Free and Clear Title Nerdhttp://www.knightbarry.com/cms/RSS_new/Cheri.aspKnightBarry.com BlogsengabLibrary RSS Component v1.0Thu, 11 Mar 2010 14:07:18 GMT‘TIS THE SEASON TO PASS NEW LAWShttp://www.knightbarry.com/cheri_blogs.asp?mode=blog&id=45&yearnum=2009&monthnum=3cah@knightbarry.com (Cheri Hipenbecker)Not only are our federal legislators in a hussle and bussle to enact new laws, our Wisconsin state legislators are also having fun. Here are some new and possible upcoming laws affecting the real estate industry:
  • New Law: Foreclosures - now the Tenants must be notified – but how? Part of 2009 Wisconsin Act 2 (enacted February 19, 2009 and published March 5, 2009), the newly created §846.35, Wis. Stats., requires a lender foreclosing on a residential rental property to provide the following notice to tenants in possession of each rental unit: (A) within 5 days after the commencement of the foreclosure action, notice to the tenant that the action has been commenced, (B) within 5 days after the judgment of foreclosure is entered, notice to the tenant that the judgment has been entered and when the redemption period ends, and (C) notice to the tenant of the date and time of the confirmation of sale, once scheduled. The notices to the tenant must be given either by personal service or certified mail. If the foreclosing lender fails to provide the tenant the necessary notice(s), the tenant may be awarded $250 in damages, plus reasonable attorneys’ fees.
The law further provides that if a tenancy of a residential rental property is terminated as a result of a foreclosure action, the tenants may retain possession of the rental units for up to 2 months after the end of the month in which the sale of the property is confirmed. The court may not execute a writ of assistance or restitution requiring the removal of a tenant before the end of the 2nd month beginning after the month in which the sale of the property is confirmed unless the tenant has waived, in writing, the right to retain possession of the premises for those 2 months.
Now a few comments about the hurdles and opportunities created by this new law. Hurdle – how does the foreclosing law firm know who are the tenants? In 99.99% of the cases (not a scientific number) there are no recorded residential lease agreements and the owner of the property is in foreclosure – is s/he going to cooperate and give the lender the names of the tenants? Probably not. Yes it’s fair that the tenant receives notice of the foreclosure action; however, why the tight time frames and the requirement of personal service or service via certified mail? Why isn’t the posting of a notice at the property sufficient? Opportunity – tenants can duck service of process in the foreclosure action and then ask an attorney to represent them to collect the $250 under the statute and attorneys are encouraged to take such cases because reasonable attorneys’ fees are included in the statute. Hurdle – from start to finish a residential foreclosure action in Wisconsin typically takes 7-10 months; but now if the property is residential rental property tack on another 2+months. Really, how long must an unpaid lender wait?
  • New Law: “Avoiding Foreclosure – YES we can help you”: “Foreclosure specialist” companies willing to help “avoid foreclosures” have been popping up out of the woodwork – some good and some bad. A common practice to “avoid foreclosure” is for the owner to sell the property to the foreclosure specialist. The foreclosure specialist then pays off the delinquent mortgage and enters into a lease with the old owner which includes an option for the old owner to buy-back the property for a set price at a set time (typically the price will be a % over the price that the foreclosure specialist bought the property – representing the foreclosure specialist’s potential profit). The newly created §846.40, Wis. Stats. (Part of 2009 Wisconsin Act 2) wraps some parameters around these types of transactions, including:
    • There must be a contract between the foreclosure specialist (in the statute defined as “foreclosure purchaser”) and the homeowner written in English and the homeowner’s principal language;
    • The contract must include a right for the homeowner to cancel the contract over specific time periods;
    • Waiver of the cancellation provisions voids the contract (with one exception – the homeowner may waive the 5-day right to cancel if the property is subject to a foreclosure sale within the 5-days);
    • The foreclosure specialist must be satisfied that a litany of items apply, including that the homeowner will have the ability to repurchase the property and the terms of repurchase or lease are not unfair or commercially unreasonable;
    • In the event that the foreclosure specialist commences an eviction action against the homeowner, the court can grant a stay of proceedings for 90 days if the homeowner makes a prima facie showing of the items listed in the statute; and
    • A homeowner may bring an action against the foreclosure specialist for violation of the new §846.40, Wis. Stats., and if successful the court may order punitive damages under §895.043, Wis. Stats. A foreclosure specialist may also face criminal charges for violation of the statute.
Note that 2009 Wisconsin Act 2 includes a related new statute governing the regulation of “foreclosure consultants” (as defined in the statute), providing civil and criminal penalties for a foreclosure consultant’s failure to comply with the statute (see the newly created §846.45, Wis. Stats.).
  • Pending Law: Don’t lie on a Residential Property Condition Report: In July of 2008, in Below v. Norton, the Wisconsin Supreme Court determined that the economic loss doctrine bars a homebuyer from recovering in tort for an intentional misrepresentation concerning the property made by the seller of the property in a residential real estate transaction (prior to Below, the economic loss doctrine only applied in commercial real estate transactions).  The Court decided in Below that the plaintiff could continue her claims for breach of contract and misrepresentation in violation of state statutes but not intentional misrepresentation. This was important because: (A) the remedies available to a plaintiff under a breach of contract claim are generally perceived as being less than the remedies available in an intentional misrepresentation claim, and (B) the statute of limitations on an intentional misrepresentation claim can be much longer than the statute of limitations for a breach of contract claim or claims for misrepresentation in violation of state statutes.
Pending in Madison right now is a bill to reverse the decision in Below (2009 Senate Bill 9 and the companion bill 2009 Assembly Bill 6). The pending bill provides that, in addition to any other available remedies, a purchaser in a residential real estate transaction may maintain an action in tort against the seller of the real estate for fraud committed, or an intentional misrepresentation made, by the seller in the transaction. The bill defines a residential real estate transaction as a real estate transfer for which a real estate condition report is required.
  • Pending Law: Wage Claim Liens get Even More Super-Priority: Currently pending in Madison is a bill to amend Wisconsin’s wage claim lien law (2009 Senate Bill 2 and the companion bill 2009 Assembly Bill 40). Under current law, the Wisconsin Department of Workforce Development (DWD) or an employee who brings a wage claim action has a lien upon all property of the employer, real and personal, located in this state for the full amount of any wages owed to the employee (“wage claim lien”) (§109.09(2)(a), Wis. Stats). The wage claim lien upon real property takes effect when the DWD or the employee gives certain notices to the employer and files a notice with the local circuit court (§109.09(2)(b)(1)) (thus the lien applies before a final order of the court and although filed in only 1 county in the state serves as a lien against the employer’s real property in all 72 counties in the state).
Wage claim liens enjoy super-priority, taking priority over all other debts, judgments, decrees, liens, or mortgages against an employer regardless of whether those other debts, judgments, decrees, liens, or mortgages originated before or after the wage claim lien took effect. One exception to this super-priority rule is that wage claim lien takes priority over a prior lien of a commercial lending institution but only as to the first $3,000 of unpaid wages covered under the wage claim lien that are earned within the six months preceding the filing of the action. The proposed changes to the wage claim lien law include:
    • The bill eliminates the $3,000 cap and six−month time limit so that under the bill a wage claim lien covering any amount of wages earned at any time takes precedence over a lien of a commercial lending institution, regardless of whether the lien of the commercial lending institution originated before or after the wage claim lien takes effect; and
    • The bill provides that a wage claim lien takes precedence over the rights of any purchaser of any property of the employer, including any bona fide purchaser that purchases the property of the employer at the time of commencement of a bankruptcy proceeding (this would reverse a recent 7th Circuit Court of Appeals decision that a trustee in bankruptcy can avoid wage claim liens).
Now a few comments and questions – Wisconsin is a consumer friendly state, but is this too consumer friendly? Which consumer is being protected? Under the proposed law a person buys a property for $125,000 from Seller/Employer on January 1, 2009. On January 1, 2009, the wage claim lien is not yet filed with the circuit court and the buyer has no reason to believe that the Seller/Employer is not paying his/her employees. Then on September 1, 2009 a wage claim lien is filed against Seller/Employer in the amount of $300,000. Under the proposed law the $300,000 wage claim lien suddenly jumps ahead of the buyer’s interest in the property and if/when the buyer sells the property the buyer has to satisfy the lien. Does this make sense? Shouldn’t a buyer of property with no actual or constructive notice of a lien, and who pays fair market value for the property, take free and clear of a lien that arises subsequent to the buyer’s purchase of the property?
And what about the elimination of the $3,000 cap and six-month time limit? Will this have a freezing effect? Will secured lenders want to lend money to an employer knowing that if the employer does not pay employees the lender will be in 2nd position to an unknown dollar amount (currently secured lenders do assume a risk that the wage claim lien will jump ahead of the lender’s lien, but it is a known quantity ($3,000 multiplied by the number of employees) – will lenders want to assume this same risk when the risk is unknown (number employees multiplied by $?????))?
One additional concern about Wisconsin’s current wage claim lien law is the filing of the wage claim lien – a wage claim lien in Rock County, for example, serves as a lien against ALL property, real and personal, of the employer in the state. What if the employer is selling real estate in Vilas County – will the buyer know to look to Rock County to find a wage claim lien? Possibly not. The Wisconsin Land Title Association is currently requesting that the Wisconsin Circuit Courts create a one-stop shop system similar to the docketing of Child Support Liens for wage claim liens to make the search for wage claim liens uniform.
This is but a brief synopsis of some of the new laws and bills affecting Wisconsin’s real estate industry. All of the bills and laws are available on the Wisconsin Legislature website. 
]]>http://www.knightbarry.com/cheri_blogs.asp?mode=blog&id=45&yearnum=2009&monthnum=3Thu, 19 Mar 2009 00:00:00 GMTRecording a condo plat? Not so fast my friend.http://www.knightbarry.com/cheri_blogs.asp?mode=blog&id=44&yearnum=2009&monthnum=2cah@knightbarry.com (Cheri Hipenbecker)For a number of years it’s been the practice of many legal practitioners to record a condominium plat and declaration the day before the first sale of a condominium unit. Practitioners have employed this practice to ensure, in part, that the individual tax parcel numbers (and an actual assessment) for the condominium units are assigned at the time of the first unit sale rather than during the construction phase of the condominium project. With the advent of a new ordinance in Milwaukee County, this practice will need to be revised.
As of February 2, 2009, condominium declarants will need to submit condominium instruments to the Milwaukee County Register of Deeds at least 10 working days prior to the first unit conveyance. Pursuant to the newly created Section 56.285 of the General Ordinances of Milwaukee County, the Milwaukee County Register of Deeds must review condominium instruments (the declaration, plats and plans of a condominium, together with any attached exhibits or schedules) to ensure that the instruments are in compliance with Wisconsin’s Condominium Ownership Act prior to recording these instruments. The Milwaukee County Register of Deeds must complete its review within 10 working days after submission to the Register (and if not completed within 10 working days, the condominium instruments shall be deemed approved for recording).
Under the new ordinance, the Milwaukee County Register of Deeds may reject condominium instruments only if the instruments do not comply with §§703.095, 703.11(2)(a), (c) and (d), 703.11(3), 703.275(5) and 703.28(1m), Wis. Stats., OR if the surveyor’s certificate under §703.11(4), Wis. Stats., is not attached to or included in the condominium plat. The Register will inform the submitter if the condominium instruments are found to meet the requirements or if further information is required.
For this service, the Milwaukee County Register of Deeds will charge a $100 fee at the time the condominium instruments are submitted for review. The recording fee will be collected by the Register only when and if the condominium instruments are deemed acceptable.
Milwaukee County does not stand alone in its requirement to review condominium instruments prior to recording. Section 21.455 of the Brown County Code of Ordinances requires that the condominium plat and declaration, along with the required fees ($300 in 2009) and application, be submitted to the Brown County Planning and Land Services Department prior to submission to the Brown County Register of Deeds. The Brown County Property Listing office, being a division of the Brown County Planning and Land Services Department, is charged with the task of reviewing the condominium plat. Similar to the Milwaukee County ordinance, in Brown County the Lister has 10 days to approve, conditionally approve or reject the condominium plat. In the event of rejection or conditional approval, the submitter may appeal the decision to the Brown County Planning Commission Board of Directors. Once approved, the submitter must submit the plat to the Register of Deeds within 6 months of approval, along with the signed certificates of the Surveyor, the Planning and Land Services Department and the municipality where the plat is located, as applicable, and the condominium declaration. The Brown County Register of Deeds will then review the condominium declaration to ensure that it complies with Wisconsin’s Condominium Ownership Act.
Some of the more common reasons that Brown County has not approved a condominium plat or declaration outright include:
·         Failure of the legal description to close;
·         Failure of all of the land owners to consent to the submission of the land to the condominium ownership act;
·         Failure of all of the outstanding mortgage holders to consent to the submission of the land to the condominium ownership act;
·         Failure of the land described in the Plat to be the same as the land described in the Declaration; and
·         Failure of the name of the condominium to be the same on the Plat and Declaration.
Because these ordinances serve as preventative measures, to give condominium declarants comfort that once the condominium instruments are accepted and recorded the instruments will not later be attacked for failure to comply with the statute and thus necessitating an amendment to the plat or declaration, other Wisconsin counties may jump on board. Would any Registers care to comment?
]]>http://www.knightbarry.com/cheri_blogs.asp?mode=blog&id=44&yearnum=2009&monthnum=2Sat, 7 Feb 2009 00:00:00 GMTDO YOU TRUST A SHORT-SALE SELLER? SHOULD WE? http://www.knightbarry.com/cheri_blogs.asp?mode=blog&id=43&yearnum=2008&monthnum=11cah@knightbarry.com (Cheri Hipenbecker)Scenario: You are purchasing a property from a seller under a foreclosure action. The sheriff’s sale is months away and you want to lock up the purchase now. The problem – the seller cannot convey clear title to you because there are too many judgments and liens. What can you do? The answer – try a short-sale. If the foreclosing lender and the other creditors are willing to take less than 100% owed (a “short-sale”), then you may be able to complete the purchase now and avoid further deterioration of the property and the potential that a 3rd party will outbid you at the Sheriff’s sale.

So let’s say you obtained a title commitment from Knight-Barry and payoff statements from the lender and creditors. The next hurdle – what about unknown judgment and lien creditors waiting in line at the courthouse to file a lien that will attach to the property? Will Knight-Barry and its underwriters be willing to insure you against this unknown risk? The answer – it depends. 

What we are talking about is GAP coverage, or the period of time from the Effective Date of the title commitment to when the new deed and mortgage are actually recorded. The obstacle - some counties have a back-log of documents to record and file, including mortgages, judgments and liens; thus, Knight-Barry will not be able to find these new liens on the property before you purchase it and record your deed, which means that although you will not be made aware of these new liens, they will become your problem as the new owner of the property.

Typically, however, Knight-Barry can help you sleep easy because we will extend title insurance coverage over these ugly/unknown matters if certain criterion is met (updating the search prior to closing, receiving an affidavit from the seller and payment of the GAP endorsement fee). But a short-sale is not a typical transaction. In a short-sale there is significantly more risk for the title insurer as there is a history of the seller not making payments to creditors (the seller is in foreclosure) and the seller is walking away with little or no money. Will the seller tell Knight-Barry the truth about its creditors? Will the seller, who has been receiving collection demand letters for months on its mortgage, even know if a different creditor is on the verge of obtaining a judgment or lien against him or her?  If you are in Knight-Barry’s shoes, would you trust the seller? Whether Knight-Barry will be able to extend the GAP coverage depends upon a number of factors:
  • The underwriter – Who is the underwriter? Some underwriters will allow its agents to issue GAP endorsements in short-sale situations, others will not. Knight-Barry writes title insurance for First American, Commonwealth, Lawyers, Fidelity, Ticor and Stewart Title, which we find is a benefit for our customers. When one underwriter says “no” to a risk we can ask another underwriter. Often times one underwriter will have a lower risk tolerance level and will step up to the plate and provide the insurance; GAP coverage in a short-sale being just one of those times.
  • GAP period- Is the property in a “slow” or “fast” county? Generally the more urban the area the greater the back-log of documents at the Register of Deeds and Clerk of Courts offices. For example, the GAP period in Milwaukee County can be up to 8 weeks but typically is only 1 or 2 days in Sheboygan County. If the property is in a “slow” county the potential of an unknown judgment or lien creditor waiting in line at the courthouse to attach to the property is greater and thus the risk to the title insurer under the GAP coverage equally greater.
  • eRecord – Is the County set up for eRecording the new deed and mortgage? If so, we can get the deed eRecorded within 1 day essentially closing the GAP and jumping ahead of other possible judgment or lien creditors waiting in line at the courthouse.
  • The Seller – Are there other judgments and liens against the seller that have attached to the property? Does this seller have a history of not paying creditors? Simply – is the seller trustworthy and will the seller tell us the truth on its closing/GAP affidavit?
If you want GAP coverage in a short-sale, please talk early and often to your title company. Even though your offer to purchase may require the seller to provide GAP coverage, the title company is not obligated to provide that coverage. Knight-Barry will work closely with you to come up with a solution that works best.
]]>http://www.knightbarry.com/cheri_blogs.asp?mode=blog&id=43&yearnum=2008&monthnum=11Fri, 7 Nov 2008 00:00:00 GMT