Re-Check that Statute - New Legislation Impacting Real Property
A number of statutory changes impacting real property law were enacted in 2011, with most becoming effective October 1, 2011. These changes are discussed in detail in an article by James E. Creekman in the October edition of the Real Property Section newsletter. Click here for article and forms.
The following are some of the significant changes affecting real estate practitioners:
- Trustee in a Deed of Trust
N.C. Gen. Stat. § 45-10(c) now provides that, if the trustee named in a deed of trust is also the beneficiary, the instrument is deemed to be a deed of trust.
Under N.C. Gen. § 45-45.3, the trustee named in a deed of trust is not a necessary or proper party to a civil action or proceeding involving title to the real property or the priority of the lien created by the deed of trust. This includes reformation and quiet title actions. A trustee should be named as a party in an action involving the foreclosure or enforcement of the deed of trust.
- Releases and Cancellations of Deeds of Trust; Rescission
Among other things, revisions to Article 4 of Chapter 45 provide forms for rescinding a satisfaction or release of a deed of trust recorded in error (N.C. Gen. § 45-36.6(g)-(h)), and sets forth the procedure for recording a partial release of a deed of trust (N.C. Gen. § 45-36.22).
- "Life of Lien" Statute
N.C. Gen. § 45-36.24(b) provides that, for deeds of trust recorded after October 1, 2011, the lien of the deed of trust will automatically expire 15 years from maturity date, if the maturity date of the secured obligation is stated in the deed of trust. If no maturity date is stated, the lien will automatically expire 35 years from the date the deed of trust was recorded.
- Payoff Statements and Short-Pay Statements
Just as borrowers can request firm loan payoff statements under N.C. Gen. § 45-36.7, they can now obtain "short-pay" statements, which identify the sum necessary to obtain the release of all or a specific portion of the real property from the lien of a deed of trust without satisfying the secured obligation in full.
A request for a short-pay statement must include the information set forth in N.C. Gen. § 45-36.7, including a clear statement of whether the request is for the amount required to release all of the real property or only a specifically described portion.
Unless the short-pay statement expressly states otherwise, the borrower remains liable for any deficiency owed on the secured obligation, even if a short sale results in a release of all the property from the deed of trust.
- Credit suspension directives
Pursuant to N.C. Gen. §§ 45-36.4(1b) and 45-36.7A, notice may be given to a secured lender directing the lender to temporarily suspend a borrower's right and ability to obtain additional credit advances on a line of credit in anticipation of an imminent sale or refinance, where the anticipated transaction will involve the satisfaction of the existing deed of trust or the release of the property from the lien of the deed of trust.
The elements required to be included in a credit suspension directive are set forth in N.C. Gen. § 45-36.7A(b).
A credit suspension directive can be submitted by the borrower, a legal representative or attorney of the borrower, or a licensed North Carolina attorney or financial institution responsible for the disbursement of funds in connection with the sale of, or a new loan secured by, property encumbered by the existing deed of trust, provided that certain requirements are satisfied.
If the credit suspension directive is given by a party other than the borrower or the borrower's attorney/representative, notice must be provided to the borrower in accordance with N.C. Gen. § 45-36.7A(c).
If a credit suspension directive has been sent and the lender receives payment sufficient to pay the loan in full, the lender is required pursuant to N.C. Gen. § 45-36.9(a) to cancel the deed of trust within 30 days.
- Terminating an Equity Line of Credit
N.C. Gen. § 45-82.2 addresses a "request to terminate an equity line of credit." A form is provided in § 45-82.2(b), though the statute provides that no particular phrasing is required for the request.
Upon receipt of a request to terminate an equity line of credit, the lender is required to (1) terminate the borrower's right to obtain advances under the borrower's equity line; (2) apply all sums subsequently paid by or on behalf of the borrower in connection with the equity line to the satisfaction of the equity line; and (3) when the balance of all outstanding sums secured by the equity line security instrument is reduced to zero, cancel the equity line security instrument as a matter of public record.
Under N.C. Gen. § 45-81, each of the following is an "authorized person" who can sign and submit a request to terminate:
- any borrower
- the legal representative of any borrower
- the attorney for any borrower
- a title insurance company authorized to issue title insurance policies in North Carolina, but only when the company is acting in connection with a title insurance policy issued or to be issued with respect to the property then encumbered by an existing equity line security instrument
- a licensed North Carolina attorney or financial institution, but only when the attorney or financial institution is or was responsible for the disbursement of funds in connection with the sale of, or a new loan secured by, property then encumbered by an existing equity line security instrument, and a requirement of the sale or new loan is or was that the property be conveyed or encumbered free and clear of the lien of the existing equity line security instrument
If the request is submitted by a title insurance company or settlement agent, that party must ensure that a copy of the request to the borrower is delivered to the borrower, along with a special notice to the borrower.
Laura Loyek joined Lawyers Mutual as claims counsel in 2009. Her focus areas are real estate and litigation. She previously worked for the law firms of Smith Moore and K&L Gates. Laura graduated summa cum laude from Wake Forest University and cum laude from Harvard Law School. She is an active member of Triangle Commercial Real Estate Women.
About the Author
Laura Loyek is a claims attorney with Lawyers Mutual, focusing in the areas of real estate, litigation, appellate law, and bankruptcy. Prior to joining Lawyers Mutual in 2009, Laura practiced for six years in the areas of complex commercial litigation and land use/zoning. Laura received her J.D. from Harvard Law School and her undergraduate degree from Wake Forest University. She is an active member of the North Carolina Association of Women Attorneys and the Real Property Section of the North Carolina Bar Association.Read More by Laura >