September 7, 2007
Dear Real Estate Professional:
DC: Title Insurance Agent Licensing: The Department of Insurance, Securities and Banking (DISB) has been working with DC Land Title Association (DCLTA) on this issue. Initially, a "model act" was proposed to DCLTA for review. Discussion was held as to whether title insurance should be stand-alone legislation, or combined into the existing insurance producers legislation. The direction now is to add a separate section to the insurance producers legislation, rather than to try to interweave provisions into the existing statutes. Click here to see redline of proposed changes to title agent licensing statutes.
DC: Foreclosure Consultant Legislation: In a continuing effort to offer protections against predatory lending in foreclosure situations, expansive legislation is being proposed by Mary Cheh. Click here to see comments on proposed foreclosure consultant legislation.
Federal: An important NJ Supreme Court decision has come down, holding that a community association was not a quasi-municipality and that its regulations concerning political signs, restricted use of the community room and facilities, and restrictions on contents of the community newsletter were reasonable, private regulations. Click here to see Opinion in Twin Rivers case.
VA: County Clerk's Office: Section 8.01-449(B) now provides that the last 4 digits of a social security number be noted when recording judgments. 17.1-223(A) and (B) now provide that the Clerk has the express authority to reject recordings, and that an attorney or party that prepares a document for recordation must "ensure that the writing satisfies the requirements of subsection A and that the social security number is removed from the writing prior [to recordation and that] a deed conveying not more than 4 residential units states on the first page... the name of the title insurance underwriter [ or a statement that the existence of title insurance is unknown to the preparer." 47.1-15 requires that a jurat be on the same page as the signature being notarized.
DC: DC Bar members should consider joining the Real Property, Housing and Land Use Section. Click here to join the REHLU section of the DC Bar. This section is one of only two sections that sends out announcements exclusively by email. You should alert your firewall/spam filter to accept announcements from REHLU@dcbarannouncements.org or you will never know about the terrific seminars offered by this section. Note that most seminars are open to the public, and are of great benefit to all professionals in the industry.
DC: Changes in D.C. Lawyer Ethics Rules Could Affect Title Companies Run By Lawyers. The D.C. Court of Appeals approved a series of amendments to the ethics rules for lawyers which became effective on February 1, 2007. Among the amendments is a new provision which could impact lawyers who own or run title companies. Under this new Rule 5.7, whenever lawyers engage in law-related services, even when they do so outside of a law firm context, they are bound to comply with all applicable ethics rules, just as if they were representing a client. Comment 9 to the rule provides examples of law-related services and among those are providing title insurance and real estate counseling.
The impact of this on a title company? Not at all clear, but potentially this could be interpreted to implicate rules regarding lawyer trust accounts and restrictions on retaining interest from such accounts.
The solution? A clear disclaimer. An attorney who is not handling such a matter in the law firm can negate this requirement by taking reasonable measures to assure that a person obtaining the law-related services are not legal services and that the protections of the client-lawyer relationship do not exist.
Suggestion: Review settlement forms to determine whether disclaimer language to this effect should be added. If you have any questions about the new ethics rules, contact Art Burger, Chair of our firms Professional Responsibility Practice Group.
VA: Fairfax City Tax Increase: Residential rate is now 72 cents for each $100 of assessed value (which city officials hasten to point out is the lowest rate of Northern Virginia jurisdictions. Commercial rates increased an average of 3.6 percent.
VA: Alexandria City Tax Increase: Residential rate is now 83 cents for each $100 of assessed value (up from 81.5 cents).
Federal: RESPA Enforcement: According to HUD's latest budget submission, HUD plans to triple the number of RESPA complaints and inquiries it responds to.
Federal: A class action in Minnesota has been filed against Coldwell Banker Burnet. The allegation is that the firm neglected its fiduciary duty to its customers by steering them to a company-affiliated title company, with full knowledge that the costs were higher than competitors. The suit says that RESPA disclosures did not cure the problem and that the breach of fiduciary duty goes much deeper than a RESPA violation.
Federal: New Conservation Easement Legislation: Donors now have additional due diligence requirements and must ceritify that the donee is qualified to accept easements and has the resources and commitment to enforce the easements. No deductions for facades that do not protect the entire exterior of a property. More documentation is required to substantiate the value of the donation. New penalties for overvaluation of the donation and penalties for appraisers complicit in overvaluation. Additional qualification standards are now in effect for appraisers. Current provisions (which expire in 2007) allow donors whose gifts are large compared to their income, to deduct up to 50% (from the old 30%) of their taxable income, with carry-forward for 15 years. The deduction is only allowable if the donor can substantiate a reduction in the property's value resulting from the donation. Click here to see H.R. Bill 4: The Pensions Protection Act of 2006.
DC: Preservation Trust closing. This was a holding entity for conservation easements. Its properties will now be overseen by the L'Enfant Trust.
VA: Electronic Notarizations: House Bill 2058, patterned after the Model Notary Act of 2002, allows electronic notarization and sets forth the technological details and requirements. Click here for more details on the Notary Act.
DC: Superior Court requiring Notary Seals to be darkened. Clerks at the D.C. Superior Court have been requiring that raised notary seals be "dusted" or penciled so that they show up on the new imaging software. Another reason why legislation should be enacted to permit rubber-stamp notary seals as are used in other jurisdictions.
DC: New Seller's Disclosure Required in Residential Contracts: As of February 9, 2007, a new form has been required for 1-4 residential units. It must be prepared by the Seller (not the broker, management company, or condo/co-op association). Exclusions: foreclosures, fiduciary transfers (i.e. personal representatives), tax-free transfers (i.e. parent-child), and new construction. Buyer has 5 days to terminate after delivery of the disclosure (but the right to terminate is waived if the settlement occurs within that 5 days, or if a loan application is filed and the lender discloses in writing that the right to rescind expires when the application is made). The new form asks these additional questions: Is the property a D.C. landlmark or within a historic district? Has the property been cited for a violation during your ownership? Is the property subject to a conservation easement?. GCAAR Form 919.
Federal: HUD promises a RESPA Reform Rule in September 2007: In an August 31, 2007 speech, President Bush promised reforms to address the mortgage industry that " that [will] require mortgage brokers to fully disclose their fees and closing costs.... This fall, HUD will propose reforms to the Real Estate Settlement Procedures Act (RESPA) that would promote comparative shopping by consumers for the best loan terms, provide clearer disclosures, limit settlement cost increases, and require fee disclosure.” OMB estimates that the Rule will be released in early 2008 for public comment.
DC: Click here for a spreadsheet showing status of various bills of interest to the real estate and title industries.
Please feel free to circulate this newsletter to others in the industry, both within and outside your office.
Sincerely,
Roy L. Kaufmann of the Real Property and Asset Management Group
Jackson & Campbell P.C.
email: Roy L. Kaufmann at rkaufmann@jackscamp.com
voice: (202) 457-1600
web: www.JacksCamp.com
The contents of this Update are intended for general informational purposes only and should not be relied upon as legal advice or as a substitute for consultation with a qualified attorney. Moreover, the mailing hereof is not intended to create nor does it constitute an attorney-client relationship.
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