could be identified with limitless data, including cross-referencing to prior conveyances.
- Imagine integrating property tax records, subdivision plats, and recorded documents with a dynamic map. How fabulous would that be!
Ms Marsh ends with: “I do not lightly suggest that we abandon 370 years of precedent. But the residential foreclosure crisis, and the role of MERS, demonstrates that the American land title system is broken. The time has come for a radical reinvention that meets the needs of the modern real estate industry.”
I love the passion, research and inspiration behind her work, but as a day to day title practitioner, author and teacher of land titles, I know the problem is much more complex than she imagines. I can dream about the possibilities, but I can’t wrap my head around how to accomplish a better land title world. Your comments are welcome.
ALTA REVISED SURVEY STANDARDS TAKE EFFECT FEB. 23, 2011
New Survey Standards have been approved by the American Land Title Association (ALTA) and the National Society of Professional Surveyors (NSPS.) The purpose of the Minimum Standards is to set nationally recognized uniform standards for land surveys and to assist title insurance companies, surveyors and lenders to use nationally recognized uniform standards to assist title insurance companies, surveyors and lenders.
The new standards discourage the drafting of new legal descriptions and also require:
• a reference to any title commitment be included on the face of the survey
• a vicinity map
• more detailed information regarding easements and right-of-way lines
• use of a standard certification.
See more at ALTA.org
Trouble Concentrating? Learn Helpful Hints
A great article from WebMD gives us the top items that keep most of us from concentrating, staying on task and really getting things done. The top six problems are:
1. Multitasking (are you switching back and forth between tasks…)
2. Boredom (those tasks you hate to do…)
3. Mental Distractions (do you worry…)
4. Electronic Interruptions (are you checking email…)
5. Fatigue (need to get 7 hours or more…)
6. Drug Side Effects and Other Medical Issues (many standard meds…)
Privacy on the Internet –
I suggest you look at this site. It shows how easy it is to get names, addresses, hobbies, date of birth, family members and much more personal information on you. It appears to collect information from various online sites for content and of course for a fee. It makes me want to be more careful about what I say and where I say it Linked-In, Facebook, Twitter, etc. It also shows that the sites are NOT perfect and one should be very careful NOT to rely on them for information. http://www.spokeo.com/
Are Title Insurers Better Prepared for 2011?
In a new article from National Mortgage News, there is a discussion about the relatively immediate future of the title industry – i.e. in 2011 as compared to past years. It should be noted that a contributing author to the articles quoted is the American Land Title Association, certainly providing a skewed perspective, meaning that the ALTA lobbies to put the best spin on the industry. For example the quote
“In addition, while the title insurers could see a very slight increase in expenses in conjunction with increased legal activity involving foreclosures, we believe it will be limited in nature and have no real impact on the bottom line. With respect to actual claims arising from the enhanced scrutiny around the foreclosure process, the title insurers have been clear in their belief that any issues involving the lenders will not result in claims for the industry,” …
This is clearly a one-sided comment. It does not address the real cause of the increase in claims. From my perspective, the real cause of claims is that the quality of the product has declined significantly. Searches of simply the last-record-owner forward to write title policies is commonplace. Indeed it has become the norm, I hear from my students. Getting the product out quicker and cheaper has become much more important than the elimination of potential or even clearly outstanding title issues that used to be the norm. This means the consumer is getting a lesser quality product. Additionally the policies that ALTA has put out cover more and more potential title issues (building code issues, etc) that should cause claims. I also have concern about the quality of those doing the title searches. Sending the work overseas as a cost savings clearly has costs in quality. I am amazed at the effort it takes to stay on top of changes in the marketplace that impact real estate abstracting and examining. I am not sure the title insurers care. It seems to be more important to sign a big agent than the quality of the work the agent can do. Certainly that means claims.
I do think title companies have laid off staff to reach the demand, but as the article points out, hiring competent staff when the market turns will be a significant problem. And as the A.M.Best report says “Loss activity stemming from agent-, consumer- and bank-related fraud activity still remains a concern. Such activity typically goes up during periods of reduced cash flow and generally involves embezzlement of funds held in escrow, potentially resulting in severe losses,” … I hope that we as an industry will work to carefully educate and bring back the quality of title title work the consumer deserves.
Home Closing 101: An Educational Initiative of the American Land Title Association
