Title Insurance Coverage Does Not Extend to A Casino Boat not located at the realty, despite a reference to UCC-1 in policy.

In an important case underscoring the nature and scope of title insurance, Jackson & Campbell filed an Amicus Brief in the U.S. Court of Appeals for the Fifth District on behalf of American Land Title Association. We prevailed. Real estate was purchased and a casino-boat was being constructed at a different location, eventually to be moored at the real estate. At issue was whether the title insurance policy covered only the real estate, or extended to cover the lender's security interest in the boat under construction. The original policy issued referenced a UCC-1 (these references were eventually deleted). When the project eventually went bankrupt, the lender took the position that the UCC-1 reference accorded the lender protection against mechanic's liens on the personalty referenced in the UCC-1. The Court found that, even if the title company had not corrected the erroneous reference to the UCC-1 in its policy, the policy only covered "the instruments creating the estate or interest in real estate which is hereby insured". Further, as opposed to deeds of trust, UCC filings are designed not to create security interests, but to provide notice to third parties that a lender may have an enforceable security interest in property. Thus, the title insurance only was found to cover the interest in the realty and conferred no coverage upon the floating casino structure. (U.S. Fifth Circuit Court of Appeals, No. 03-60348 Click here for Text of Court Opinion

Title Company Fails to Properly Instruct Lender to Close Credit Line.

In a case similar to others, a title company paid a credit line in full. We advise that such payments be accompanied by a letter of instruction from the borrower that the line be closed and the encumbrance released (or, at the very least, such an instruction from the title company indicating that it is the authorized agent of the borrower to transmit that instruction). In this case, the accompanying letter fell short. It said simply that if the amount was short, the balance would be forthcoming as may be required to satisfy the mortgage. The lender did not close the line, the borrowers took additional draws, and the title had to pay the additional money to the lender to secure a release. Title companies: make sure your form letters and procedures cover this situation. (Dreibelbiss Title Co. v. Fifth Third Bank. Indiana Second District Court of Appeals, No. 49A02-0309-CV-823). Click here for Text of Court Opinion

Competency of a Party - Virginia Supreme Court Examines. Generally, people are deemed competent unless proven otherwise. Consequently, a party who challenges the competency of a person who executes a document bears the burden of proving the incompetency. In this case, an elderly man executed a waiver to disclaim his inheritance under his late wife's will and, instead, to accept an "elective share". The logic followed by the court is complex, distinguishing the execution of the waiver from a "bilateral" exchange such as a deed or contract. The morale of the story for the retail title industry, however, is to be vigilant: If you know that an executing party is in a nursing home, infirm, or you "feel" that there may be a problem with competency, you might consider requiring an opinion letter from an attending physician, or declining to insure without a court conservatorship or guardianship being instituted. (Jones v. Peacock, 267 Va 16 (2004).

Reciprocal Licensing - Virginia vs. D.C.; D.C. presently has no licensing requirement for title agents (apart from the Basic Business License). We understand that Virginia has taken the position that it will no longer license D.C. residents as title agents.

Correction: D.C. Land Title Association. We apologize for unintentional omissions. The roster of officers elected at the recent meeting of the D.C. Land Title Association should have also included Alaine Donovan, as Vice President who hails from Chicago Title.

Continuing Problems with WASA. Notwithstanding the assurances from WASA that an efficient method would be developed to transmit final water bills that have estoppel effect, reports are that the situation is worse than ever with no responsiveness from WASA. DCLTA has formed a task force to address this important issue.

Maryland - Does a Notary have a license as a title insurance producer? MD Insurance Administration says: if Notary is present at a closing CONDUCTED BY ANOTHER PERSON, and is there only to witness signatures in consideration for the statutory fee, no special license required. However, if Notary is only person present (other than the signer), is presenting documents, collecting funds, or otherwise performing any duty other than the witnessing of a signature, the Notary is "performing escrow, closing or settlement services that fall within the scope of Section 10-101(i) and, thus, must be licensed as a title insurance producer".

Change in D.C. real estate taxation: Class 1 Homestead Exemption: To be eligible for the homestead exemption, one must be domiciled in D.C. and the property must be the principal place of residence. "Cap" can disappear: Current legislation provides for an owner-occupied residential tax credit (not to be confused with the Homestead Exemption). It is a credit applied against the tax due on the portion of a reassessment that exceeds 12% over the prior year. The credit disappears if, during he prior year, there was a sale or transfer of the property, there were any zoning changes initiated by the owner, or there was a calculation or measurement error.

D.C. Tax Sale Foreclosures. Roy L. Kaufmann recently addressed a forum produced by the D.C. Bar on tax sale foreclosures. If you would like a copy of the presented materials, please click "Reply".

The annual DCLTA President's reception will be held on Thursday, June 10 at 8:00 p.m. at the City Club at Frankin Square at 1300 I St NW (note this different venue). Fee for the event is $35. If interested in attending, kindly click "Reply".

Status of Legislation

DC B15-16 "Mortgage Foreclosure Procedures Reform Act of 2003". Not law, still in holding pattern until sorted out with Department of Insurance, Securities and Banking.

DC B15-133 "Rental Housing Conversion ... Act of 2003" (revising tenants' opportunities to purchase). Not law, expired. Nothing yet reintroduced.

DC B15-462 "Deed Recordation Tax ... Act of 2004" (adding domestic partners to exemptions from transfer/recordation taxes for personal residences). Not law, no official projection on when this will become law.

Federal Senate Bill No. 1175 (restoring $5,000 tax credit for purchase of DC Homes). Passed by House, Passed by Senate. Currently in conference in Senate. May pass by the end of July 2004.

To update your list of handy websites:

www.NTIWeb.com: an excellent site made available by Chicago Title to its agents and clients with state-specific customs (i.e. who traditionally pays for premiums, recording taxes, recording requirements, etc.) and other information.

www.FreeTimeSheet.com: provides a free integrated timesheet, expense reporting and project tracking for up to 5 users (you will have to put up with their advertising).

www.FindLaw.com: good, free portal with links to resource materials in various practice groups.

http://Thomas.loc.Gov: Full text of federal legislation, roll-call votes, complete Congressional Record.

www.USCourts.gov: An ever-improving site giving access to federal courts, opinions, rules, guidelines.

http://www.washington.dc.us.landata.com: Obtain copies of documents recorded at the D.C. Recorder of Deeds. Search by party name, lot/square, or instrument number. Free version will not let you view documents. Registered users may view documents for free (but modest per-document charge to print).

www.EntreWorld.org: A wonderful site geared towards entrepreneurs,

U.S. Patriot Act affects title companies, law firms, etc! You have to make sure the parties to your transaction or people from whom you receive funds (i.e. clients) are not "Specially Designated Nationals" the names of which are found on a list of approximately 250 names of people suspected in terrorism matters. The Act freezes assets of those people and restricts everyone from having "transactions" with these individuals. Click to see U.S. Treasury Department's Current List of Specially Designated Nationals under the US Patriot Act

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.