11 minute read
Ask the Underwriter
By: Martha Prizio, New Hampshire Senior Underwriting Counsel
Q: Our office is acting as settlement agent for an upcoming purchase. Our title examination indicates the current title holder is Jane A. Smith, Trustee of the Jane A. Smith Revocable Trust u/d/t dated November 3, 1994. However, the Purchase and Sale Agreement was signed by Alan B. Smith, Trustee, as Seller. Upon inquiry as to whether Jane would be available for closing, Alan indicated Jane died on August 20, 2006 and that he is the Trustee of the Trust with authority to sign all closing documents. Alan is not represented by an attorney. Do I need to review a copy of the Trust?
A: Yes. Because the record Trustee differs from the individual purporting to be the acting trustee, a copy of the trust should be obtained and reviewed.
Pursuant to Title Standard 5-17 (Trust and Trustee – Existence and Authority Presumed), in the absence of contrary information, a title examiner may assume that the trust was (1) legally in existence at the time the instrument took effect and (2) that the individual/entity identified as the trustee held the position and was authorized to enter into the transaction on behalf of the trust.
But while existence and authority may be presumed for documents of record, when dealing with a concurrent transaction, it is prudent to require additional evidence, e.g. copies of the declaration of trust, amendments, restatements, appointments and resignations. Further, upon review of the trust, it may be necessary to obtain evidence that a condition precedent has been satisfied; for example, a beneficial consent or directive may be required if the trust indicates that a trustee may act only with the consent or at the direction of the beneficiaries. See Comment to Title Standard 5-17.
Once existence and authority have been established, a trustee certificate pursuant to NH RSA 564-A:7 should be executed in conjunction with the transaction. The trustee certificate may be embedded within the instrument of conveyance or recorded as a standalone document.
Assuming, in the scenario outlined above, that the Declaration of Trust identified Alan B. Smith as the sole Successor Trustee upon the death of Jane A. Smith, best practice is to include a brief explanation as to how Alan succeeded to the position. For example:
Under this set of facts, it is not necessary to record a death certificate for Jane A. Smith; the recitation within the trustee certificate is sufficient.
Note that, you need not review a trust where Seller’s counsel has represented that they have reviewed the trust documents, they have provided a trustee certificate in compliance with RSA 564-A:7, and you are not aware of information to the contrary.
Q: Our office is working on a residential refinance. The lender completed its appraisal and indicated that the property is part of a Planned Unit Development (PUD) and it requires a PUD endorsement to the loan policy. I completed a search, but do not see a reference to “PUD” anywhere. What is a PUD? How can I tell if the subject property is part of a PUD? When can I issue a PUD endorsement?
A: A Planned Unit Development (PUD), Planned Residential Development (PRD), or cluster development is a piece of land that is allowed a greater density of buildings than is usually permitted under conventional zoning. A municipality’s planning or zoning board may approve development in exchange for certain restrictions to better facilitate the use of the land (e.g., trees, parks, dedication of open space, etc.). PUDs and cluster developments are considered “innovative land use controls” that a municipality may implement as part of its local land use planning and regulatory powers. See RSA 674:21. They typically include
open space or common area, which is managed by a homeowner’s association and necessitates a collection of fees for maintenance. A PUD or cluster development may also integrate a variety of land uses within the subdivision.
Among the purported benefits of PUDs, PRDs and cluster developments, are the reduction in development costs (e.g., less site work, smaller investment in utilities, fewer feet of road construction, etc.) and maintenance costs for the community. A municipality may use these types of developments to allow for growth, while preserving community identity and ensuring open space for environmental or aesthetic purposes.
To determine whether your subject property is considered a PUD for purposes of title, look first to documents of record. A formal declaration of covenants and restrictions or a subdivision plan may indicate the development is a PUD, PRD or cluster development. Next, the property card, assessment data or verbal information provided by the Town/City’s tax collector or assessor may also clarify the property type.
The ALTA 5 PUD endorsement series provide coverage against loss or damage resulting from certain risks related to planned unit developments, including the violation of any restrictive covenants which may be of record; charges and assessments in favor of any association of homeowners; the enforced removal of improvements which exist as of date of policy because of present encroachments; and the failure of title by reason of a right of first refusal.
The ALTA 5 (Planned Unit Development – Assessments Priority) and the ALTA 5.1 (Planned Unit Development – Current Assessments) are identical in all respects except that the ALTA 5 provides coverage with respect to a lack of priority of the Insured Mortgage over a lien for homeowners’ association charges or assessments, whereas the ALTA 5.1 instead provides coverage with respect to homeowners’ association charges or assessments due and unpaid at Date of Policy.
In order to issue the PUD endorsement for a residential transaction:
(1) Review the restrictive covenants related to the property. If your review of the covenants reveals the existence of a forfeiture or reversionary clause, a right of first refusal, or a use violation, you must obtain underwriting approval prior to policy and endorsement issuance.
(2) Obtain a statement (i.e. estoppel letter) from the homeowner’s association that identifies any outstanding assessments and/or charges currently due and payable, and what period is covered by payment of said charges.
Further, it is prudent to request the association’s statement indicate that there are no present violations of the restrictive covenants or any right to cause a forfeiture or reversion of the subject property.
Note that underwriter approval is required for issuance of the PUD endorsement for a commercial transaction. One reason for this limitation is that commercial properties rarely have “homeowners’ associations,” but may have another type of common-interest community associations or governing bodies. As a result, it is necessary to carefully review the particular circumstances, and modification of the endorsement may be required.
Q: We are handling a purchase of property in New Hampshire with institutional lender financing. We have just been informed that the title holder and borrower is under guardianship. The guardian provided a copy of the order appointing her as guardian of the estate of the ward. Is this sufficient evidence of authority?
A: No. Guardians may not sell, lease, mortgage or otherwise dispose of an interest in property without a license from the probate court of appropriate jurisdiction. See RSA 464-A:27(I), RSA 463:24. This includes both guardians of minor children and incapacitated adults. A list of authorized and/or unauthorized actions is typically incorporated in, or attached to, the order of appointment.
Upon receipt, the license must be reviewed as it may set specific limits or conditions on its exercise. Further, if the guardian is the owner of the property being sold to the ward, the price and manner of sale must be approved by the probate court. See RSA 464-A:27(II). Unless otherwise specified in the order, the license is considered valid for 2 years. See RSA 464-A:27(IV).
If an individual has been appointed guardian of the estate of the ward by a court of competent jurisdiction in another state, in order to act on behalf of the ward in New Hampshire, the guardianship must first be “domesticated.” This may be accomplished by filing a petition and certified copy of their foreign appointment with the Probate Division of the Circuit Court. See RSA 464-C:17, RSA 463:30, and Title Standard 7-25. The guardian will then be able to petition for a license to mortgage (or sell, if the case may be).
When establishing authority in a concurrent transaction, the best practice is to record a certified copy of the license with the instrument of conveyance (i.e., the deed and/or mortgage). Because guardianship files are typically sealed to protect the privacy of the ward, recordation of the license provides future examiners comfort that the transaction was authorized.
Q: I completed a title search, and the current deed indicates Harold G. Corriveau and Winifred A. Corriveau took title to the property as “husband and wife, as joint tenants with rights of survivorship.” Harold provided a death certificate for Winifred, who died within the last few months, and I noticed that it reflects her marital status as “Divorced.” Does this mean that Winifred’s interest must be probated?
A: Maybe… maybe not.
Pursuant to RSA 477:18, “Every conveyance or devise of real estate made to 2 or more persons shall be construed to create an estate in common and not in joint tenancy, unless it shall be expressed therein that the estate is to be holden by the grantees or devisees as joint tenants, or to them and the survivor of them, or unless other words are used clearly expressing an intention to create a joint tenancy. The addition, following the names of the grantees in the granting clause of a deed or devise, of the words ‘as joint tenants with rights of survivorship’ or ‘as tenants by the entirety’ shall constitute a clear expression of intention to create a joint tenancy.”
In this case, there was clear intention to create a joint tenancy, with use of the language “as joint tenants with rights of survivorship.” As a result, Harold and Winifred had equal right and possession of the entire property. Provided the joint tenancy was not severed by divorce or other action , upon Winifred’s death her interest was extinguished, and Harold became the sole owner of the property.
Generally, joint tenancy is not automatically severed by divorce. A specific divorce decree provision must address and sever the joint tenancy rights of the parties. See Title Standard 5-13. Therefore, determining whether Harold and Winifred’s divorce effectuated a severance of their joint tenancy will require scrutiny of their divorce decree and analysis based on “expression of intent by the parties.” See Estate of Croteau v. Croteau, 143 N.H. 177 (1998).
Q: We have been asked to accept a document acknowledged by a notary public in the U.S. Virgin Islands. Do we need to authenticate the document through the apostille process?
A: No. Pursuant to RSA 456-B:4(I), when dealing with a notarial act in other jurisdictions of the United States, “[a] notarial act has the same effect under the law of this state as if performed by a notarial officer of this state, if performed in another state, commonwealth, territory, district, or possession of the United States by any of the following persons: (a) A notary public of that jurisdiction; (b) A judge, clerk, or deputy clerk of a court of that jurisdiction; or (c) Any other person authorized by the law of that jurisdiction to perform notarial acts….”
Within the statute, “state” is defined as “a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States.” RSA 456-B:1(XV).
Because the U.S. Virgin Islands are a U.S. territory, provided the acknowledgment is taken by an authorized notary public, the acknowledgment need not be authenticated via the apostille process.
When scrutinizing an acknowledgment taken in a U.S. territory, it is prudent to contact the department that oversees notary public commissions within the jurisdiction to verify the legitimacy of the notary’s appointment.
The information contained in this document was prepared by First American Title Insurance Company (“FATICO”) for informational purposes only and does not constitute legal advice. FATICO is not a law firm and this information is not intended to be legal advice. Readers should not act upon this without seeking advice from professional advisers.
First American Title Insurance Company makes no express or implied warranty respecting the information presented and assumes no responsibility for errors or omissions. First American, the eagle logo, First American Title, and firstam.com are registered trademarks or trademarks of First American Financial Corporation and/or its affiliates.
