G:FSCCurrent WorkBurton acultyBUTLER 0NewsletterMayFinal0 … · 2011. 8. 30. · Burdette v. Brush Mountain Estates LLC, 278 Va. 286, 682 S.E.2d 549 (Sept. 18, 2009) Facts: Kelly

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VOLUME XXX, NUMBER 2 MAY 2010

TABLE OF CONTENTS

Chairperson’s Message . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Joseph M. Cochran

The 2010 Traver Scholar Award Recipient . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

28th Annual Real Estate Seminar: Virginia's Real Estate Case Law Update . . . . . . . . . . . . . . . . 3James L. Windsor

2010 Virginia General Assembly Report: Real Estate Legislation . . . . . . . . . . . . . . . . . . . . . . 17David S. Mercer and Lucia Anna Trigiani

2010 Virginia General Assembly: Selected Real Estate Legislation Bill List . . . . . . . . . . . . . . . 24David S. Mercer and Lucia Anna Trigiani

Inquiry Notice Defeats Prior Deed of Trust: Wells Fargo Bank, N.A. as Trustee for Carrington Mortgage Loan Trust v. Crowther . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45Bradley D. McGraw

The Evolution of Residential Foreclosure Litigation in Virginia . . . . . . . . . . . . . . . . . . . . . . . . 56Robert R. Michael and Joseph M. LeNoir

Foreclosures-Part Deux . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65Stephen C. Gregory

The Powerful “Protecting Tenants at Foreclosure Act” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74Whitney Jackson Levin

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The Short Sale Era: Successfully Working-Out & Closing Short Sales . . . . . . . . . . . . . . . . . . . 77Todd E. Condron and Larry McElwain

Virginia's Property Owners Are Not Safe From Kelo-Styled Economic Takings . . . . . . . . . . . . 97Joshua E. Baker

Title Insurers Are Entitled to Recovery Under a Virginia Settlement Agent Surety Bond . . . . 104Brian O. Dolan and Christopher R. Papile

Brambleton Community Association v. Than: Are Bankruptcy Filers Receiving Bad Advice to Vacate Their Homes? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108Mary N. Peacock

A Tale of Two Counties: How the Legal Quillotine Can Sever Your Lien . . . . . . . . . . . . . . . . 112John A. Dezio

“Hot” 1031 Topics in a “Not So Hot” 2010 Real Estate Environment . . . . . . . . . . . . . . . . . . 119Susan E. Hayden

New Law School Graduates May Be Particularly Adept at Defeatingthe Technical Language Trap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124Erin McNeill

Administrative Letter 2009-11: Remittance of Title Premium and Issuance of Title Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126Virginia Bureau of Insurance

Subcommittee Reports:

Commercial Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128William L. Nusbaum

Eminent Domain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129Charles M. Lollar

Membership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130Joseph M. Cochran

Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131Joseph M. Cochran

Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132Douglass W. Dewing

Board of Governors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134

Area Representatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137

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The FEE SIMPLE is published semiannually for distribution to members of the Real PropertySection of the Virginia State Bar. Anyone interested in publishing an article in the FEE SIMPLE is invitedto contact the Editors. Articles generally should be submitted by email as Word documents. Yoursubmission will also be consent to the posting of the article on the Real Property Section web site,http://www.vsb.org/sections/rp/index.htm. The FEE SIMPLE has the authority to edit materials submittedfor publication. The views expressed in articles in the FEE SIMPLE are solely the views of the author(s).Authors are responsible for the accuracy of their articles.

The Board of Governors gratefully acknowledges the dedication and the hard work of theAssistant to the Editors, Felicia A. Burton ((757) 221-3813, (email) [email protected]), of the College ofWilliam and Mary School of Law.

Co-Editors

Lynda L. Butler Courtland L. Traver, EsquireChancellor Professor of Law 1620 Founders Hill NorthThe College of William and Mary Williamsburg, VA 23185School of Law (757) 564-6177 (tel and fax)Williamsburg, Virginia 23185 (email) [email protected](757) 221-3843; (757) 221-3261 (fax)(email) [email protected]

SPRING SUBMISSION DEADLINE: OCTOBER 15, 2010

The next meeting of the Board of Governors of the Real Property Section of the Virginia State Bar will be held on Friday, June 18, 2010 at 12:30 p.m.

at the Skytop Room in the Holiday Inn Sunspree in Virginia Beach.

Subcommittee Chairpersons and Other Section Contacts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145

Subject Index: November 1987-November 2009 . . . . . . http://www.vsb.org/sections/rp/articles/30.02.subjectindex.pdf

Visit the section web site at

http://www.vsb.org/sections/rp/register.htm for the Real Property Section Membership form

And

http://www.vsb.org/sections/rp/index.htmfor articles from the Fee Simple and a whole lot more!

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Vol. XXX, No. 2 1 May 2010

CHAIRPERSON’S MESSAGE

by Joseph M. Cochran* By the time you receive this report, I will have completed my year as Section Chair. I have enjoyed my time as Chair and I believe we have seen some accomplishments this year. Overall I think we have been able to generate new interest in the Section among some of the membership and the Area Representatives. I refer you to the Membership Subcommittee report and the Programs Subcommittee report in this issue of the FEE SIMPLE for an accounting of some of the accomplishments this year. I have enjoyed my year because I have gotten to know colleagues around the state. This is an obvious benefit of serving in leadership on any state Bar committee or organization and one that is normally cited by an outgoing chair at the end of their term. But more than that, I have enjoyed trying to make a difference in the life of the Section. There is something deeply satisfying about looking to see where things need attention and focus efforts there in hopes of leaving an organization in some way better than you found it. We all have this opportunity with the Section, as members, as Area Representatives, and as Board members and officers. Working to build up the Section is gratifying work. It is gratifying because at its heart it is about building community. Nothing is quite so satisfying as participating in building community. As social beings we are much better off as individuals and together as a group when we work to build up our common life rather than keep to ourselves. Anything we can do to enhance our community, whether it is small and unnoticed or something that makes a big splash, is noble work that satisfies longings deep within us. Revising bylaws, seeking out seminar speakers, holding conference call meetings, preparing a handbook, producing the FEE SIMPLE, all of these actions and countless others work together to build the community we know as the Real Property Section of the Virginia State Bar. It is satisfying work. If you haven’t been able to contribute to the Section, I invite you to get involved. If you have contributed in the past and haven’t been able to in a while, give it some thought and join in again. If you are contributing, thank you and I know you are enjoying the gratification your service brings. I know how you feel. Such gratification greets us with a smile and shows us that we have responded to a longing that is deep and enduring.

* Joseph M. Cochran is a partner with the law firm of Richmond & Fishburne in Charlottesville,

Virginia. He is the Chairperson of the Board of Governors of the Real Property Section of the Virginia State Bar. As the current Chair, he serves as the Chair of the Programs Standing Subcommittee and is the Co-Chair of the Membership Standing Subcommittee. He also is a member of the Commercial Real Estate Subcommittee and the Residential Real Estate Subcommittee.

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THE 2010 TRAVER SCHOLAR AWARD RECIPIENT

Larry J. McElwain Parker, McElwain & Jacobs

Charlottesville

Mr. McElwain received his undergraduate degree from the University of Virginia in 1970 and a J.D. from Boston College Law School in 1975. He was admitted into the Virginia State Bar in 1975.

Larry became involved with the Real Estate Section of the Virginia State Bar in 1977 as an Area

Representative, and began contributing articles to the section’s newsletter, the FEE SIMPLE. He was appointed to the Section’s Board of Governors in 1999, and served as its Chair in 2004-2005. His first experience as a planner and moderator for the Section’s Advanced Real Estate Seminar came in 2002, positions that he has served with few interruptions since that time. He is currently a Director and Vice Chair of the Virginia Bar Association’s Real Property Section. Being a litigator, a bank director for more than 25 years and a frequent guest lecturer on real property at the University of Virginia Law School, Larry has become a popular and frequent seminar speaker. In the last year, he has spoken on RESPA, Short Sales and Construction issues. Larry has been known to wear shoes on occasion.

THE TRAVER SCHOLAR

The Traver Scholar Award was created by the Virginia Continuing Legal Education and the Real

Estate Section of the Virginia Bar Association to honor Court Traver and to recognize on a regular basis someone who has contributed outstanding service to continuing legal education in Virginia.

PAST YEARS’ AWARD RECIPIENTS

2005 Courtland L. Traver, retired from McGuire Woods 2006 C. Grice McMullan, Thompson McMullan 2007 Joseph W. Richmond, Jr., Richmond & Fishburne 2008 Douglass W. Dewing, Chicago Title Insurance Company 2009 Susan M. Pesner, Pesner Kawamoto Conway

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28TH ANNUAL REAL ESTATE SEMINAR: VIRGINIA’S REAL ESTATE CASE LAW UPDATE

by James L. Windsor*

2009 SUPREME COURT CASES

Burdette v. Brush Mountain Estates LLC, 278 Va. 286, 682 S.E.2d 549 (Sept. 18, 2009) Facts: Kelly Burdette (“Burdette”) owned 8.2 acres of land in Montgomery County consisting of Parcel “A” and Parcel “B.” Burdette acquired the real property from Thomas and Margaret Davis by deed dated December 8, 1999 (“Burdette/Davis Source Deed”). Brush Mountain Estates, LLC (“Brush Mountain”) owns an adjacent parcel identified at Tax Parcel 27(A)(40). The Burdette/Davis Source Deed referenced a boundary line adjustment plat (the “Plat”), dated September 2, 1999, and stated that the conveyance was subject to all easements of records. The Plat depicts a 50-foot easement that traverses a portion of Parcels “A” and “B” and contains two notations to “SEE NOTE #6.” Note #6 states “50’ PRIVATE EASEMENT FOR INGRESS, EGRESS AND PUBLIC UTILITIES FOR THE BENEFIT OF TAX PARCEL 27(A)(40), IS HEREBY CONVEYED.” Brush Mountain submitted a request to rezone its property, indicating its intent to develop the land and access the same via the 50’ easement across Burdette’s land. Upon learning of this plan, Burdette filed a declaratory judgment action against Brush Mountain asserting that the purported easement was not created by deed, will, or any other legal method. The Circuit Court granted summary judgment in favor of Brush Mountain after concluding that the notations upon the Plat were sufficient to create an easement for the benefit of Brush Mountain; the Circuit Court rejected Burdette’s argument, based upon VA. CODE § 55-2, that any interest in land, including an easement, must be conveyed by will or deed. Holding: The Court noted that easements are not ownership interests in the servient tract, but instead privileges to use the land of another in a particular manner and for a particular purpose. Since an easement is not an ownership interest, an easement is not an estate and the provisions of § 55-2 do not control the conveyance of an easement. The Court then examined whether the incorporation of the Plat into the Davis/Burdette Source Deed and another prior deed in the chain of title subjected the conveyances to the purported easement. The Court stated that the phrase “subject to” contained in deeds is a phrase of qualification and notice and does not create affirmative rights. The Court reasoned that the “subject to” language in the Davis/Burdette Source Deed was “boiler plate.” The Court also concluded that a person looking solely at the Plat, which did not show the dominant tract, would not be able to determine the size of Tax Parcel 27(A)(40) and could not determine the extent of the burden imposed. The Court noted that no particular language is required to convey an easement as long as the intention to grant is manifest on the face of the instrument. Nonetheless, the Court stated that a provision to create an easement is strictly construed against the establishment of an easement. The Court then held that that “subject to” language in the Davis/Burdette Source Deed only operated as a phrase of qualification since the deed did not mention the Plat in the phrase subjecting the conveyance to easements of record. The Court also held that the Plat alone cannot serve as an instrument of conveyance because when a deed incorporates a plat by reference, the plat is only considered part of the deed for descriptive purposes to establish the metes and bounds of the property. Accordingly, due to the absence of an instrument of conveyance, the Court reversed the trial court’s decision establishing an easement across Burdette’s real property.

* From the Twenty-Eighth Annual Real Estate Practice Seminar, co-sponsored by the Real

Property Section and Virginia CLE. Presenter was James L. Windsor. Jim Windsor gratefully acknowledges and expresses his appreciation to Sarah E. Messersmith,

Christy L. Murphy, Jason A. Dunn and Jean Marie Walker of Kaufman & Canoles for their assistance in preparing this outline.

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Anderson v. Delore, 278 Va. 251, 683 S.E.2d 307 (Sept. 18, 2009) Facts: Henry Anderson, Jr. and Linda W. Anderson own a parcel of land (the “Anderson Lot”) that lies immediately above the 800-foot contour of Smith Mountain Lake. Michael Delore and his wife own the adjacent parcel, which is also immediately above the 800-foot contour. The two parcels both derive from a common grantor, Villamont Corporation, which retained ownership of the land below the 800-foot contour. The deeds in the chain of title to the Anderson Lot granted an easement of right of way in the land lying between the Anderson Lot and the lake, while the most recent deed conveying the Delore lot did not expressly grant a similar easement, but conveyed the land with buildings and improvements thereon and “easement thereunto belonging.” At the time of purchase, the Delores acquired a pre-existing dock. The Delores subsequently obtained permits to replace rip-rap along the beach area near the dock. In January 2007, the Andersons sought an injunction to compel the Delores to remove the dock, beach area, and other improvements that allegedly encroached within the “extended lot lines” of the Anderson Lot and interfered with the Anderson’s use and enjoyment of the same. The Andersons attached a 2006 survey to the Complaint, which depicted “extended lot lines” from the 800-foot contour to the lake. Upon cross-motions for summary judgment, the trial court dismissed the complaint. Holding: A deed may expressly create an easement but fail to define its dimensions. If the deed does not state the object or purpose of the easement, the scope is determined by the intention of the parties to the grant. If the granting language does state the object or purpose of the easement, the dimensions may be inferred to be those that are sufficient to accomplish that purpose. The Court noted that the Andersons, as proponent of the injunction, bore the burden of proving that their easement below the 800-foot contour included the encroachments. The Andersons’ deed did not specify the lateral dimensions of the easement and failed to mention “extended lot lines.” Further, the Andersons failed to present any evidence as to the intent of the grantors of the easement at the time the lots were severed by the common grantor. Accordingly, the Court held that the Andersons failed to present sufficient evidence to establish that the deeds in the chain of title conveyed an easement over the property from the 800-foot contour to the water’s edge within the disputed area on which the encroachments were present. IndyMac Mortgage Holdings, Inc. v. Warren L. Almquist, petition for appeal refused, sub nom. WMC Mortgage Corp. v. One West Bank, No. 081230 (Nov. 17, 2009) Facts: On March 10, 2000, IndyMac Mortgage Holdings, Inc. (“IndyMac”) recorded a deed of trust securing a loan in the amount of $283,200. On October 2, 2003, the forged certificate of satisfaction was recorded. On March 2, 2004, WMC Mortgage Corporation (“WMC”) recorded a deed of trust securing a loan in the amount of $225,000. On March 25, 2004, IndyMac recorded a memorandum of lis pendens which stated that the IndyMac deed of trust should not have been released and that the forged certificate of satisfaction was void and of no effect. On June 16, 2004, IndyMac rerecorded its deed of trust with a notation that it should not have been released. On July 11, 2006, WMC refinanced its loan of March 2, 2004, and recorded a deed of trust in the amount of $455,000. On October 3, 2006, WMC recorded a certificate of satisfaction releasing the 2004 WMC deed of trust. The Alexandria Circuit Court found that a forged certificate of satisfaction was null and void and that the deed of trust that it purportedly released was valid and related back to the date of its initial recordation. Because of this finding, the trial court did not consider the doctrine of equitable subrogation asserted by the beneficiary of a subsequent deed of trust. In its petition for appeal, WMC argued that the trial court erred by not considering whether its 2006 deed of trust should be equitably subrogated to the position of its 2004 deed of trust. WMC relied upon Helm v. Lynchburg Trust & Savings Bank, 106 Va. 603, 56 S.E. 598 (1907), where the Virginia Supreme Court held that equitable subrogation applied where a deed of trust was forged and declared null and void. IndyMac argued on appeal that while Helm provides that a forged instrument is null and void, it does not support the application of equitable subrogation where a certificate of satisfaction is null and void due to a

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forgery. Where a deed of trust is forged, the effect is to remove a fraudulent lien from property, and it is therefore equitable to subrogate a subsequent lien to the position of the forged deed of trust. However, where a certificate of satisfaction is forged, the result is that the deed of trust was never released and the property remains subject to the lien. Accordingly, Helm, which deals only with a forged deed of trust, does not support the application of equitable subrogation where a certificate of satisfaction is forged and a deed of trust is determined to be a valid prior lien on property. Holding: The Supreme Court refused a petition for appeal, stating that there was no reversible error. Because the Virginia Supreme Court refused WMC’s petition for appeal stating that there was no reversible error, the trial court’s holding provides authority for the rule that when a certificate of satisfaction is null and void as a result of a forgery the deed of trust retains its original lien position and that equitable subrogation of a subsequent deed of trust should not be considered. However, the trial court’s opinion does not impact the applicability of equitable subrogation in any other context. Sales v. Kecoughtan Housing Company, 279 Va. 475, 690 S.E.2d 91 (Feb. 25, 2010) Facts: Tenant Sales leased an apartment owned by landlord Kecoughtan Housing Co. and managed by Abbitt Management, Inc. After a couple of months, Sales told Abbitt that there was mold growing in the apartment and requested repairs. Abbitt entered the property, performed some repairs and assured Sales that the mold problem was corrected and the apartment was safe for habitation. Sales continued to live in the apartment and eventually mold began to grow in his eye, causing serious and permanent injury. Mold also destroyed all of his personal property in the apartment. Sales filed a complaint that Abbitt performed the repairs negligently, particularly that Abbitt only painted over the mold without first treating it. Holding: The Court held that there was sufficient evidence of negligent repair to have sustained a demurrer. Although a landlord does not have a common law duty to make repairs after turning over possession of property to the tenant, if a landlord (or its agent) enters the property to make repairs, the landlord must use reasonable care in performing the repairs. Marble Technologies v. City of Hampton, 279 Va. 409, 690 S.E.2d 84 (Feb. 25, 2010) Facts: The City of Hampton amended its zoning ordinance to apply the Chesapeake Bay Preservation Act to the locality. The City ordinance provided that all properties which were designated as part of the Coastal Barrier Resources System (created by the Coastal Barrier Resources Act, 16 U.S.C.S. §§ 3501-3510) were necessarily part of the resource protection area (RPA) of the Chesapeake Bay Preservation District. Certain additional development restrictions applied to all properties located within an RPA. After this zoning ordinance amendment, several property owners' entire parcels fell within the RPA. Holding: In a Dillon Rule analysis, the Court held that the General Assembly did not expressly or impliedly grant to localities the authority to designate RPAs based upon the criteria set by the federal government, such as the Coastal Barrier Resources System. The fact that certain property may be included within the federal Coastal Barrier Resources Act for purposes of federal funding has no bearing on whether the property should be included in an RPA. The City's automatic inclusion of Coastal Barrier Resources Act property within the RPA violated the General Assembly's instruction that a locality “use the criteria developed by the [Chesapeake Bay Local Assistance] Board to determine the extent of the Chesapeake Bay Preservation Area within [its] jurisdiction.”

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C. Porter Vaughan, Inc. v. DiLorenzo, 279 Va. 449, 689 S.E.2d 656 (Feb. 25, 2010) Facts: DiLorenzo, the Bishop of the Catholic Diocese of Richmond, and Beitz, an agent for Vaughan (a real estate brokerage company), entered into an oral brokerage agreement for the sale of certain property located in the City of Richmond. When the property was ultimately sold to Virginia Commonwealth University, a prospect to whom Beitz had marketed the property, DiLorenzo failed to pay a commission to Vaughan. Vaughan brought suit to recover the commission and DiLorenzo argued that the brokerage agreement was unenforceable due to the Statute of Frauds. Holding: The Court upheld the brokerage agreement. Several writings which were produced as evidence were ruled to be sufficient to remove the bar of the Statute of Frauds. The writings included a letter from DiLorenzo to Beitz thanking her for transmitting a contract to a potential purchaser and a signed contract (which was never consummated) with a potential purchaser with a clause that Beitz, an agent of Vaughan, was representing DiLorenzo and would receive a commission of four percent at the time of sale. Board of Supervisors of Stafford County v. Crucible, Inc., 278 Va. 152, 677 S.E.2d 283 (June 4, 2009) Facts: Crucible operates a security training facility in Stafford County and sought to acquire additional land in order to expand its facility. In March 2004, Crucible requested a zoning verification for certain property in Stafford County, which was zoned A-1, and the zoning verification addressed whether the proposed facilities would qualify as a “school” under the zoning ordinance. Under the zoning ordinance, a school could be constructed in A-1 zones on a “by right” basis. Following a meeting between zoning officials and Crucible, the zoning administrator issued a letter, dated May 11, 2004, stating that the facility would be classified as a school and that the verification is valid as of May 22, 2004 and is subject to change. On July 26, 2005, Crucible purchased the subject property. Subsequently, Stafford County adopted a zoning ordinance requiring a conditional use permit to operate a school in an A-1 district. Crucible, which did not have an approved site plan at that time, could no longer operate a school on its property on a “by right” basis, absent a determination that it had a vested right to do so. Crucible filed a declaratory judgment action in Circuit Court requesting that the court declare whether Crucible had a vested right, pursuant to VIRGINIA CODE § 15.2-2307, to operate a school on its property on a “by right” basis. Prior to filing suit, Crucible did not request a vested rights determination from the zoning administrator. The Circuit Court concluded that the zoning administrator’s zoning verification letter was “substantially similar and equally serious” as the six affirmative governmental acts enumerated in § 15.2-2307. Therefore, the trial court held that the zoning verification letter was a significant affirmative governmental act and that Crucible satisfied all the elements set forth in § 15.2-2307 and had a vested right to develop a school on its property on a “by right” basis. Holding: The Court held that the Circuit Courts retained the authority to make vested rights determinations, despite the enactment of VIRGINIA CODE § 15.2-2286, which authorized zoning administrators to make vested rights determinations. Therefore, the Court concluded that the trial court has jurisdiction to make a vested rights determination, despite Crucible’s failure to obtain a vested rights determination from the zoning administrator. Next, the Court addressed whether Crucible acquired a vested right in its planned use of the property as a result of the zoning verification letter. A specific affirmative governmental act is a prerequisite to the acquisition of a vested right in a land use.1 The

1 Section 15.2-2307 states, in relevant part, that a landowner may establish a vested right when

the landowner: (i) obtains or is the beneficiary of a significant governmental act which remains in effect allowing development of a specific project, (ii) relies in good faith on the significant affirmative governmental act, and (iii) incurs extensive obligations or substantial expenses in diligent pursuit of the specific project in reliance on the significant affirmative governmental act.

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a “by right” basis.

Court noted that the zoning verification letter is not encompassed within any of the six enumerated examples of significant affirmative governmental acts that are included in § 15.2-2307. The list within the statute is not exhaustive; therefore, the Court examined prior case law and the plain meaning of the purported governmental act to evaluate whether the verification letter was sufficient. The Court reasoned that when a landowner has only a future expectation that he will be allowed to develop his property in accordance with its current classification under the local zoning ordinance, there is no vested property right in the continuation of the land’s existing zoning status. Statements of general support of a plan and informal assurances of future approval are not sufficient to constitute a significant affirmative governmental act. The zoning verification letter did not approve the project, and it affirmatively stated that the verification is “subject to change.” Accordingly, the Court held that the zoning verification letter was not a significant affirmative governmental act and reversed the trial court because Crucible did not have a vested right to develop the new training facility on

BANKRUPTCY COURT (EASTERN DISTRICT) In re Elizabeth Ann Carrillo, 2010 Bankr. LEXIS 180 (E.D. Va. Jan. 14, 2010) Facts: This case arose from a Chapter 7 bankruptcy petition filed by two debtors. On the debtors’ statement of financial affairs, they listed four properties which went into foreclosure. One of the properties was a condominium the debtors had acquired and placed a deed of trust on. The debtors conveyed the property to Stoneridge in the deed of trust to secure a loan made by a lender. The deed of trust was notarized by an individual who was a notary public and who was the managing member of Stoneridge. On the notarization, where the notary was to place Title or Rank, the notary wrote “Managing Member.” There was no seal. The bankruptcy trustee filed a three-count complaint, two counts of which were voluntarily dismissed with prejudice. The third count, for avoidance under the trustee’s “strong-arm” powers as a hypothetical bona fide purchaser of real property or hypothetical lien creditor on the deed of trust and the subsequent foreclosure deed, is the subject of this opinion. Holding: The court reasoned that the bankruptcy trustee had strong arm powers which essentially placed him in the same position as if he were a bona fide purchaser who bought the property from the debtor on the filing date and simultaneously perfected the transfer by recording a deed or had extended credit to the debtor on the filing date and obtained a judgment lien against the property. Therefore, the court reasoned that if a bona fide purchaser could take the property not subject to the deed of trust, then so could the bankruptcy trustee. The court first had to determine whether the deed of trust was properly acknowledged. The court recognized that under Virginia law a deed of trust must be properly acknowledged. The court found that the acknowledgment in the deed of trust was proper in form except for the fact that the notary wrote “Managing Member” under Title or Rank. The court did an extensive analysis of Virginia case law on proper notarizations and came to the conclusion that the official character of the notary cannot be taken from parol evidence and it must be apparent on the face of the document the title or rank of the person performing the notarization. Virginia law is very specific on who can notarize a document and among those persons are notary publics. In Virginia a managing member is not the same as a notary public. Therefore, the court held that the deed of trust was not properly acknowledged and should not have been recorded. The court then determined the effect of the improper acknowledgment on the recording by looking to VA. CODE §17.1-223. That section states that the clerk is to take fees and record “writing[s] authorized by law to be recorded, with all certificates, plats, schedules or other papers thereto annexed or thereon endorsed.” It further states “[i]f the writing or deed is accepted for record and spread on the deed books, it shall be deemed to be validly recorded for all purposes.” Therefore, the court concluded that, even though the deed of trust was not properly acknowledged, it was a properly recorded deed of trust and did provide constructive notice sufficient to bind a bona fide purchaser.

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HSBC Bank U.S.A. N.A. v. H. Jason Gold, Trustee (In re Taneja), Case No. 08-13293-SSM, Adversary Proceeding No. 09-1047 (E.D. Va. Mar. 16, 2010) Facts: On June 9, 2008, Vijay Taneja and four companies he controlled, including a mortgage loan originator known as FMI, filed Chapter 11 petitions. Among the assets listed on the debtor's schedules was a condominium located at 4862 Eisenhower Avenue, Unit #465, Alexandria, Virginia (the “Property”). On December 23, 2008, the Trustee filed a motion to sell the Property free and clear of all liens for $285,000.00. In his motion, the Trustee acknowledged the existence of an unreleased memorandum of lis pendens in favor of Wells Fargo, but represented that there were no other liens of record. HSBC filed a response asserting that it was the holder of a note secured by a $375,920.00 deed of trust against the Property. HSBC initially opposed the sale, but later agreed to entry of a consent order approving the sale, with the net proceeds to be held in escrow pending determination of HSBC's rights. Subsequently, HSBC instituted an adversarial proceeding and asserted that HSBC was the beneficiary of a deed of trust recorded against the Property, which was later released by “false” certification recorded by the debtor as president of FMI. HSBC alleged that the debtor acquired title to the Property with a loan made by FMI, which was sold to Washington Mutual, and ultimately acquired by HSBC as part of a securitization. The amended complaint sets forth a detailed history of the conveyances and encumbrances following the execution of the purchase money deed of trust, which included six conveyances of the Property within a six month period, the last of which returned title to the debtor. During the same period, a total of eleven additional deeds of trust were recorded, all of them securing MERS as nominee for FMI, and all released by certificates of satisfaction signed by the debtor. By amended complaint, HSBC sought to establish the validity and priority of the HSBC lien and impose a constructive trust. In response, the Trustee asserted that under Virginia law, an innocent purchaser for value may conclusively rely on the land records, and that such a purchaser would take free and clear of the released deed of trust, even if the release was unauthorized. Accordingly, the Trustee argued that the “strong arm” powers under Section 544(a) of the Bankruptcy Code trump any equitable claim by HSBC to recognize the deed of trust as a valid lien. HSBC argued that the number of conveyances and deeds of trust within such a short time frame should have excited the suspicion of a prudent purchaser and would therefore have provided constructive notice that the deed of trust might have been released without authority. Holding: The court noted that the bankruptcy trustee is in the same position, with respect to real estate, as if he were a bona fide purchaser who bought the property from the debtor on the filing date and simultaneously perfected the transfer by recording a deed, or if he had extended credit to the debtor on the filing date and on the same date had obtained a judgment lien against the Property. Therefore, the court reasoned that if under Virginia law a bona fide purchaser for value who had bought the Property from the debtor on June 9, 2008, and recorded a deed the same day, or a creditor who had docketed a judgment lien against debtor on that day, would have taken free and clear of a falsely-released deed of trust, so would the bankruptcy trustee. This outcome does not change unless, under state law, a constructive trust would trump the interest of a bona fide purchaser for value or a judgment lien creditor. The court noted that the statutory exclusion set forth in Section 541(d) is inapplicable by its express terms to property coming into the bankruptcy estate under Sections 541(a)(3) and (4) through the exercise of the trustee's avoidance powers. Therefore, bankruptcy trustees routinely utilize their “strong-arm” avoidance powers to set aside unperfected security interests and unrecorded conveyances, even though such security interests could be enforced against the debtor under state law. The court stated that a recorded but falsely-released deed of trust raised a more difficult question than a simple unrecorded deed of trust. The court recognized that the majority of states adhere to the modern rule that the holder of a note secured by a recorded mortgage or deed of trust that is released without authority will prevail over an innocent purchaser of the property. After examining Virginia law, the court concluded that a century old opinion of the Supreme Court of Appeals of Virginia (now the Supreme Court of Virginia) reached the opposite result and squarely held that an innocent emcumbrancer prevailed over the holder of a note secured by a prior deed of trust that had been released without authority. Evans Bros. v. Roanoke Savings Bank, 95 Va. 294, 28 S.E. 323 (1897). The court found that the position of HSBC is indistinguishable from that of Roanoke Savings Bank in the Evans case as the lenders in both cases argued that their notes were released without authority. The court stated that “it is certainly an interesting question – given the age of the

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Evans opinion and the weight of authority to the contrary in more recent opinions from other states – if the Supreme Court of Virginia would adopt a different view if presented with the issue today.” Nonetheless, the court held that, in the absence of constructive notice, a bona fide purchaser would take free and clear of HSBC's lien. The court rejected HSBC's claim that the unusual series of conveyances, encumbrances and releases in the chain of title would confer constructive notice upon the trustee and prevent the exercise of the ”strong arm” powers. The court agreed that a title examination would have uncovered the unusual series of transactions, but concluded that the transactions alone only suggest “flipping” of real estate, which is not inherently fraudulent, and/or a “kiting” scheme. A “kiting” scheme is one in which the borrower utilizes the proceeds of later loans to pay off earlier loans before payments were due to commence. The court concluded that a “kiting” scheme would raise questions about whether the last deed of trust in the chain of title had been properly released, but would not raise as substantial concerns as to the first deed of trust in the series. HSBC was claiming a lien pursuant to the first deed of trust in the series of twelve. The court noted that there are no reported Virginia cases holding that a pattern of conveyances constituted constructive notice of fraud. Due to the failure of HSBC to plead sufficient facts to plausibly establish that a bona fide purchaser would have constructive notice that the deed of trust was released without authority, the court held that the Trustee's power as a hypothetical bona fide purchaser allowed him to administer the Property free of HSBC's equitable claim for the reinstatement of the deed of trust, even if it was falsely released. Accordingly, the court dismissed the claims of HSBC.

BANKRUPTCY COURT (WESTERN DISTRICT)

In re Shirley Whitlow, 410 B.R. 220, 2009 Bankr. LEXIS 2344 (W.D. Va. July 6, 2009) Facts: This case arose from a Chapter 13 bankruptcy filed by a spouse. The spouses owned a property as joint tenants with rights of survivorship. The City of Roanoke filed a motion seeking annulment of the automatic stay asserting that the debtor spouse, the wife, owned a one half interest in the property and the property was being sold at auction under a decree of sale due to tax liens. This litigation was in state court. Apparently, the husband had delayed the sale on three separate occasions because he would file for bankruptcy on the morning of the sale each time it was scheduled to be auctioned. The third time the sale was not prevented because there was no automatic stay and the house was auctioned. However, two days after the auction the wife filed this bankruptcy. The city contends that the property was no longer property of the marital estate because the debtor’s right of redemption was terminated at the time of the sale which was before she filed the bankruptcy. The debtor contended that the property was still property of the marital estate because the court had not confirmed the sale and it was not a complete sale before she filed the bankruptcy. Holding: The court held that the bankruptcy estate included the property of the debtor at the time of the commencement of the action. The court further held that the filing of a bankruptcy could not revest the debtor with property lost pre-petition by foreclosure or eviction. Under an assessment of Virginia law, the court held that the owner of real estate loses the right of redemption prior to a judicial sale and the judicial sale becomes final when the trustee “knocks the land down to the bidder.” Therefore, the court modified the automatic stay for the City to have the sale confirmed by the state court. If the sale was confirmed by the state court, then the property was not the property of the bankruptcy estate. The court did warn, however, if the sale was not confirmed by the state court and did not go through, then it would return to the bankruptcy estate for purposes of the bankruptcy litigation. In re Jerry Allen Creger, 403 B.R. 381, 2009 Bankr. LEXIS 850 (Apr. 17, 2009) Facts: This case arose from a lender’s Motion for Relief from Stay in a bankruptcy action filed by husband and wife debtors. An issue arose over the legal description of the property in the deed of trust securing the sellers’ loan to the buyers on the property. The other lender on the property sought for relief from the automatic stay in bankruptcy to exercise its contractual and statutory rights under its deed of trust. The commercial lender also had a security agreement on the intangibles of the debtors. Two

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questions were presented to the bankruptcy court. First, does “Tract 1,” which had an issue with the legal description, constitute property of the debtors subject to the bankruptcy? Second, what is the consequence, if any, of the security interest of the commercial lender in the debtors’ general intangibles? Holding: In answering the first question the court reviewed Virginia law as pertains to ambiguities in a contract and found that the controlling question was whether a deed with a particular description in the granting clause that conflicts with a later recital in the deed is ambiguous under Virginia law. The court found that, under Virginia law, the granting clause prevails under other portions of the deed. The court then found that the granting clause here was controlling and that the deed was not ambiguous. As the granting clause in the lender deed only conveyed tract 2, not Tract 1, Tract 1 was not property of the debtors and was not subject to the bankruptcy proceeding. In answering the second question, the court found that the question was inapposite; it did not matter whether the cause of action for the other lenders’ deed of trust was a general intangible because a beneficiary under a deed of trust has an independent cause of action for reformation. The court then held that reformation was proper in the bankruptcy proceeding because of the potential impact on the bankruptcy estate if Tract 1 was not included in the bankruptcy estate. As the court had already determined that Tract 1 was not included in the bankruptcy estate, the proper cause of action in the bankruptcy proceeding for the other lenders’ deed of trust was for reformation of the deed to include Tract 1. In re Blue Shadows Hotel & Conference Center, LLC, 419 B.R. 308, 2009 Bankr. LEXIS 3833 (W.D. Va. Nov. 30, 2009), rev’d, No. 5: 10cv00005 (W.D. Va. Apr. 1, 2010) Facts: This case arose from a dispute over whether mechanic’s liens were valid in a bankruptcy proceeding. A contractor filed a memorandum of mechanic’s lien in the amount of $228,761.33 for sleeper sofas, lounge chairs and lamps, artwork, mirrors, tables and lamp shades. Another contractor filed a memorandum of mechanic’s lien in the amount of $56,034.43 for flat panel LCD monitors, cable, microphones, speakers, amplifiers, and a portable projector. The validity of the mechanic’s liens was questioned due to the fact that two deeds of trust were on the property which were both subordinate to the mechanic’s liens if they were valid.

Holding: The bankruptcy court considered the question of whether materials need to be permanently annexed to a structure in order to be properly claimed under a mechanic’s lien. The court basically found that it is irrelevant that items could be easily removed from the hotel. The court reasoned that the goods supplied by the contractors were “delivered, accepted and installed and added value” to the structure. Further, the court reasoned that the hotel could not have functioned as a hotel without these items. Consequently, the mechanic’s liens were valid and in superior position to the deeds of trust on the property. In addition, the court allowed one of the contractors to include in the mechanic’s lien labor for design services. In doing so the court drew an analogy to an architect who provides plans and then supervised the construction of a building. The court based its holding on the fact that it could not draw a distinction between “one who puts his labor into plans for the erection of a building and actually supervises its erection, and one who . . . actually performs a manual service” (quoting Cain v. Hawthorne, 159 Va. 446, 166 S.E. 478 (1932)). The court reasoned, in drawing an analogy to architectural work, that the contractor applied labor to the property when it created the plan for the design services and provided labor and materials to help carry out the design plan. Therefore, the design work qualified for a mechanic’s lien under VA. CODE § 43-3.

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Summit Community Bank v. Blue Ridge Shadows Hotel & Conference Center, No. 5:10cv00005 (W.D. Va. Apr. 1, 2010) Recently, the United States District Court for the Western District of Virginia reversed an earlier bankruptcy court order permitting furniture to be claimed in a supplier's mechanic's lien. The United States Bankruptcy Court for the Western District of Virginia had previously held that a contractor may claim a mechanic's lien for materials supplied to a hotel, even if the individual items the contractor supplied are not permanently annexed to the freehold. In particular, the Bankruptcy Court ruled that the two contractors in that case had valid mechanic's liens for supplying the hotel with sofas, lounge chairs, pillows, lamps, benches, artwork, and electronics among other easily removed items. See Summit Community Bank v. Blue Ridge Shadows Hotel & Conference Center, LLC (In re Blue Ridge Shadows Hotel & Conference Center, LLC), No. 08-51271, 2009 Bankr. LEXIS 3833 (Bankr. W.D. Va. Nov. 30, 2009). On April 1, 2010, the District Court reversed the earlier Bankruptcy Court order and held that the Virginia mechanic's lien statute, VA. CODE § 43-3, requires that materials supplied to improve a building must have a more substantial connection to the building or structure to qualify as an “improvement” for purposes of the lien statute. In other words, it is not sufficient for the materials supplied to merely add value to a building by the mere presence of the items within the building. The court reasoned that this interpretation is consistent with the statute's intent, which is to secure payment for work performed or materials provided in erecting or repairing a building or structure. The court distinguished an earlier Virginia Supreme Court decision, which held that “installed” cabinets were properly subject to a lien, based upon the fact that the furniture supplied by the lien claimant was not intended to be installed or incorporated into the structure. The court held that the Bankruptcy Court erred in concluding that the furniture and other items constituted “improvements” that were properly included in the supplier's mechanic's lien.

U.S. DISTRICT COURT (EASTERN DISTRICT OF VIRGINIA)

Murnan v. Stewart Title Guar. Co., 585 F. Supp. 2d 825 (E.D. Va. 2008), vacated in part by 607 F. Supp. 2d 745 (Apr. 1, 2009) Facts: This case arose over a dispute as to whether a taxpayer trustee upon her purchase of a piece of property should be denied coverage under an Owner’s Title Insurance Policy based on whether she created, suffered, or assumed a tax lien obligation which attached to the property. Between 1986 and 2003 the taxpayer trustee, in her personal capacity, was the subject of a number of federal tax liens and other judgments in or around 2004. The taxpayer trustee attempted to have the IRS discharge her federal tax liens, however in early 2004 the IRS sent a letter to the taxpayer trustee rejecting her request for a discharge of the federal tax liens. At that time the total tax liens against her were $292,899.46. Previously, in or around 1998, the taxpayer trustee’s uncle purchased the property in question for $350,000.00. Several years later the taxpayer trustee executed a written trust agreement naming herself as trustee and her uncle transferred the property in question to the trust. The taxpayer trustee, acting in her capacity as trustee, then recorded the property in the appendix in or around June 2001. Through a series of loan transactions the taxpayer trustee placed liens against the property totaling $216,301.80. In and around January 2003, the taxpayer trustee executed a sales contract to re-acquire the property from Mount Vernon, a lender on the property, on behalf of the trust in her capacity as trustee. In this loan transaction the taxpayer trustee identified one prior tax lien on the property. Subsequent to doing this the taxpayer trustee contacted Stewart Title regarding issuance of a title insurance policy on the property. Stewart title learned of the IRS tax judgments in doing its title search on the property. Stewart Title specifically excluded from coverage any tax liens subsequent to 2002. Despite the fact that the taxpayer trustee was aware of the IRS liens prior to 2002 at the time she purchased the owners policy of title insurance, she did not disclose them to Stewart Title. In or around November of 2003, the taxpayer trustee

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filed a claim with Stewart Title based on the IRS tax liens and asked that Stewart Title take the steps necessary to clear the title as pertained to the IRS tax liens. Holding: In 2008 this case originally arose over a question of whether title insurance coverage was provided for an insured based on whether the insured created, suffered, or assumed a tax lien which arose from the property under exclusion 3(a) in the owner’s policy. In the 2008 case the U.S. District Court for the Eastern District of Virginia adopted the “well-settled” definitions of the terms in exclusion 3(a). In doing so the court found that the applicable term for a tax lien is “suffer” because a tax lien arises by virtue of a deficient taxpayer’s failure to pay an assessed tax despite the power and obligation to do so. When used in this way, “suffer” “has been interpreted to mean consent with the intent that what is to be done is to be done” and has been deemed synonymous with “permit,” implying the power to “prohibit or prevent the claim from arising.” The court then held that the taxpayer trustee could not suffer the IRS tax liens on the trust property because as trustee she did not have the power or duty to satisfy her personal tax liabilities. The court further went on to find that the taxpayer trustee neither created, assumed nor agreed to the tax liens; “create” affirms an act and “assume or agree to” generally carries connotations of contracted requiring full knowledge by the insurer of the extent of the amount of the claim which here the trustee did not have. In a 2009 opinion on this case, which arose because the U.S. District Court reconsidered its decision in the 2008 case, the court vacated it previous grant of partial summary judgment to the Plaintiff, and in doing so found that it was mistaken when the 2008 opinion concluded that the taxpayer trustee in her capacity as trustee did not create, suffer, assume or agree to the tax liens on the property. Specifically the court found that, upon a clear analysis, the facts demonstrated that the taxpayer trustee, in her capacity as trustee, “suffered” the liens to attach to the property at the time she acquired the property, and, therefore, exclusion 3(a) bars coverage and Plaintiff’s claim should be dismissed. The court re-analyzed the term “suffer” and found that when used as in 3(a) it has been interpreted to mean “consent with the intent that what is to be done is to be done.” It has been deemed “synonymous with permit, which implies the power to prohibit or prevent the claim from arising.” The court went on to find that the taxpayer trustee, when she purchased the property, essentially allowed the liens to attach the property and, therefore, she suffered the liens on the properties. Therefore, coverage under the Owners Title of Policy Insurance was denied under exclusion 3(a). Carter v. Countrywide Home Loans, Inc., No. 3:07cv651, 2009 U.S. Dist. LEXIS 31446 (E.D. Va. Apr. 14, 2009) Facts: Plaintiffs were the owners of property which was subject to a foreclosure sale. Plaintiffs brought suit against their lender Countrywide under the Real Estate Settlement Protection Act (“RESPA”) and the Fair Debt Collection Practices Act (“FDCPA”) for failure to properly apply certain payments that the Plaintiffs made toward their mortgage loan. Holding: Plaintiffs are entitled to claim damages for emotional distress, frustration, humiliation, and damage to reputation as part of the “actual damages” that they may recover under RESPA and the FDCPA. Courts have previously held that “actual damages” include emotional distress damage based on the fact that RESPA is a consumer protection statute that should be construed liberally. Additionally, the Federal Trade Commission commentary to the FDCPA has established that “actual damages” for a violation can include damages resulting from emotional distress. Abbott v. SunTrust Mortgage, Inc., 2009 U.S. Dist. LEXIS 29265 (E.D. Va. Apr. 8, 2009) Facts: This case arose from a dispute between the Abbotts and SunTrust Bank dealing with bankruptcy proceedings the Abbotts filed between the time when they went into default on their SunTrust mortgage and the time SunTrust foreclosed on the property. In or around July of 2006, the Abbotts obtained a $359,000.00 mortgage from SunTrust Bank for the purpose of acquiring a piece of property. The loan was secured by a deed of trust on the property, which as most deeds of trust, provided that the

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trustee could foreclose and sell the property if the Abbotts defaulted on the loan. The Abbotts did default on the loan and eventually SunTrust did foreclose and auction the property. However, in or around September 2007, after the default but before foreclosure, the Abbotts filed a voluntary bankruptcy petition in the Eastern District of Virginia. The Bankruptcy Court found the bankruptcy pleadings to be frivolous and without merit. Therefore, the bankruptcy court dismissed the bankruptcy pleadings. The bankruptcy court also enjoined the Abbotts from filing any further bankruptcy petitions for 180 days. On the Abbotts appeal of the bankruptcy court’s decision, the District Court upheld the bankruptcy court’s dismissal of the petition and injunction. Then in or around October 2008, the Abbotts initiated this action in the Eastern District of Virginia, filing a petition for writ of mandamus stating that SunTrust had violated IRS laws by not possessing certain tax forms and had violated the Fair Debt Collection Practices Act by not complying with those particular laws. Holding: The U.S. District Court held that the petition for a writ of mandamus, which the court considered a complaint, was also frivolous and without merit. Therefore, the court had to consider, by request of the Defendant, whether to award the mortgage company’s attorney fees under 28 U.S.C. § 1927 and whether to impose sanctions under Rule 11 of the Federal Rules of Civil Procedure. The court recognized the split in authority as to whether 28 U.S.C. § 1927 applies to pro se litigants. In recognizing the split the court held that the section should not apply to pro se litigants and denied SunTrust’s requests for attorney fees. However, the court did review Rule 11 for Sanctions and found that it was clear that the pleading were entirely frivolous and filed for an improper purpose. Therefore, the court held that the Abbotts had to pay $1000.00 in sanctions for their frivolous filing and further held that the Abbotts may not file any further actions dealing with the property in question until that $1000.00 in sanctions was paid to SunTrust. First American Title Ins. Co. v. Western Surety Co., No. 1:09cv403, 2009 U.S. Dist. LEXIS 44231 (E.D. Va. May 27, 2009) Facts: First American Title Insurance Company underwrote First Alliance Title Company's insurance policy on a piece of real property which was being refinanced by SunTrust Mortgage, Inc. Pursuant to the Consumer Real Estate Settlement Protection Act (“CRESPA”) regulations, First Alliance Title Company obtained a surety bond in the amount of $100,000.00. An agent of First Alliance Title Company wrongfully diverted the funds which were intended to pay off the original mortgage. When the owner of the property stopped paying on the original mortgage, the original mortgagor foreclosed on the property and there were not sufficient funds to satisfy SunTrust's claim. SunTrust made a claim under its title policy with First American which was paid in full. First American sought recovery from the surety company, but was denied payment. Accordingly, First American brought suit against the surety company and First Alliance Title Company. Holding: The court ruled that CRESPA does not preclude common law claims by a title company against a surety bond. The court rejected the surety's argument that CRESPA is the exclusive remedy for actions on surety bonds, and that only the state licensing authority has standing to pursue a claim. The court also ruled that a title insurance company that pays a claim to its insured lender under a title insurance policy qualified as an “aggrieved person” under a CRESPA bond. The court permitted the title insurance company to proceed with its subrogation claim, but noted that in recognizing the right of a title insurance company to proceed directly against the surety, it may be unnecessary for a title company to allege that it is subrogated to the rights of its insured lender. Lee v. ZOM Clarendon, L.P., 665 F. Supp. 2d 603* (E.D. Va. Oct. 22, 2009) Facts: Plaintiff and Defendant owned adjoining parcels of real property. Defendant owned the alleged servient estate and Plaintiff owned the alleged dominant estate. As Defendant began development, it built a fence around its property, which obstructed Plaintiff's use of the alleged easement across Defendant's property.

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Holding: The Court held that an express easement could not be created in a deed of partial release executed by trustees of a deed of trust. The deed of trust specifically limited the trustees to having the authority to release the deed of trust upon full payment of the debt or to sell the property if the debtor defaulted. Accordingly, an attempt by the trustees to grant an express easement would be an ultra vires action without legal effect. Additionally, the fact that the note holder also signed the deed of partial release did not create an easement because the note holder had no legal interest in the property subject to the deed of partial release. In order to establish an easement by implication, the party seeking validity of the easement must satisfy a well established test. Accordingly, even if it was proved that the dominant and servient tracts originated from a common grantor, it was not possible to establish an easement by implication if there was no evidence that the easement was in use at the time that the property was severed. Martinez v. Resource Bank, FSB, No. 1:09cv1112, 2009 U.S. Dist. LEXIS 104212 (E.D. Va. Nov. 9, 2009) and 2009 U.S. Dist. LEXIS 111620 (Nov. 30, 2009) Facts: Plaintiff was a permanent resident of the United States, but was originally from El Salvador and had limited ability to speak, read or write English. Plaintiff purchased a home on January 29, 2004, by obtaining two loans on the property (secured by first and second deeds of trust). Plaintiff incorrectly believed that he had obtained loans with fixed interest rates; however, the rates were adjustable, and when one of the rates adjusted, Plaintiff experienced difficulties making the larger payments and the property was scheduled for sale by foreclosure. Plaintiff filed a complaint on September 10, 2009. Holding: On November 9, 2009, the court ruled on Plaintiff's claims against the settlement agent who handled the closing on the property. The court held that the Plaintiff's Real Estate Settlement Protection Act (“RESPA”) claim was time-barred by the Statute of Limitations. Although RESPA has several different statutes of limitations for different violations and the court was not sure which section Plaintiff claimed was violated, the claim was barred by any of the applicable statutes of limitations because the settlement occurred more than five years before the complaint was filed. Similarly, the Court held that Plaintiff's Federal Truth in Lending Act (“TILA”) claim was time-barred, whether under the one-year or the three-year statute of limitations. Lastly, the court also held that although it lacked sufficient facts to evaluate them, the Plaintiff's claims for common law civil conspiracy, breach of fiduciary duty and negligence were all time-barred under either a two-year or three-year statute of limitations. On November 30, 2009, the court ruled on Plaintiff's claims against the trustee and the substitute trustee under the deed of trust and against Mortgage Electronic Registration Systems, Inc. (“MERS”). The court made the same findings that Plaintiff's claims under RESPA, under TILA and for common law civil conspiracy, breach of fiduciary duty and negligence were all time-barred. However, this time Plaintiff argued that each claim should not be time-barred due to equitable tolling. The court cited an unpublished Fourth Circuit case which held that equitable tolling did not apply to RESPA; and even if it did, Plaintiff did not provide evidence of the required acts of fraudulent concealment. With regard to the TILA claim, the court ruled that equitable tolling did not apply because Plaintiff did not provide evidence of the required acts of fraudulent concealment. With regard to the common law claims, the court ruled that equitable tolling did not apply because Plaintiff did not provide evidence that he was intentionally mislead. Wells Fargo Bank, N.A. v. Old Republic National Title Ins. Co., No. 01:09cv297, 2009 U.S. Dist. LEXIS 118655 (E.D. Va. Dec. 17, 2009) Facts: Vijay Taneja operated a fraudulent scheme by which his company FMI originated home mortgage loans and sold them to investors, such as Well Fargo, in the secondary market. The settlement agent in these transactions was TitlePro, a policy issuing agent for Old Republic National Title Ins. Co.

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(“ORNTIC”). However, the agency agreement between TitlePro and ORNTIC specifically stated that TitlePro did not have any authority to act as ORNTIC's agent for anything other than serving as a title agent. Holding: The court held that the Consumer Real Estate Settlement Protection Act (“CRESPA”) does not expand the agency relationship between the title insurer and the title agent to require that the insurer be responsible for the title agent's actions as a settlement agent. The court acknowledged that use of a closing protection letter confirms that the settlement agent is not an agent of the title insurer because the letter is issued for the purpose of stating that the insurer is not liable for the actions of the title insurance agent. The court also held that ORNTIC was not liable for negligence, as there is no common law duty of reasonable care owed by a settlement agent or a title agent to a secondary market purchaser. On a claim by Wells Fargo under the title commitments and closing protection letters which were originally issued to FMI and assigned to Wells Fargo, the court held that because FMI's fraudulent activity would have barred FMI from recovering under the commitments and closing protection letters, Wells Fargo, as the assignee of FMI, was also barred. Comstock Yard L.C. v. Balfour Beatty Construction LLC, 2009 U.S. Dist. LEXIS 61753 *36 (E.D. Va. 2009) Facts: Comstock Yard L.C. (“Comstock”) developer entered into a $92 million contract with Centex Construction LLC (“Centex”) for construction of a condominium project in Arlington. Balfour Beatty subsequently acquired Centex’s rights to the contract. During the course of performance between Comstock and Balfour Beatty, several disputes arose as a result of delays. In September 2007, a subcontractor filed two mechanic’s liens totaling $1.4 million against the project. In an effort to resolve several pending disputes, the parties entered into a settlement agreement in January 2008. The settlement agreement provided that “[Balfour Beatty] agrees that it will not at any time file or record a lien against the Project.” Pursuant to the settlement agreement, the parties agreed that Comstock would pay $1.7 million to settle certain disputed claims. Comstock further agreed to negotiate in good faith as to another $8 million in claims that Comstock believed it had a right to recover against Balfour Beatty. In return for these promises, Balfour Beatty agreed to waive its right to file mechanic’s liens. Subsequently, Balfour Beatty filed liens based, in part, upon work performed after the settlement agreement. Holding: The court considered whether the settlement agreement between the parties barred Balfour Beatty from asserting two mechanic’s liens for work performed following the agreement. The court addressed three issues: 1) was the lien waiver supported by consideration? 2) were the lien waivers subject to a condition precedent that had not been triggered? and 3) did Comstock materially breach the agreement before Belfour Beatty filed the subject mechanic’s liens? The court noted that Virginia law specifically provided for a waiver of a right to file a mechanic’s lien, provided that such a lien waiver was supported by consideration. Balfour Beatty specifically argued that the promise to pay $1.7 million did not constitute consideration because Comstock was previously obligated to pay these sums. However, the court reasoned that Balfour Beatty was not guaranteed to collect that amount prior to the execution of the settlement agreement between the parties “during an uncertain and litigious time.” Thereafter, the court concluded that the lien waiver was clear and unambiguous and applied prospectively. The court also rejected Balfour Beatty’s alternative argument that the lien waiver was not enforceable because Comstock materially breached the settlement agreement prior to the filing of the subject mechanic’s liens. Further, the court also held that the lien waiver contained in the settlement agreement was not subject to a condition precedent because Comstock specifically rejected all attempts to qualify the lien waiver provision during the course of negotiations. Therefore, the court enforced the lien waiver provision and held that the mechanic’s liens were invalid.

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Comstock Yard, L.C. v. Balfour Beatty, 2009 U.S. Dist. LEXIS 73206 * 28 (E.D. Va. 2009) Facts: Following the execution of a settlement agreement, which included a mechanic’s lien waiver provision, Balfour Beatty filed two mechanic’s liens against the subject condominium project. In response, Comstock filed this suit alleging breach of contract, slander of title, and abuse of process. Following the court’s holding in the above opinion, which invalidated the mechanic’s liens, the parties moved for partial summary judgment on numerous issues, including Comstock’s slander of title claim. Holding: Comstock argued that Balfour Beatty committed slander of title by filing two mechanic’s liens on the project while knowing that it previously waived its mechanic’s lien rights. Balfour Beatty responded that the filing of a mechanic’s lien constituted a “judicial proceeding,” which entitled Balfour Beatty to the defense of absolute privilege. The court, relying upon Donohoe Constr. Co v. Mount Vernon Assocs. and its progeny, explained that the filing of a memorandum of lien in combination with the suit to enforce the lien constitutes a judicial proceeding. See 235 Va. 531, 369 S.E. 2d 857 (1988). Therefore, the court held that the filing of the mechanic’s liens by Balfour Beatty in conjunction with the enforcement suit constituted a judicial proceeding and conferred absolute immunity upon Balfour Beatty. The court also rejected Comstock’s alternative argument that the execution of the lien waiver by Balfour Beatty waived any applicable privilege relating to said lien waiver. The court reasoned that the attendant right Balfour Beatty arguably waived (i.e., the right to absolute privilege in a judicial proceeding) is not closely related in subject matter to the prior contract that would be relied upon to trigger the waiver. The court reached this conclusion after determining that the policies underlying the lien waiver, debt collection and/or priority were unrelated to the policies underlying absolute privilege in judicial proceedings, which seeks to foster open and free communication in court. The lien waiver agreement also did not explicitly or implicitly address the concept of privilege in a judicial proceeding. Accordingly, the court rejected Comstock’s argument that Balfour Beatty waived its judicial privilege by contracting away its right to file mechanic’s liens; therefore, the slander of title claim was dismissed.

U.S. DISTRICT COURT (WESTERN DISTRICT OF VIRGINIA) NENR Investments, LLC v. Starbucks Corp., No. 1:08cv00047, 2009 U.S. Dist. LEXIS 44769 (W.D. Va. May 18, 2009) Facts: NENR Investments, LLC (“NENR”) purchased improved property and entered into a commercial lease to rent the property to Starbucks for ten years. Starbucks decided to demolish the building, rather than renovate it, and the parties amended their agreement accordingly. However, Starbucks never occupied or demolished the building and failed to pay rent from October 1, 2008. NENR brought suit against Starbucks. Holding: The court held that NENR was not limited solely to recovery of the unpaid rent because the language of the lease provided that no remedy in the lease was exclusive, unless otherwise expressly stated, and because the presumption under Virginia law is against exclusivity. Accordingly, NENR was also permitted to recover for loss in property value of the leased premises. Universal Concrete Prods. Corp. v. Turner Constr. Co., 595 F.3d 527 (4th Cir. Feb. 19, 2010)

Facts: The issue before the federal court was whether certain provisions in a prime contract, which the general contractor and a subcontractor incorporated by reference into their subcontract, render an otherwise unambiguous pay-when-paid clause within that subcontract ambiguous. Holding: The court found that the contract unambiguously reflected both parties’ understanding that Universal would only be paid for its work after Turner was paid by the owner. Because the contract language was so clear and unambiguous, the court rejected foreign case law citing public policy concerns not held by the Virginia courts and legislature, instead finding the analysis in W.O. Grubb Steel Erection Inc. v. 515 Granby LLC more consonant with Virginia law and public policy.

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2010 VIRGINIA GENERAL ASSEMBLY REPORT: REAL ESTATE LEGISLATION

by David S. Mercer and Lucia Anna Trigiani*

The 2010 Session of the Virginia General Assembly convened on January 13, 2010 and adjourned on March 13, 2010; the Session was extended one day to allow for consideration of the budget bill. This was a “long session” of the General Assembly, lasting 60 days (plus one day for the extended session). The reconvened session (more commonly referred to as the veto session) was convened on April 21, 2010. In all, a total of 2,964 bills were introduced during the 2010 session, an increase from the number of bills introduced during the 2009 session (2577 bills) but still fewer than the number of bills considered in the 2008 session (3323). Of the bills considered, 1598 were passed by the Senate and the House of Delegates and forwarded to the Governor for signature. A total of 1093 bills failed. The House and Senate carried over 273 bills for consideration in the 2011 session. The last day to act on continued legislation is December 2, 2010. The Governor did not veto any measures this year, but recommended changes to 122 bills.

Following is a brief overview of select real estate legislation by topic area. This summary is intended to provide highlights of legislation enacted during the 2010 Session. Most legislation becomes effective July 1, 2010, even though a number of measures contain emergency clauses or delayed effective dates. So, careful attention should be given to determining when legislation becomes effective.

Accompanying this summary is a bill list. Legislation text and detailed reports on the status of

each bill as considered by the Virginia General Assembly are available on the General Assembly website at http://leg1.state.va.us/lis.htm.

BANKING AND FINANCE

The General Assembly continues to give attention to consumer protection with a substantial revision and re-codification of the laws governing financial institutions and services. The Virginia Housing Commission recommended legislation to require mortgage lenders and brokers whose employees are required to be licensed as mortgage loan originators to register with the Nationwide Mortgage Licensing System and Registry. Also on recommendation of the Virginia Housing Commission, the General Assembly established regulatory requirements for exchange facilitators. The focus of the legislation, supported by the Virginia Bar Association, is to prohibit misrepresentation, fraudulent and dishonest dealing and require an

* David S. Mercer and Lucia Anna Trigiani are partners in the firm of MercerTrigiani in

Alexandria, Virginia. The focus of their practice is on the representation of common interest community associations and developers of those communities.

Mr. Mercer and Ms. Trigiani are lobbyists for the community association industry. Mr. Mercer has been active in legislative issues throughout his practice. He is past President of Lawyers Helping Lawyers. He is a Virginia Law Foundation Fellow and is a charter member and served as Dean of the College of Community Association Lawyers. Ms. Trigiani is a past Chair of the Virginia Bar Association Real Estate Section Council, and is an Area Representative and a member of the Publications and the Ethics Subcommittees of the Real Property Section of the Virginia State Bar. Ms. Trigiani is also a charter member of the College of Community Association Lawyers. She is President Elect of the Virginia Bar Association.

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accounting. The legislation establishes civil penalties that are enforced by the Attorney General, local commonwealth attorneys or attorneys for individual localities.

BUILDING CODE

The General Assembly responded to issues arising out of significant losses from use of “Chinese

drywall” by creating the Virginia Defective Drywall Correction and Restoration Assistance Fund. The Fund will be administered by the Virginia Resources Authority and the Department of Housing and Community Development, with guidelines for loans or grants from the Fund to be developed by the Department. The Virginia General Assembly also adopted legislation to clarify that any person aggrieved by a local building official in that official’s application of the Uniform Statewide Building Code may appeal the decision to the local Board of Building Code Appeals. And, the General Assembly increased the civil penalty for second or subsequent violations of the Uniform Statewide Building Code - based on several different bills which sought to increase those penalties.

BUSINESS ENTITIES The General Assembly continues efforts to enact legislation to conform the statutes addressing the creation and operation of business entities. Legislation was passed, on the recommendation of the Virginia Bar Association Business Law Section, to conform provisions of the Stock and Non-Stock Corporation Acts to the Model Business Corporation Act.

In other legislation, the General Assembly required that payments of annual registration fees assessed against a corporation be applied to the corporation’s oldest unpaid registration fee or penalty.

The General Assembly gave the State Corporation Commission authority to correct clerical errors in its recordings for limited liability companies, similar to existing law applicable to stock and nonstick corporations. Other legislation allows registered agent changes to be filed electronically with the Commission.

CIVIC AND CHARITABLE

The General Assembly considered and enacted several bills affecting the regulation of charitable gaming. Following a review of charitable gaming practices by special subcommittees of the House Committee on General Laws and the Senate Committee on General Laws and Technology, further regulations regarding the conduct of bingo games will become law. These regulations limit the number of bingo games that may be played in a session to no more than fifty and require the Charitable Gaming Board to adopt regulations prescribing the condition by which non-members of an organization may participate in the conduct of bingo and the minimum time interval required between the conduct of bingo games. In addition, the definition of “illegal gambling” was modified to make it clear that the making, placing or receipt of any bet or wager of money or other thing of value includes the purchase of a product. Legislation also sought to make machines commonly known as “free spin machines” illegal in Virginia.

CIVIL REMEDIES AND PROCEDURE On recommendation by the Virginia Housing Commission, the General Assembly enacted legislation to establish that suits in interpleader of real estate escrows are within the jurisdiction of the General District Court. The legislation also protects escrow funds in the event of real estate foreclosure.

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The General Assembly continues to focus on legislation to encourage electronic filing of civil cases in both the General District Court and the Circuit Courts. Legislation establishes electronic filing of cases in Circuit Courts by providing for acceptance of electronic images as original documents for filing and recording.

COMMUNITY ASSOCIATIONS As in 2009, the General Assembly considered refinements to the statutes enacted in 2008 to create the Common Interest Community Board. The legislation adopted in the 2010 Session affirms the requirement that associations establish a procedure for resolution of complaints pursuant to procedures established by regulation of the Board. Additionally, legislation established an exemption from the requirement for manager licensure for residents who provide bookkeeping, billing or recordkeeping services to the Association in which that individual resides. The General Assembly again this year considered several bills seeking to narrow and limit the scope of restrictive covenants. The bills address the display of the United States flag as well as prohibitions against clotheslines and solar panels. Only legislation affecting the display of the U.S. flag ultimately passed the General Assembly. The legislation mirrors the federal flag display law. The General Assembly enacted changes to the law to allow associations to take advantage of technology in voting and amending governing documents. And, legislation intended to limit the liability of common interest community associations for certain stormwater facilities was enacted.

CONSERVATION AND ENVIRONMENT The most significant number of bills covered in our annual review of real estate legislation is again in the area of conservation and environment. The General Assembly continues to focus on protection of precious water resources - in order to ensure the propagation of commercial shellfish and to protect a number of scenic rivers within the Commonwealth. Additionally, the General Assembly considered several measures on dam safety with bills to require the Soil and Water Conservation Board to establish procedures to provide for new standards for spillway design and to award grants to local government and private entities for dam break analysis. In an interesting piece of legislation, the General Assembly addressed concerns about the transportation of waste kitchen grease - apparently, a hot commodity in some circles. Under new regulations, persons who transport such grease must register with the Virginia Department of Agriculture and Consumer Services unless otherwise exempt from the requirements.

DEEDS OF TRUST The General Assembly enacted legislation to clarify that, in the event of a foreclosure sale, the trustee shall apply proceeds of the sale to payment of taxes. In another bill, the General Assembly enacted legislation to allow certain title insurance companies to exercise the authority that settlement agents currently may exercise to release the lien of a deed of trust.

FAIR HOUSING On recommendation of the Virginia Housing Commission, the General Assembly passed two bills to require the Fair Housing Board to promulgate regulations regarding educational materials for persons in the business of selling or renting dwelling units who are not licensed real estate brokers. The

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requirements of the legislation include that the individual must submit an affidavit to the Fair Housing Board that they have read and understand the law.

HOUSING AND REDEVELOPMENT The Virginia Code Commission recommended legislation to repeal the statutory provisions formally notifying the Federal Housing Expeditor that the rental control provisions contained in the Defense Rental Area Program, established by the Veteran’s Emergency Housing Act of 1946 because such notification is no longer necessary.

The Virginia Code Commission recommended legislation to repeal the statutory provisions formally notifying the Federal Housing Expeditor of the rental control provisions contained in the Defense Rental Area Program, established by the Veteran’s Emergency Housing Act of 1946, because such notification is no longer necessary.

And in other legislation, the General Assembly enacted laws to provide that a commissioner on a

local housing authority receives compensation as determined by the locality for each meeting of the authority attended by the commissioner, not to exceed $75.00.

INSURANCE

The General Assembly gave the State Corporation Commission the authority to require a person to make restitution in the amount of direct, actual financial loss if the person improperly withholds, misappropriates, or converts any money or property received in the course of conducting business. This is a change in the Commission’s authority which is currently limited to cases where an insurer charges an excessive rate or discriminatory premium or fails to pay undisputed amounts required under an insurance contract. Legislation also exempts certain information concerning insurance rates filed with the State Corporation Commission from public inspection and copying if the information qualifies as or constitutes a trade secret as defined in the Uniform Trade Secrets Act.

LANDLORD TENANT The definition of landlord in the Virginia Residential Landlord and Tenant Act and the landlord and tenant law was modified to provide that the definition does not include community land trusts. A number of technical amendments were made to the landlord and tenant laws as they relate to landlord and tenant obligations. Also, the legislation requires the Executive Secretary of the Supreme Court to require electronic interface with case management systems and for the General District Courts to allow private vendors to file civil actions electronically on forms developed by the Executive Secretary. The legislation also allows certain persons to prepare, execute and file in any proceeding in General District Court without the intervention of an attorney. In separate legislation, the Residential Landlord and Tenant Act was amended to provide that when a tenant presents on or before the first return date in any action for an unlawful detainer the payment in full, the court must continue the action for ten days.

LAND RECORDS AND COURT RECORDS In the only bill addressing land records, the General Assembly made technical changes to the handling of electronic or digital filing by the Circuit Court clerks.

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PROFESSIONS AND OCCUPATIONS The General Assembly raised the threshold for which a person must have a Class C Contractors License from less than $7,500 to less than $10,000. Commensurate with that change, the Class B Contractors License threshold is also raised from $7,500 or more to $10,000 or more. Contractors are also required to apply for or renew a business license in any locality and provide proof of that licensure to the Board for Contractors. The Board for Contractors will also be regulating certified waterwell systems providers. The regulatory boards within the Department of Professional and Occupational Regulations have authority to issue a temporary license or certification to an applicant who holds a comparable license or certification in another state. The temporary license or certification is valid for not more than forty-five days. This legislation was part of the Governor’s “Jobs and Opportunity” agenda. The Real Estate Appraiser Board will now have the authority to regulate appraisal management companies. Other legislation established a voluntary compliance program within the Real Estate Board to allow certain real estate brokers to bring practices, policies and procedures into compliance with applicable law and regulations. The bill also provides that the Real Estate Board may establish minimum education requirements for licensure by reciprocity.

REAL ESTATE SETTLEMENTS

The General Assembly again revised the requirements for seller disclosure under the Residential Property Disclosure Act to add a requirement for disclosure concerning wastewater systems. The statute contains the specific disclosure requirement: the owner makes no representations with respect to the presence of any wastewater system, including the type or size thereof or associated maintenance responsibilities related thereto, located on the property.

TAXATION

The General Assembly enacted legislation which makes a number of changes to the manner in which real property is assessed. The bill provides that the fair market value of certain affordable housing must be determined using the income approach, based on the properties current use and restrictions. New requirements are imposed for real property appraisers and Boards of Equalization.

The legislation also provides that a locality’s real property sales assessment ratio higher than 130% is prima facia proof that the locality has failed to assess at 100% of fair market value. Taxpayers must be given access to certain information related to assessments. And, the local assessing office must provide notice of any request to increase an assessment for commercial, multi-family residential or industrial property assessments that are already under appeal. Other legislation addresses enterprise zone grant programs, changing eligibility for enterprise zone job grants in certain areas where an unemployment rate is 1-1/2 times or more than the state average. The legislation is part of the Governor’s legislative agenda for job creation and economic development.

TRUSTS AND ESTATES

In legislation supported by the Virginia Bar Association, a number of revisions were made to the Small Estate Act. The statutory provisions are rewritten to consolidate a variety of different provisions found elsewhere in the Virginia Code. The bill also allows a person holding a small asset belonging to a

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decedent to pay or deliver the asset to a designated successor if he presents an affidavit on behalf of the known successors. The asset cannot exceed $50,000 in value. The General Assembly also adopted the Uniform Power of Attorney Act recommended by the National Conference of Commissioners on Uniform State Laws in 2006. The Uniform Act establishes default rules that can be modified if the principal desires. Under the legislation, powers of attorney are durable unless drafted to expire upon a specified date or event and the Uniform Act addresses creation and use, good faith reliance, limitations on an agent’s powers, judicial review and other matters pertaining to the operation of the power of attorney. The statutory provision includes a form that may be used by an agent to certify acts concerning a power of attorney. The bill was supported by the Wills, Trusts and Estates Section of the Virginia Bar Association.

The General Assembly also amended the VIRGINIA CODE provisions addressing the duties of testamentary trustees. The legislation provides that any trustee under a will probated on or after July 1, 2010 is relieved of the duty to file an inventory or annual accounts with the Commissioner of Accounts if the will does not direct the filing of such inventory or accounts and the trustee obtains written consent from the beneficiaries.

ZONING AND LAND USE In legislation springing out of the Virginia Supreme Court case involving the Crucible, an anti-terrorism training facility in Stafford County, the General Assembly enacted legislation that provides that the issuance of any written order, requirement, decision or determination by the zoning administrator regarding the permissibility of a specific use or density is considered a significant affirmative governmental act for the purpose of determining vested rights. The General Assembly also granted authority to governing bodies to prepare amendments to the locality’s comprehensive plan rather than the governing body directing the Planning Commission to prepare such amendments. In legislation given recent attention by the press, zoning ordinances must consider temporary family health care structures a permitted accessory use in any single family residential zoning district. The legislation provides that the structures do not require a special use permit nor are such temporary family health care structures subject to any other local requirements beyond requirements imposed upon other authorized accessory structures. And, the General Assembly enacted legislation to provide that a residential facility in which no more than eight elderly or disabled persons reside must be considered residential occupancy by a single family. The General Assembly also gave localities the authority to obtain a determination by the Circuit Court concerning the constitutionality of local ordinance that has previously been held to be unconstitutional in a court not of record. Currently, only the Commonwealth has the authority to obtain such determination.

CONCLUSION

The focus of the 2010 Session of the Virginia General Assembly was the budget. Even so, the General Assembly enacted significant legislation affecting business entities. Equally significant was the adoption of the Uniform Power of Attorney Act, legislation that had been introduced in several prior sessions.

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The Housing Commission continues to be the source of much legislation. The Commission has a full agenda for 2010 to address a number of bills referred by the General Assembly. The Commission will continue four work groups addressing: neighborhood transitions and residential land use; common interest communities; affordability, real estate law and mortgages; and, housing and environmental standards. Additional legislation in these areas is likely.

We expect to see further efforts to amend the notary laws to facilitate electronic notarization.

Legislation seemed likely in the 2010 Session after adoption by the House of Delegates, but the legislation was not approved in the Senate.

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2010 VIRGINIA GENERAL ASSEMBLY: SELECTED REAL ESTATE LEGISLATION BILL LIST

Compiled by David S. Mercer and Lucia Anna Trigiani*

The submitted proposed bills are related to real estate. Further information will be forthcoming.

BANKING AND FINANCE

HB 367 Bad Checks; recovery if stop-payment order placed in bad

faith. [Amends and reenacts § 15.2-106 of the Code of Viginia.]

Delegate Onzlee Ware

HB 386 Deposits; removes stated maturity date. [Amends and reenacts § 8.3A-118.1 of the Code of Virginia.]

Delegate William R. Janis.

HB 417 Exchange Facilitators Act; established. [Amends the Code of Virginia by adding in Title 55 a chapter numbered 27.1, consisting of sections numbered 55-525.1 through 55-525.7.]

Delegate G. Glenn Oder.

HB 434 Freedom of Information Act; exemption for credit card and bank account data. [Amends and reenacts § 2.2-3705.1 of the Code of Virginia.]

Delegate H. Morgan Griffith

HB 482 Credit unions; conversion to a state mutual savings institution. [Amends the Code of Virginia by adding in Article 7 of Chapter 4.01 of Title 6.1 a section numbered 6.1-225.30:1.] Senate Bill 440 is identical.

Delegate Mark D. Sickles

HB 547 Nationwide Mortgage Licensing System & Registry; requires mortgage lenders and brokers to register. [Amends and reenacts §§ 6.1-409 and 6.1-410 of the Code of Virginia.] Senate Bill 240 is identical.

Delegate Daniel W. Marshall, III

HB 946 Financial institutions; method of obtaining records concerning banking and credit cards. [Amends and reenacts § 19.2-10.1 of the Code of Virginia.]

Delegate R. Steven Landes

* David S. Mercer and Lucia Anna Trigiani are partners in the firm of MercerTrigiani in

Alexandria, Virginia. The focus of their practice is on the representation of common interest community associations and developers of those communities. They have presented the legislative update segment of Virginia CLE’s Annual Real Estate Seminar for the last several years. This bill list is compiled for that presentation.

Mr. Mercer and Ms. Trigiani are lobbyists for the community association industry. Mr. Mercer has been active in legislative issues throughout his practice. He is past President of Lawyers Helping Lawyers. He is a Virginia Law Foundation Fellow and is a charter member and served as Dean of the College of Community Association Lawyers. Ms. Trigiani is a past Chair of the Virginia Bar Association Real Estate Section Council, and is an Area Representative and a member of the Publications and the Ethics Subcommittees of the Real Property Section of the Virginia State Bar. Ms. Trigiani is also a charter member of the College of Community Association Lawyers. She is President Elect of the Virginia Bar Association.

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HB 1036 Security for Public Deposits Act. [Amends and reenacts §§ 2.2-4400 through 2.2-4411 of the Code of Virginia.] Senate Bill 456 is identical.

Delegate Kathy J. Byron

SB 154 Inflationary effects; increasing various costs, fees, etc., penalties. [Amends and reenacts §§ 6.1-118.1, 8.01-66, 8.01-66.2, 8.01-416, 8.01-504, 8.01-682, 15.2-1716, 16.1-105, 17.1-605, 19.2-69, 21-186, 38.2-807, 43-3, 43-24, and 46.2-364 of the Code of Virginia.]

Senator John S. Edwards

SB 240 Nationwide Mortgage Licensing System & Registry; mortgage lenders & brokers required to register. [Amends and reenacts §§ 6.1-409 and 6.1-410 of the Code of Virginia.] House Bill 547 is identical.

Senator John C. Watkins

SB 294 Mortgage Lender and Broker Act; definition of principal. [Amends and reenacts § 6.1-409 of the Code of Virginia.]

Senator Ryan T. McDougle

SB 295 Financial institutions and services; revising and recodifying laws. [Amends and reenacts §§ 8.4-105, 19.2-10.1, 36-55.33:1, 36-96.20, 57-60, and 59.1-207.19 of the Code of Virginia; to amend the Code of Virginia by adding a title numbered 6.2, containing Subtitle I, consisting of chapters numbered 1 through 5, containing sections numbered 6.2-100 through 6.2-513, Subtitle II, consisting of chapters numbered 6 through 13, containing sections numbered 6.2-600 through 6.2-1380, Subtitle III, consisting of chapters numbered 14 through 21, containing sections numbered 6.2-1400 through 6.2-2111, and Subtitle IV, consisting of chapters numbered 22 through 24, containing sections numbered 6.2-2200 through 6.2-2405; by adding a section numbered 17.1-626.1; by adding in Chapter 1 of Title 26 a section numbered 26-7.5; and by adding in Title 55 a chapter numbered 27.1, consisting of sections numbered 55-525.1 through 55-525.8, and a chapter numbered 27.2, consisting of sections numbered 55-525.9 through 55-525.25; and to repeal Title 6.1 (§§ 6.1-1 through 6.1-479), Chapter 6 (§§ 11-30 through 11-34) of Title 11, and Chapter 2.3 (§§ 59.1-21.19 through 59.1-21.28) of Title 59.1 of the Code of Virginia, relating to revising and recodifying the laws pertaining to financial institutions and services.]


SB 440 Credit unions; conversion to a state mutual savings institution. [Amends the Code of Virginia by adding in Article 7 of Chapter 4.01 of Title 6.1 a section numbered 6.1-225.30:1.] House Bill 482 is identical.

Senator Richard L. Saslaw

SB 445 Financial institutions; serving notice of lien. [Amends and reenacts §§ 8.01-502.1 and 8.01-512.4 of the Code of Virginia.]

Senator Frederick M. Quayle

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SB 456 Security for Public Deposits Act. [Amends and reenacts §§ 2.2-4400 through 2.2-4411 of the Code of Virginia.]

Senator A. Donald McEachin

SB 606 Motor vehicle title loans; establishes requirements, penalties. [Amends and reenacts §§ 6.1-249, 6.1-330.55, 6.1-330.78, and 59.1-200 of the Code of Virginia and amends the Code of Virginia by adding in Title 6.1 a chapter numbered 21, consisting of sections numbered 6.1-480 through 6.1-507.]

Senator Richard L. Saslaw

BUILDING CODE

HB 46 Virginia Defective Drywall Correction and Restoration

Assistance Fund. [Amends the Code of Virginia by adding in Title 36 a chapter numbered 10.1, consisting of sections numbered 36-156.1 and 36-156.2.]

Delegate G. Glenn Oder

HB 312 Building Code; appeals to local board and State Technical Review Board. [Amends and reenacts §§ 36-105 and 36-114 of the Code of Virginia.]

Delegate Jennifer L. McClellan

HB 517 Uniform Statewide Building Code; court may order violations on nonresidential buildings be abated. [Amends and reenacts § 36-106 of the Code of Virginia.]

Delegate Thomas Davis Rust

HB 605 Housing and Community Development, Board for; powers. [Amends and reenacts § 36-137 of the Code of Virginia.]

Delegate Donald W. Merricks

HB 687 Uniform Statewide Building Code; increases civil penalty. [Amends and reenacts § 36-106 of the Code of Virginia.]

Delegate Jackson H. Miller

HB 1260 Uniform Statewide Building Code; buildings or structures built on state-owned property. [Amends and reenacts § 36-98.1 of the Code of Virginia.]

Delegate Robert H. Brink

BUSINESS ENTITIES

HB 526 State Corporation Commission; filings that contain personal

identifying information. [Amends and reenacts § 12.1-19 of the Code of Virginia.]

Delegate Samuel A. Nixon, Jr.

HB 612 Corporations; payment of annual registration fees. [Amends and reenacts §§ 13.1-615, 13.1-752, 13.1-768, 13.1-775, 13.1-775.1, 13.1-815, 13.1-914, 13.1-930, 13.1-936, and 13.1-936.1 of the Code of Virginia.]

Delegate Harry R. Purkey

HB 831 Public Procurement Act; foreign & domestic businesses authorized to transact business in State. [Amends the Code of Virginia by adding a section numbered 2.2-4311.2.]

Delegate Scott A. Surovell

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HB 1040 Limited liability companies; SCC to correct its records to eliminate effects of clerical error, etc. [Amends and reenacts §§ 13.1-1004, 13.1-1050.2, 13.1-1056.1, and 13.1-1062 of the Code of Virginia and to repeal § 13.1-1063 of the Code of Virginia.]

Delegate Kathy J. Byron

HB 1105 Business entities; statement of change of registered agent, etc., may be filed electronically. [Amends and reenacts §§ 13.1-635, 13.1-636, 13.1-764, 13.1-765, 13.1-834, 13.1-835, 13.1-926, 13.1-927, 13.1-1016, 13.1-1017, 13.1-1221, 13.1-1222, 50-73.6, and 50-73.135 of the Code of Virginia.]

Delegate Johnny S. Joannou

SB 100 Stock Corporation Act; conforms provisions of Act to revisions to Model Business Corporation Act. [Amends and reenacts §§ 13.1-603, 13.1-604, 13.1-610, 13.1-614, 13.1-624, 13.1-635, 13.1-646, 13.1-656, 13.1-657, 13.1-658, 13.1-660, 13.1-661, 13.1-663, 13.1-664.1, 13.1-672.1, 13.1-675, 13.1-686, 13.1-689, 13.1-699, 13.1-704, 13.1-714, 13.1-718, 13.1-720, 13.1-721.1, 13.1-725, 13.1-730, 13.1-733, 13.1-734, 13.1-770 through 13.1-773, 13.1-774, and 13.1-779 of the Code of Virginia; to amend the Code of Virginia by adding sections numbered 13.1-660.2 and 13.1-669.1; and to repeal § 13.1-681 of the Code of Virginia.]

Senator Walter A. Stosch

SB 131 Nonstock Corporation Act; conforms revisions to Model Business Corporation Act. [Amends and reenacts §§ 13.1-803, 13.1-804, 13.1-810, 13.1-813, 13.1-823, 13.1-842, 13.1-845, 13.1-847, 13.1-847.1, 13.1-855, 13.1-866, 13.1-878, 13.1-883, and 13.1-939 of the Code of Virginia and to amend the Code of Virginia by adding a section numbered 13.1-844.2.]


SB 178 Pass-through entities; penalties. [Amends and reenacts § 58.1-486.2 of the Code of Virginia and to amend the Code of Virginia by adding in Article 16.1 of Chapter 3 of Title 58.1 a section numbered 58.1-486.3.]


SB 493 Electronic communication service; foreign corporation to disclose record of subscriber to officer. [Amends and reenacts § 19.2-70.3 of the Code of Virginia.]

Senator Robert Hurt

CIVIC AND CHARITABLE

HB 436 Donations by localities; may donate to nonprofit organizations

providing energy efficiency services. [Amends and reenacts § 15.2-953 of the Code of Virginia.] Senate Bill 291 is identical.

Delegate David J. Toscano

HB 495 Churches; exempts serving meals prepared in homes of members from licensure requirements. [Amends and reenacts § 35.1-25 of the Code of Virginia.] Senate Bill 117 is identical.

Delegate L. Scott Lingamfelter

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HB 507 Transportation services; those that operate as nonprofit organization & serve senior citizens, etc. [Amends the Code of Virginia by adding a section numbered 15.2-967.1.]

Delegate C. Todd Gilbert

HB 941 Charitable gaming; regulations of Charitable Gaming Board defining electronic, etc., equipment. [Amends and reenacts § 18.2-340.19 of the Code of Virginia.]

Delegate Watkins M. Abbitt, Jr.

HB 942 Charitable gaming; limits authority of VDACS to revoke permits. [Amends and reenacts § 18.2-340.20 of the Code of Virginia.]


HB 950 Charitable gaming; regulations of Charitable Gaming Board, report. [Amends and reenacts §§ 18.2-340.16, 18.2-340.19, 18.2-340.27, and 18.2-340.33 of the Code of Virginia and to repeal § 18.2-340.30:1.]

Delegate S. Chris Jones

HB 1010 Illegal gambling; definition, requirements for lawful game, contest, lottery, etc., to be conducted. [Amends and reenacts § 18.2-325 of the Code of Virginia and to amend the Code of Virginia by adding a section numbered 18.2-325.1.]

Delegate Clifford L. Athey, Jr.

HB 1245 Surplus property; school boards may donate obsolete technology hardware to nonprofit organizations. [Amends and reenacts § 22.1-129 of the Code of Virginia.]

Delegate Kaye Kory

SB 116 Consumer Protection Act; consumer transactions involving churches and other religious bodies. [Amends and reenacts § 59.1-198 of the Code of Virginia.]

Senator J. Chapman Petersen

SB 117 Churches; exempts serving meals prepared in homes of members from licensure requirements. [Amends and reenacts § 35.1-25 of the Code of Virginia.] House Bill 495 is identical.


SB 291 Donation by locality; may donate to nonprofit organizations that are exempt under 501 (c)(3) of IRC. [Amends and reenacts § 15.2-953 of the Code of Virginia.] House Bill 436 is identical.

Senator R. Creigh Deeds

SB 563 Charitable organizations; veterans' posts or organizations exempt from reporting requirements. [Amends and reenacts § 57-60 of the Code of Virginia.]

Senator Patricia S. Ticer

SB 676 Abandoned graveyards; when locality acquires title they may continue to maintain property. [Amends and reenacts § 57-36 of the Code of Virginia.]

Senator William C. Wampler, Jr.

HJR 161 Nonprofit employment service organizations; recognizing services thereof vended through DRS.


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HJR 182 Philanthropy and private foundations; recognizing and encouraging formation & creation of entities. Senate Joint Resolution 164 is identical.

Delegate William J. Howell

SJR 164 Philanthropy and private foundations; recognizing and encouraging formation & creation of entities. House Joint Resolution 182 is identical.

Senator Jeffrey L. McWaters

CIVIL REMEDIES AND PROCEDURE

HB 84 Search warrants, out-of-state; to be honored by State

corporation or other entity. [Amends and reenacts § 19.2-70.3 of the Code of Virginia.] Senate Bill 492 is identical.

Delegate Robert G. Marshall

HB 105 Appeals; court may impose additional requirements to security posted. [Amends and reenacts § 8.01-676.1 of the Code of Virginia.]

Delegate G. Manoli Loupassi

HB 231 Interpleader of real estate escrows; suits shall go to district court in event of foreclosure. [Amends and reenacts § 16.1-77 of the Code of Virginia and amends the Code of Virginia by adding a section numbered 54.1-2108.1.]

Delegate Rosalyn R. Dance

HB 283 General district courts; electronic filing of civil cases. [Amends the Code of Virginia by adding in Title 16.1 a section numbered 16.1-79.1.]

Delegate David B. Albo

HB 376 Service by publication; validates orders of those processed by a clerk or deputy clerk. [Amends and reenacts § 8.01-316 of the Code of Virginia.]

Delegate Lynwood W. Lewis, Jr.

HB 1065 Circuit courts; electronic filing of cases. [Amends and

reenacts §§ 16.1-243, 17.1-124, 17.1-224, 17.1-258.3, and 17.1-258.4 of the Code of Virginia and to amend the Code of Virginia by adding a section numbered 8.01-271.01 and by adding in Article 4.1 of Chapter 2 of Title 17.1 a section numbered 17.1-258.6.] Senate Bill 220 is identical.


HB 1193 Fiduciaries; actions or suits involving. [Amends the Code of Virginia by adding a section numbered 8.01-6.3.]


HB 1306 Jurors; to provide identification. [Amends the Code of Virginia by adding a section numbered 8.01-353.1.]

Delegate James M. LeMunyon

SB 27 Warranty registration cards; prohibits seller from conditioning coverage or performance of warranty. [Amends and reenacts § 59.1-200 of the Code of Virginia and to amend the Code of Virginia by adding a section numbered 8.2-317.1.]

Senator Linda T. Puller

http://leg1.state.va.us/cgi-bin/legp504.exe?101+mbr+H197

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SB 220 Circuit courts; electronic filing of cases. [Amends and reenacts §§ 16.1-243, 17.1-124, 17.1-224, 17.1-258.3, and 17.1-258.4 of the Code of Virginia and to amend the Code of Virginia by adding a section numbered 8.01-271.01 and by adding in Article 4.1 of Chapter 2 of Title 17.1 a section numbered 17.1-258.6.] House Bill 1065 is identical.

Senator Janet D. Howell

SB 383 Claims against county; attorney of county shall notify claimant by certified mail of date. [Amends and reenacts §§ 15.2-1245, 15.2-1246, and 15.2-1247 of the Code of Virginia, relating to claims against counties; timing of decision; appeals.]

Senator Mark D. Obenshain

SB 384 Attorney-client privilege and work product protection; limitations on waivers. [Amends the Code of Virginia by adding in Article 9 of Chapter 14 of Title 8.01 a section numbered 8.01-420.7.]


SB 385 Affidavits; admissibility as evidence by government official regarding search of government records. [Amends the Code of Virginia by adding a section numbered 19.2-188.3.]


SB 409 Circuit court; duties of clerk. [Amends and reenacts §§ 17.1-218, 17.1-229, 19.2-270.4, 19.2-310, 43-17.1, and 55-66.6 of the Code of Virginia and to repeal § 20-32 of the Code of Virginia.]

Senator Jill Holtzman Vogel

SB 492 Search warrants, out-of-state; to be honored by State corporation or other entity. [Amends and reenacts § 19.2-70.3 of the Code of Virginia.] House Bill 84 is identical.

Senator Robert Hurt

COMMUNITY ASSOCIATIONS

HB 191 Common Interest Community Board; clarification for complaints. [Amends and reenacts § 55-530 of the Code of Virginia.] Senate Bill 270 is identical.

Delegate John A. Cosgrove

HB 468 Common interest communities; exemptions from licensure, powers and duties. [Amends and reenacts §§ 54.1-2347, 54.1-2348, and 54.1-2349 of the Code of Virginia.]

Delegate Vivian E. Watts

HB 702 Property Owners' Association Act; fees for disclosure packet paid when delivered. [Amends and reenacts §§ 55-509.4 and 55-509.7 of the Code of Virginia.]

Delegate David L. Bulova

HB 956 Condominium and Property Owners' Association Acts; restrictions on display of U.S. flag. [Amends and reenacts §§ 55-79.75:2 and 55-513.1 of the Code of Virginia. ] Senate Bill 151 is identical.


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HB 1058 Condominium and Property Owners' Association Acts; amending association documents using technology. [Amends the Code of Virginia by adding sections numbered 55-79.71:1 and 55-515.3.]

Delegate Richard P. Bell

HB 1100 Stormwater management; certain landowners immune from civil liability. [Amends and reenacts § 10.1-603.12:3 of the Code of Virginia.]


HB 1102 Property Owners' Association Act; authority to adopt rules & regulations. [Amends the Code of Virginia by adding a section numbered 55-513.01.]


SB 151 Condominium and Property Owners' Association Acts; restrictions on display of U.S. flag. [Amends and reenacts §§ 55-79.75:2 and 55-513.1 of the Code of Virginia.] House Bill 956 is identical.

Senator Richard H. Stuart

SB 270 Common Interest Community Board; clarification for complaints. [Amends and reenacts § 55-530 of the Code of Virginia.] House Bill 191 is identical.

Senator Mary Margaret Whipple

SB 665 Common Interest Community Board; powers and duties. [Amends and reenacts §§ 54.1-2349 and 54.1-2351 of the Code of Virginia.]


CONDEMNATION AND EMINENT DOMAIN

HB 81 Jurors; equalizes pay of those in condemnation cases with that

of regular jurors. [Amends and reenacts § 25.1-235 of the Code of Virginia.]

Delegate Barry D. Knight

HB 516 Condemnations; highway construction. [Amends and reenacts § 33.1-128 of the Code of Virginia.] Senate Bill 405 is identical.


HB 997 Eminent domain; applicability of requirements to acquisition of property by City of Norfolk, etc. [Amends and reenacts the fourth enactment of Chapters 882, 901, and 926 of the Acts of Assembly of 2007.]

Delegate Algie T. Howell, Jr.

SB 405 Condemnations; highway construction. [Amends and reenacts § 33.1-128 of the Code of Virginia.] House Bill 516 is identical.


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CONSERVATION AND ENVIRONMENT

HB 138 Aquaculture opportunity zones; Marine Resources Commission establish for propagation of shellfish. [Amends and reenacts § 28.2-603 of the Code of Virginia.]

Delegate Albert C. Pollard, Jr.

HB 141 Land preservation tax credit; nonprofit organizations holding a easement are ineligible to receive. [Amends and reenacts § 58.1-512 of the Code of Virginia.]

Delegate Albert C. Pollard, Jr.

HB 326 Mercury thermostats; Waste Management Board to adopt regulations to encourage recycling. [Amends and reenacts § 10.1-1425.26 of the Code of Virginia.]

Delegate Kenneth R. Plum

HB 389 Virginia Offshore Wind Development Authority; created. [Amends the Code of Virginia by adding in Title 67 a chapter numbered 12, consisting of sections numbered 67-1200 through 67-1211.] House Bill 389 is identical.

Delegate William R. Janis

HB 438 Dam safety; Soil and Water Conservation Board to establish incremental damage analysis procedure. [Amends and reenacts §§ 10.1-605, 10.1-607.1, and 10.1-609 of the Code of Virginia.]


HB 447 Income tax; remainder of revenues transferred to Land Conservation Fund for distribution. [Amends and reenacts § 58.1-513 of the Code of Virginia.] Senate Bill 264 is identical.

Delegate R. Lee Ware, Jr.

HB 501 Jordan River; designates portion thereof as component of State Scenic Rivers System. [Amends the Code of Virginia by adding in Chapter 4 of Title 10.1 a section numbered 10.1-418.6.]


HB 503 Hughes River; designates portion thereof as component of State Scenic Rivers System. [Amends the Code of Virginia by adding in Chapter 4 of Title 10.1 a section numbered 10.1-418.6.]


HB 591 Administrative Process Act; removes obsolete exemptions. [Amends and reenacts §§ 2.2-4002, 2.2-4006, 10.1-1308.1, 28.2-103, 28.2-1307, and 36-100 of the Code of Virginia.]


HB 619 Erosion and sediment control; may assess civil penalty. [Amends and reenacts § 10.1-562 of the Code of Virginia.]

Delegate Robert D. Orrock, Sr.

HB 627 Cultural heritage sites; Director of DCR to establish directory of historical facilities and sites. [Amends the Code of Virginia by adding in Article 3 of Chapter 1 of Title 10.1 a section numbered 10.1-114.1.]

Delegate Terry G. Kilgore

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HB 717 Civil War Site Preservation Fund; established. [Amends the Code of Virginia by adding a section numbered 10.1-2202.4.] Senate Bill 614 is identical.

Delegate Christopher K. Peace

HB 940 Hunting and trapping; reduces penalty for violations. [Amends and reenacts § 10.1-1157 of the Code of Virginia.]


HB 951 Blackwater River; designates a portion as component of State Scenic Rivers System. [Amends the Code of Virginia by adding in Chapter 4 of Title 10.1 a section numbered 10.1-418.6.] Senate Bill 17 is identical.

Delegate S. Chris Jones

HB 999 Certified renewable energy manufacturing equipment, etc.; separate classification for property tax. [Amends and reenacts § 58.1-3506 of the Code of Virginia and to amend the Code of Virginia by adding a section numbered 58.1-3221.4.]

Delegate David A. Nutter

HB 1135 Pollutant Discharge Elimination System permit; certain conditions for owner of sewage facility. [Amends and reenacts §§ 62.1-44.19:14 and 62.1-44.19:15 of the Code of Virginia.]

Delegate Harvey B. Morgan

HB 1180 Russell Fork River; designates portion thereof as component of State Scenic Rivers System. [Amends the Code of Virginia by adding a section numbered 10.1-411.2.]

Delegate Clarence E. Phillips

HB 1213 Historic preservation grants; technical and procedural changes to authority of the Department of Historic Resources. [Amends and reenacts §§ 10.1-2208 and 10.1-2213 of the Code of Virginia.]

Delegate Kaye Kory

HB 1220 Stormwater management regulations; changes effective date that establishes local program criteria. [Amends and reenacts the second enactment of Chapter 18 of the Acts of Assembly of 2009.] Senate Bill 395 is identical.

Delegate Timothy D. Hugo

HB 1290 Nutrient trading; Eastern Shore facility to acquire credits in Potomac & Rappahannock tributaries. [Amends and reenacts § 62.1-44.19:18 of the Code of Virginia.]


HB 1300 Air Pollution Control Board; regulations under the Clean Air Interstate Rule. [Amends and reenacts § 10.1-1328 of the Code of Virginia.]


HB 1320 Dam safety; DCR to award grants to local government and private entity for dam break analysis, etc. [Amends and reenacts §§ 10.1-603.18, 10.1-603.19, and 10.1-613.5 of the Code of Virginia.]

Delegate Beverly J. Sherwood

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HB 1322 Waste kitchen grease; any person who transports must register

with VDACS, exceptions. [Amends the Code of Virginia by adding in Title 3.2 a chapter numbered 55.1, consisting of sections numbered 3.2-5508 through 3.2-5516.]

Delegate Beverly J. Sherwood

SB 17 Blackwater River; designates portion thereof as component of State Scenic Rivers System. [Amends the Code of Virginia by adding in Chapter 4 of Title 10.1 a section numbered 10.1-418.6.] House Bill 951 is identical.

Senator L. Louise Lucas

SB 81 Agricultural, forestal, or agricultural and forestal districts; use value assessment. [Amends and reenacts §§ 15.2-4405 and 58.1-3233 of the Code of Virginia.]

Senator Janet D. Howell

SB 128 Air Pollution Control Board; regulations under Clean Air Interstate Rule. [Amends and reenacts § 10.1-1328 of the Code of Virginia.]


SB 233 Income tax, corporate and individual; credit for land conservation. [Amends and reenacts § 58.1-512 of the Code of Virginia.]


SB 244 Dam Safety Act; Soil & Water Conservation Board to adopt regulations concerning low traffic roadway.


SB 264 Income tax, state; remainder of revenues transferred to Land Conservation Fund for distribution. [Amends and reenacts § 58.1-513 of the Code of Virginia.] House Bill 447 is identical.


SB 276 Dam safety; requirements of Soil and Water Conservation Board's Impounding Structure Regulations. [Amends and reenacts § 10.1-605 of the Code of Virginia.]

Senator R. Edward Houck

SB 346 Land conservation practices; information management. [Amends the Code of Virginia by adding in Article 7 of Chapter 2 of Title 2.2 a section numbered 2.2-220.3.]

Senator Emmett W. Hanger, Jr.

SB 395 Stormwater management regulations; changes effective date that establishes local program criteria. [Amends and reenacts the second enactment of Chapter 18 of the Acts of Assembly of 2009.] House Bill 1220 is identical.

Senator Frank W. Wagner

SB 569 State Water Supply Plan Advisory Committee; established. [Amends the Code of Virginia by adding a section numbered 62.1-44.38:2.]

Senator Patricia S. Ticer

SB 577 Virginia Offshore Wind Development Authority; created. [Amends the Code of Virginia by adding in Title 67 a chapter numbered 12, consisting of sections numbered 67-1200 through 67-1211.] House Bill 389 is identical.


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SB 614 Civil War Site Preservation Fund; established. [Amends the Code of Virginia by adding a section numbered 10.1-2202.4.] House Bill 717 is identical.

Senator R. Edward Houck

SB 659 Outer Continental Shelf; air pollution control regulations. [Amends the Code of Virginia by adding a section numbered 10.1-1307.03.]

Senator Frank W. Wagner

SB 686 Uniform Environmental Covenants Act; established. [Amends the Code of Virginia by adding in Title 10.1 a chapter numbered 12.2, consisting of sections numbered 10.1-1238 through 10.1-1250.]

Senator W. Roscoe Reynolds

DEEDS OF TRUST

HB 714 Foreclosure sales; trustee to pay taxes. [Amends and reenacts

§§ 55-59.4 and 58.1-3340 of the Code of Virginia.] Delegate Christopher K. Peace

HB 715 Deed of trust; allows title insurance companies authority

settlement agents have to release lien. [Amends and reenacts § 55-66.3 of the Code of Virginia.]


FAIR HOUSING

HB 192 Fair Housing Board; establishes educational materials on Fair

Housing Law. [Amends and reenacts §§ 54.1-2343 and 54.1-2344 of the Code of Virginia.]


SB 216 Fair Housing Board; establishes educational materials on Fair Housing Law. [Amends and reenacts §§ 54.1-2343 and 54.1-2344 of the Code of Virginia.]

Senator Mamie E. Locke

HOUSING AND REDEVELOPMENT

HB 233 Affordable housing units; assessments. [Amends and reenacts

§ 58.1-3295 of the Code of Virginia.] Senate Bill 273 is identical.

Delegate Rosalyn R. Dance

HB 592 Federal rent control; repealing Code that declared unnecessary. [Repeals Chapter 13.1 (§ 55-248.1) of Title 55 of the Code of Virginia.]


HB 758 Workforces; allowed on private property owned by elderly or indigent persons if needing repair. [Amends and reenacts § 53.1-128 of the Code of Virginia.]

Delegate Christopher P. Stolle

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HB 1174 Housing authorities; compensation of commissioners. [Amends and reenacts § 36-11 of the Code of Virginia.]

Delegate Clarence E. Phillips

SB 273 Affordable housing units; assessments. [Amends and reenacts § 58.1-3295 of the Code of Virginia.] House Bill 233 is identical.


INSURANCE

HB 260 Insurance; SCC to require person to make restitution if

improperly withholds money. [Amends and reenacts § 38.2-218 of the Code of Virginia.]


HB 531 Insurance rate filings; exempts insurance rate-related information filed with SCC from inspection. [Amends and reenacts § 38.2-1907 of the Code of Virginia.]


HB 548 Group health insurance policies; provide a discount to employers who institute wellness programs. [Amends and reenacts § 38.2-4319 of the Code of Virginia and to amend the Code of Virginia by adding a section numbered 38.2-3540.2.]


HB 1018 Insurance policies; repeals a provision for countersignature requirements. [Repeals § 38.2-323 of the Code of Virginia.]

Delegate Timothy D. Hugo

LANDLORD TENANT

HB 213 Residential Landlord and Tenant Act and Landlord and Tenant

law; definition of landlord. [Amends and reenacts § 55-248.4 of the Code of Virginia and to amend the Code of Virginia by adding a section numbered 55-221.1.]


HB 407 Landlord and tenant laws; landlord and tenant obligations. [Amends and reenacts §§ 6.1-330.54, 8.01-128, 34-5, 55-226.2, 55-246.1, 55-248.4, 55-248.7:2, 55-248.9:1, 55-248.15:1, 55-248.15:2, and 55-248.38:3 of the Code of Virginia and to amend the Code of Virginia by adding a section numbered 16.1-79.1.]


HB 764 Income tax credits; landlords participating in housing choice voucher programs. [Amends and reenacts §§ 36-55.63 and 58.1-435 of the Code of Virginia and to amend the Code of Virginia by adding in Article 13 of Chapter 3 of Title 58.1 a section numbered 58.1-439.12:03.] Senate Bill 458 is identical.


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SB 282 Residential Landlord and Tenant Act; eviction procedure, acceptance of redemption tenders. [Amends and reenacts §§ 55-243 and 55-248.34:1 of the Code of Virginia.]

Senator Frederick M. Quayle

SB 458 Income tax credits; landlords participating in housing choice voucher programs. [Amends and reenacts §§ 36-55.63 and 58.1-435 of the Code of Virginia and to amend the Code of Virginia by adding in Article 13 of Chapter 3 of Title 58.1 a section numbered 58.1-439.12:03.] House Bill 764 is identical.


LAND RECORDS AND COURT RECORDS

HB 974 Circuit court clerks' offices; makes technical changes in handling of electronic or digital filing. [Amends and reenacts §§ 8.01-449, 17.1-258.3, 17.1-258.3:1, 17.1-276, 17.1-279, and 17.1-293 of the Code of Virginia and to amend the Code of Virginia by adding a section numbered 17.1-258.3:2.]


LIENS

SB 105 Mechanics' and materialmen's liens; removes certain

requirements. [Amends and reenacts §§ 43-1 and 43-4.01 of the Code of Virginia.]


MANUFACTURED HOUSING

HB 1374 Manufactured Housing Licensing & Transaction Recovery

Fund Law; dealer may retain damages. [Amends and reenacts § 36-85.28 of the Code of Virginia and to amend and reenact the second enactment of Chapter 141 of the Acts of Assembly of 2009.]

Delegate James M. Scott

MISCELLANEOUS

HB 485 Governor; shall initiate an operational and programmatic

performance review of state agencies. [Provides for an operational and programmatic performance review of certain public agencies.]


HB 706 General Assembly deadlines; computation of time. [Amends and reenacts § 1-210 of the Code of Virginia.]


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HB 789 Public Procurement Act; increases cost of construction for which state or local public body may use. [Amends and reenacts § 2.2-4303 of the Code of Virginia.]

Delegate Ron A. Villanueva

SB 101 Public-Private Partnership Advisory Commission; DLS shall provide legal and research services. [Amends and reenacts §§ 30-279 and 30-280 of the Code of Virginia.]


SB 430 State and Local Government Conflict of Interests Act; disclosure of interest in real estate. [Amends and reenacts §§ 2.2-3117 and 30-111 of the Code of Virginia.]

Senator Mark R. Herring

SB 546 Railroad rights-of-way; passage permitted for access to lands used for recreational purposes, etc. [Amends and reenacts § 29.1-509 of the Code of Virginia.]


PROFESSIONS AND OCCUPATIONS

HB 408 Real Estate Appraiser Board; regulation of appraisal

management companies, penalty. [Amends the Code of Virginia by adding in Title 54.1 a chapter numbered 20.2, consisting of sections numbered 54.1-2020 through 54.1-2023.]


HB 416 Contractors, Board for; adds certified water well systems provider. [Amends and reenacts § 54.1-1102 of the Code of Virginia.]


HB 713 Contractors, Board for; prerequisite for obtaining business license. [Amends and reenacts § 54.1-1111 of the Code of Virginia.] House Bill 409 is identical.


HB 797 Architects, Professional Engineers, Land Surveyors, etc.; limitation of liability contract clauses. [Amends and reenacts § 54.1-411 of the Code of Virginia.] Senate Bill 104 is identical.


HB 963 Real Estate Board; requirements for licensure, allows broker to enter into a voluntary program. [Amends and reenacts § 54.1-2105 of the Code of Virginia and to amend the Code of Virginia by adding in Article 1 of Chapter 21 of Title 54.1 a section numbered 54.1-2111.1.] Senate Bill 457 is identical.

Delegate Jackson H. Miller

SB 104 Architects, Professional Engineers, Land Surveyors, etc.; limitation of liability contract clauses. [Amends and reenacts § 54.1-411 of the Code of Virginia.] House Bill 797 is identical.


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SB 457 Real Estate Board; requirements for licensure, allows broker to enter into a voluntary program. [Amends and reenacts § 54.1-2105 of the Code of Virginia and to amend the Code of Virginia by adding in Article 1 of Chapter 21 of Title 54.1 a section numbered 54.1-2111.1.] House Bill 963 is identical.


REAL ESTATE SETTLEMENTS

HB 667 Residential Property Disclosure Act; seller required to disclose

presence of wastewater system. [Amends and reenacts § 55-519 of the Code of Virginia.]

Delegate Joe T. May

RESOLUTIONS AND STUDIES

HJR 135 Development and Land Use Tools in State's Localities, Joint

Subcommittee Studying; continued. Senate Joint Resolution 89 is identical.


SJR 89 Development and Land Use Tools in State's Localities, Joint Subcommittee Studying; continued. House Joint Resolution 135 is identical.


TAXATION

HB 147 Constitutional amendment; limit on taxes or revenues and

Revenue Stabilization Fund. [Provides for the submission to the voters of a proposed amendment to Section 8 of Article X of the Constitution of Virginia.] Senate Bill 362 is identical.

Delegate John M. O'Bannon, III

HB 149 Constitutional amendment; property tax exemption for certain veterans. [Provides for the submission to the voters of a proposed amendment to the Constitution of Virginia by adding in Article X a section numbered 6-A.] Senate Bill 31 is identical.


HB 200 Service districts annual tax; shall only be levied upon specific classification of real estate. [Amends and reenacts § 15.2-2403 of the Code of Virginia.]

Delegate Kenneth C. Alexander

HB 228 Personal property tax relief; deletes requirement that vehicle held in trust can qualify. [Amends and reenacts § 58.1-3523 of the Code of Virginia.]


HB 430 Real property tax assessment; Department of Taxation to establish qualifications for certification. [Amends and reenacts §§ 58.1-3258.1, 58.1-3259, 58.1-3295, 58.1-3331, 58.1-3374 and 58.1-3379 of the Code of Virginia.]


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HB 523 Income tax, state; exemption for any income taxed as long-term capital gain for federal income tax. [Amends and reenacts §§ 58.1-322 and 58.1-402 of the Code of Virginia.] Senate Bill 428 is identical.


HB 624 Major business facility job tax credit; business that creates at least 50 qualified full-time jobs. [Amends and reenacts § 58.1-439 of the Code of Virginia.] Senate Bill 472 is identical.


HB 803 Income tax, state; green jobs tax credit. [Amends the Code of Virginia by adding in Article 13 of Chapter 3 of Title 58.1 a section numbered 58.1-439.12:03.]

Delegate Charles D. Poindexter

HB 1301 Short-term rental property; local government may tax or may impose tax. [Amends and reenacts §§ 58.1-3500, 58.1-3510.4, 58.1-3510.6, 58.1-3704, and 58.1-3706 of the Code of Virginia.]

Delegate Matthew J. Lohr

HB 1356 License fees and taxes, local; exempts campgrounds and bed and breakfast establishments. [Amends and reenacts § 58.1-3703 of the Code of Virginia.]


SB 31 Constitutional amendment; property tax exemption for certain veterans. [Provides for the submission to the voters of a proposed amendment to the Constitution of Virginia by adding in Article X a section numbered 6-A.] House Bill 149 is identical.

Senator Linda T. Puller

SB 341 Land preservation tax credit; DCR to provide estimate of land used for production agriculture, etc. [Amends and reenacts § 58.1-512 of the Code of Virginia.]


SB 355 Short-term rental property; shall classify as a separate classification of merchants' capital. [Amends and reenacts §§ 58.1-3500, 58.1-3510.4, 58.1-3510.6, 58.1-3704, and 58.1-3706 of the Code of Virginia.]


SB 362 Constitutional amendment; limit on taxes or revenues and Revenue Stabilization Fund. [Provides for the submission to the voters of a proposed amendment to Section 8 of Article X of the Constitution of Virginia.] House Bill 147 is identical.

Senator George L. Barker

SB 428 Income tax, state; exemption for any income taxed as long-term capital gain for federal income tax. [Amends and reenacts §§ 58.1-322 and 58.1-402 of the Code of Virginia.] House Bill 523 is identical.


SB 472 Major business facility job tax credit; reduces number of qualified full-time jobs required. [Amends and reenacts § 58.1-439 of the Code of Virginia.] House Bill 624 is identical.


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SB 623 Income tax, corporate and individual; green job tax credit. [Amends the Code of Virginia by adding in Article 13 of Chapter 3 of Title 58.1 a section numbered 58.1-439.12:03.]


SB 633 Neighborhood assistance tax credits; changes definition of impoverished people. [Amends and reenacts § 58.1-439.18 of the Code of Virginia.]


SB 661 Land preservation tax credit; verification of conservation value of certain donations. [Amends and reenacts § 58.1-512 of the Code of Virginia.]


HJR 33 Constitutional amendment; property tax exemption for certain veterans (second reference). Proposing an amendment to the Constitution of Virginia by adding in Article X a section numbered 6-A, relating to a property tax exemption for certain veterans. Senate Joint Resolution 13 is identical.


HJR 34 Constitutional amendment; limit on taxes or revenues and Revenue Stabilization Fund. Proposing an amendment to Section 8 of Article X of the Constitution of Virginia. Senate Joint Resolution 81 is identical.


SJR 13 Constitutional amendment; property tax exemption for certain veterans (second reference). Proposing an amendment to the Constitution of Virginia by adding in Article X a section numbered 6-A. House Joint Resolution 33 is identical.

Senator Linda T. Puller and Richard H. Stuart

SJR 81 Constitutional amendment; limit on taxes or revenues and Revenue Stabilization Fund. Proposing an amendment to Section 8 of Article X of the Constitution of Virginia. House Joint Resolution 34 is identical.

Senator George L. Barker

TRUSTS AND ESTATES

HB 56 Testamentary trustees; relief of duty to file an inventory or

annual accounts. [Amends and reenacts § 26-17.7 of the Code of Virginia.] Senate Bill 43 is identical.

Delegate Mark L. Cole

HB 346 Small Estate Act; revises by repealing related provisions in Code. [Amends and reenacts §§ 6.1-125.10, 6.1-125.11, 6.1-225.50, 51.1-511, and 64.1-132.1 through 64.1-132.4 of the Code of Virginia; to amend the Code of Virginia by adding in Article 2.1 of Chapter 6 of Title 64.1 sections numbered 64.1-132.5 and 64.1-132.6; and to repeal §§ 6.1-71, 6.1-194.58, 6.1-225.49, 51.1-164, 64.1-123, 64.1-123.1, 64.1-123.3 through 64.1-125 of the Code of Virginia, relating to the Small Estate Act; revision.]


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HB 719 Uniform Power of Attorney Act; established within Code of Virginia. [Amends and reenacts §§ 6.1-125.15:1, 37.2-1009, 37.2-1020, 37.2-1023, 55-34.7, 55-544.01, 55-544.02, and 55-546.02 of the Code of Virginia; to amend the Code of Virginia by adding in Title 26 a chapter numbered 7, consisting of sections numbered 26-71.01 through 26-74.03; and to repeal §§ 11-9.1 through 11-9.7 and 37.2-1018 of the Code of Virginia.] Senate Bill 159 is identical.


HB 755 Wills & trusts; formula clauses referring to federal estate, generation-skipping transfer tax laws. [Amends the Code of Virginia by adding a section numbered 64.1-62.4, relating to wills and trusts; formula clauses referring to federal estate and generation-skipping transfer tax laws; application.]

Delegate William R. Janis

HB 1345 Probate; list of heirs must be filed with clerk of court. [Amends and reenacts § 64.1-134 of the Code of Virginia.]

Delegate William K. Barlow

SB 43 Testamentary trustees; relief of duty to file an inventory or annual accounts. [Amends and reenacts § 26-17.7 of the Code of Virginia.] House Bill 56 is identical.

Senator Richard H. Stuart

SB 159 Uniform Power of Attorney Act; established within Code of Virginia. [Amends and reenacts §§ 6.1-125.15:1, 37.2-1009, 37.2-1020, 37.2-1023, 55-34.7, 55-544.01, 55-544.02, and 55-546.02 of the Code of Virginia; to amend the Code of Virginia by adding in Title 26 a chapter numbered 7, consisting of sections numbered 26-71.01 through 26-74.03; and to repeal §§ 11-9.1 through 11-9.7 and 37.2-1018 of the Code of Virginia.] House Bill 719 is identical.


SB 204 Uniform Power of Attorney Act; established within Code of Virginia. [Amends and reenacts §§ 6.1-125.15:1, 37.2-1009, 37.2-1020, 37.2-1023, 55-34.7, 55-544.01, 55-544.02, and 55-546.02 of the Code of Virginia; to amend the Code of Virginia by adding in Title 26 a chapter numbered 7, consisting of sections numbered 26-71.01 through 26-74.03; and to repeal §§ 11-9.1 through 11-9.7 and 37.2-1018 of the Code of Virginia, relating to the Uniform Power of Attorney Act.]

Senator Harry B. Blevins

SB 427 Insurance policy limits; allows personal representative of estate of decedent to request disclosure. [Amends and reenacts § 8.01-417 of the Code of Virginia.]


SB 692 Probate tax; establishes tax on recordation of list of heirs, etc. [Amends and reenacts §§ 58.1-1718 and 58.1-3805 of the Code of Virginia and to amend the Code of Virginia by adding a section numbered 58.1-1717.1.]

Senator Frank M. Ruff, Jr.

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WATER, SEWER AND STORMWATER

HB 515 Wetlands and stream mitigation; prohibits localities from regulating location of projects. [Amends and reenacts § 62.1-44.15:20 of the Code of Virginia.]


HB 707 Water and sewer charges; adds Counties of Caroline and New Kent to those localities that may impose. [Amends and reenacts § 15.2-2118 of the Code of Virginia.]

Delegate Christopher K. Peace (by request)

ZONING AND LAND USE

HB 51 Comprehensive plan amendment; grants authority to local

government to prepare & submit to public hearing. [Amends and reenacts § 15.2-2229 of the Code of Virginia.]

Delegate Mark L. Cole

HB 374 Cash proffers; collected or accepted by locality after completion of final inspection. Senate Bill 632 is identical.


HB 552 Vested rights; includes right to replace existing on-site sewage system. [Amends and reenacts § 15.2-2307 of the Code of Virginia.]


HB 553 Signs; provides local government authority to regulate. [Amends and reenacts §§ 33.1-375.1, 56-265.15, and 56-265.15:1 of the Code of Virginia.] Senate Bill 64 is identical.


HB 618 Local ordinances; permits locality to obtain determination by circuit court as to constitutionality. [Amends and reenacts § 16.1-131.1 of the Code of Virginia.] Senate Bill 521 is identical.

Delegate Brenda L. Pogge

HB 635 Subdivision of land; dividing lot for sale or gift may include family member's spouse. [Amends and reenacts § 15.2-2244 of the Code of Virginia.]

Delegate Edward T. Scott

HB 882 Development rights; permitted to be attached in receiving areas to be equal or greater than rights. [Amends and reenacts § 15.2-2316.2 of the Code of Virginia.]


HB 967 Assisted living facility and group home; no more than 8 aged, infirmed, etc., persons shall reside. [Amends and reenact § 15.2-2291 of the Code of Virginia.] Senate Bill 338 is identical.


HB 1063 Zoning appeals, board of; fee for filing appeal by person aggrieved by decision, etc. [Amends and reenacts §§ 15.2-2311 and 15.2-2314 of the Code of Virginia.]


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HB 1071 Urban development; sets certain densities in areas according to population of locality. [Amends and reenacts § 15.2-2223.1 of the Code of Virginia.] Senate Bill 420 is identical.


HB 1250 Vested rights; issuance of written order, etc., by zoning administrator regarding use of property. [Amends and reenacts § 15.2-2307 of the Code of Virginia.]

Delegate Barry D. Knight

HB 1307 Family healthcare; zoning provisions for temporary structures. [Amends the Code of Virginia by adding a section numbered 15.2-2292.1.]


HB 1383 Zoning appeals, Board of; no action of board shall be valid unless authorized by majority. [Amends and reenacts § 15.2-2308 of the Code of Virginia.]

Delegate Ron A. Villanueva

SB 64 Signs; provides local government authority to regulate. [Amends and reenacts §§ 33.1-375.1, 56-265.15, and 56-265.15:1 of the Code of Virginia.] House Bill 553 is identical.

Senator L. Louise Lucas

SB 318 Subdivision ordinance; dedication of public improvements. [Amends and reenacts § 15.2-2241 of the Code of Virginia.]

Senator Frank M. Ruff, Jr.

SB 338 Assisted living facility; considered occupancy by single family if no more than 8 persons reside. [Amends and reenacts § 15.2-2291 of the Code of Virginia.] House Bill 967 is identical.


SB 420 Urban development; sets certain densities in areas according to population of locality. [Amends and reenacts § 15.2-2223.1 of the Code of Virginia.] House Bill 1071 is identical.


SB 521 Local ordinances; determination of constitutionality. [Amends and reenacts § 16.1-131.1 of the Code of Virginia.] House Bill 618 is identical.

Senator Thomas K. Norment, Jr.

SB 632 Cash proffers; delays collection or acceptance by locality until completion of final inspection. House Bill 374 is identical.


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INQUIRY NOTICE DEFEATS PRIOR DEED OF TRUST: WELLS FARGO BANK, N.A. AS TRUSTEE FOR

CARRINGTON MORTGAGE LOAN TRUST V. CROWTHER

by Bradley D. McGraw∗

The Circuit Court of Pittsylvania County has issued an opinion addressing inquiry notice as a factor affecting the priority of deeds of trust. The case, Wells Fargo Bank, N.A. as Trustee for Carrington Mortgage Loan Trust v. Crowther, Case No. CL08000583-00 (Pittsylvania Co. Cir. Ct. Va. 2009), involved a dispute regarding the priority of two deeds of trust. Based on inquiry notice, the court found an exception to the general principle of “first in time, first in right,” and held that a subsequent deed of trust was senior to a prior one.

I represented the Plaintiffs, Wells Fargo Bank, N.A. as Trustee for Carrington Mortgage Loan

Trust, Series 2006-RFC1, Asset-Backed Pass Through Certificates (“Wells Fargo”), as the beneficiary of a deed of trust, and the trustee named in the deed of trust that secured Wells Fargo. Therefore, this article discusses not only the court’s stated ruling and rationale, but also provides additional context from the record. It discusses a perspective contrary to the court’s ruling that I may have presented had I represented the other side.

OVERVIEW

The Plaintiffs filed a Complaint seeking to enjoin a trustee’s sale by F. Bosley Crowther, III (“Crowther”), the beneficiary under the other deed of trust, and the trustee then serving under his deed of trust. They also sought a declaratory judgment that Wells Fargo’s deed of trust lien was senior to Crowther’s lien despite being recorded later.

The property covered by the deeds of trust straddled the county line between Henry and Pittsylvania Counties. Wells Fargo’s lien was recorded first in Henry, but its Pittsylvania recording was delayed. Meanwhile, Crowther recorded in both counties.

This case is noteworthy for real estate lawyers for two reasons: 1. It addresses inquiry notice principles in absence of reported Virginia cases on the key

language of the recording acts since the last related statutory amendments in 1922. 2. It is instructive regarding how a court may resolve conflicting provisions in a legal

description.

Both Wells Fargo’s and Crowther’s deeds of trust included a legal description of a 25.713 acres parcel straddling the boundary between Pittsylvania and Henry Counties. Crowther initiated foreclosure on the portion of the property lying within Pittsylvania County, claiming a first priority lien. Wells Fargo then sought an injunction to stop the foreclosure and a declaratory judgment establishing its lien priority despite the recording order of the deeds of trust.

After trial, the court agreed that Wells Fargo’s deed of trust was entitled to priority. The court issued its opinion by letter to counsel dated July 10, 2009, setting forth its rationale. The court noted that the plat referenced in the legal description of each deed of trust showed that the majority of the parcel, along with the dwelling and outbuildings, were located in Pittsylvania County. Wells Fargo’s deed of

∗ Mr. McGraw is a member of WootenHart PLC, in Roanoke, specializing in real estate litigation.

His practice also includes commercial litigation and transactions. He is a former member of the Real Property Section Board of Governors.

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trust as recorded in Henry County gave a complete description of the one parcel lying in both counties and divided by the county line. Access to the property was gained through Henry County.

The court ruled that Wells Fargo was entitled to priority in Pittsylvania County because its deed of trust, as recorded in Henry County, placed Crowther on inquiry notice. Such inquiry would have revealed that GMAC, the original creditor under Wells Fargo’s deed of trust, intended to have the dwelling in Pittsylvania County as its collateral, so its delay in recording there did not defeat its priority.

THE EVIDENCE

Stipulations

At the beginning of trial, Plaintiffs’ counsel presented a Stipulation covering core, undisputed facts. The Stipulation established that:

• Each of the deeds of trust was duly recorded in Henry and Pittsylvania Counties.

• Wells Fargo’s deed of trust was recorded first in Henry County, but Crowther’s was recorded first in Pittsylvania County.

• Both Wells Fargo’s deed of trust and Crowther’s deed of trust included legal descriptions referencing the same 25.713 acres parcel located at 3831 Axton Road, Axton, Virginia.

• This 25.713 acres parcel was located partially in Pittsylvania County and partially in Henry County.

• The legal description in both deeds of trust was:

All that certain tract or parcel of land, together with all the improvements thereon and appurtenances thereunto appertaining, situated along and with State Route 610 (Axton Road) partly in the Iriswood Magisterial District of Henry County, Virginia, and partly in the Westover Magisterial District of Pittsylvania County, Virginia, being designated as tract “X” containing 25.713 acres, more or less, as more particularly shown on plat of survey for Cheryl M. Terry, prepared by Terry A. Waller, L.L.S., dated April 25, 2000, of record in the Henry County Circuit Court Clerk’s office in map book 90, page 506, and in the Pittsylvania County Circuit Court Clerk’s office in map book 43 page 261L, said tract “X” being a part of the 175.9138 acre tract or as shown on boundary survey land of J. Stephen Williams and Carol B. Williams, of record in aforesaid Henry County Clerk’s office in map book 89, page 241, and in the aforesaid Pittsylvania County Clerk’s office in map book 43, page 175M.

• An accurate copy of the recorded boundary survey, dated April 25, 2000, was recorded in both counties before the deeds of trust and was referenced in the legal description. The central part of the survey appears below.

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• The improved portion of the 25.713 acres parcel is in Pittsylvania County.

• The unimproved portion of the 25.713 acres parcel is in Henry County.

Stipulation ¶¶ 1-19, Wells Fargo Bank, N.A. as Trustee for Carrington Mortgage Loan Trust v. Crowther.

The Legal Description and the Dwelling

The stipulated legal description expressly included “all” the 25.713 acres, not just the part in Henry County. It said that part of the acreage was in Pittsylvania County and explicitly referenced Pittsylvania County three times. The boundary survey referenced in the legal description shows the dwelling as clearly within Pittsylvania County.

The boundary survey was recorded in Henry County in 2000. Therefore, it was a matter of public record when Crowther did his title examination and made the secured loan to the homeowners in 2007. It shows that the unimproved portion of the property in Henry County did little more than provide access to a public road, with the driveway extending back to the house in Pittsylvania County.

Crowther admitted that he was aware of Wells Fargo’s deed of trust as recorded in Henry County, but that, beyond doing a title examination, he chose not to do any investigation regarding the extent of Wells Fargo’s lien. He admitted doing a title examination in Henry County before he recorded his deed of

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trust. Wells Fargo’s deed of trust explicitly described the parcel it covered as, “All [not part of] that certain tract or parcel of land . . . partly in Henry County . . . and partly in . . . Pittsylvania County . . ., being . . . tract ‘X’ containing 25.713 acres . . . shown on a plat” recorded in both. The plat recorded in both counties showed that this collateral straddled the boundary between Henry County and Pittsylvania County. Crowther chose, nevertheless, to ignore Wells Fargo’s deed of trust.

Testimony of Appraiser and Title Attorney

The Plaintiffs’ evidence included testimony of two witnesses: an appraiser and a title attorney. The appraiser testified as a fact witness. He had issued an appraisal report related to the loan secured by Wells Fargo’s deed of trust. The title attorney testified as an expert witness. Mr. David Helscher, former chair of the Real Property Section, served as the Plaintiffs’ title expert. He presented opinions related to conduct of a title examination based on the status of the land records in the two counties.

The appraiser’s testimony established that GMAC, the original creditor secured by Wells Fargo’s deed of trust, intended to include real estate in Pittsylvania County as part of its collateral. The appraiser testified that he appraised the dwelling in Pittsylvania County at the request of GMAC. GMAC had asked him to appraise the dwelling with 10 acres. The record does not disclose why GMAC wanted to limit the appraisal to include only 10 acres.

The appraiser prepared a sketch of an area, just under 10 acres, that extended back from Axton Road, across the boundary line between the two counties, to encompass the house in Pittsylvania County. The portion of the 25.713 acres parcel actually located on the Henry County side of the boundary included only 5.163 acres, so the acreage appraised for GMAC obviously included nearly five acres, plus the house, in Pittsylvania County.

The Title Examiner’s Duty

The title attorney’s testimony established that, under the applicable standard of care, Wells Fargo’s deed of trust, as recorded in Henry County, placed title examiners on inquiry notice that GMAC intended a lien on the entire 25.713 acres parcel. He testified that inquiry notice entailed doing “detective work” beyond merely looking at the land records, such as calling the property owners or secured creditors.

The title attorney testified regarding his opinions after reviewing the recorded deed by which the homeowners acquired the 25.713 acres, the boundary survey, and Wells Fargo’s deed of trust. He testified that the legal description in Wells Fargo’s deed of trust was the same 25.713 acres, called “Tract X,” that the homeowners acquired by the referenced deed.

He explained the mechanics of doing a title examination and indicated that, in looking at the legal description, a title examiner should take an “inclusive” approach. He explained that this meant looking at all available information. If one piece of information in the description is right and another piece of information is wrong, the title examiner should evaluate these to determine the real property covered by the deed of trust. He considered the preface to the description, the description itself, and the derivative clause.

He concluded that the most reliable information in the “Exhibit A” legal description of Wells Fargo’s deed of trust, was the central portion itself, which began “All that certain tract or parcel of land” and then referenced “Tract X, 25.713 acres.” That clearly was a reference to the entire tract as set forth in the stipulated legal description.

He said that the derivative clause does not affect the validity of a deed, but is simply included as a matter of convenience for title examiners to help them track where the owner is supposed to have

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acquired the property. He said that tax parcel numbers are included for the commissioner of revenue, under a statute related to recording requirements, but do not affect the validity of a deed.

He also addressed Crowther’s reliance on the words preceding the legal description: “The land … is situated in the State of Virginia, County of Henry, City of Axton, and described as follows.” This preliminary language did not reference Pittsylvania County. When asked about the importance of this language, he said that it was “just setting the stage.” He said that if it had said “North Carolina” and then the legal description still referenced the same “Tract X, 25.713 acres,” it still is “our property,” that is, the homeowners’ property. In questioning by Gregory, the title attorney said that, “[f]rom a title examiner’s point of view, this language is “mere surplus.”

Having confirmed that the legal description in Wells Fargo’s deed of trust included the entire 25.713 acres tract in both Henry County and Pittsylvania County, the title attorney’s testimony then focused on the duties of a title examiner who found this recorded in Henry County.

Although Wells Fargo’s deed of trust is recorded in both Henry County and Pittsylvania County, the title attorney’s testimony focused primarily on inquiry notice existing before the recording in Pittsylvania County. He said that, having confirmed that the property was in two jurisdictions, the question for the title examiner became, “Why is this not recorded in both places?” In other words, in his opinion, this placed the title examiner on inquiry notice. The task would become to look for additional information regarding what was intended under the deed of trust.

He testified that the first line of inquiry, after finding the deed of trust in Henry County, would be to look for its recording in Pittsylvania County. He confirmed, as the Plaintiffs asserted, that the lack of the timely recording in Pittsylvania would not end the inquiry, because the legal description as recorded in Henry County so clearly encompassed the entire 25.713 acres. Therefore, this warranted additional inquiry, such as contacting the homeowners, as owners of the property, and contacting all the lenders identified from the title search, to determine intent.

The title attorney said that you cannot ignore, as Crowther did, that Wells Fargo’s deed of trust had a legal description identical to that included in the deed to the homeowners. He said that, even if the deed of trust was poorly drafted, “the fact is inquiry means questions, and if this document does nothing else, it creates questions.” He testified that inquiry means “detective work.” What Crowther should have done is contact parties identified through his title examination to determine intent.

Testimony of Zoning Administrator and Notary Public

Crowther’s evidence included testimony of the zoning administrator and director of code compliance for Pittsylvania County, and the notary public who conducted the “witness” closing with the homeowners for GMAC. The administrator testified that the portion of the property lying within the boundaries of Pittsylvania County could be sold without violating the county’s subdivision ordinance. On cross-examination, he acknowledged, however, that the entire 25.713 acres as shown on the boundary survey constituted one parcel. The notary public testified that he witnessed the signing of loan documents at the homeowners’ dwelling in Pittsylvania County. Wells Fargo argued that this testimony is not probative regarding priority of the deeds of trust.

Testimony of Second Title Attorney

In support of the priority of Crowther’s deed of trust, another title attorney testified that he agreed with 99 percent of the testimony of the title expert whom Wells Fargo presented. His testimony made a careful distinction that seemingly undermined Crowther’s position. He said:

[I]n his opinion the recordation of [Wells Fargo’s] deed of trust in Henry County, Virginia, would not have provided actual or constructive notice to any title examiner in

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Pittsylvania County, Virginia that it was also intended to apply to or encumber property located in Pittsylvania County.

Therefore, he offered no opinion regarding whether recording of Wells Fargo’s deed of trust in Henry County was actual or constructive notice to a title examiner in Henry County. In effect, this left the testimony of Wells Fargo’s title attorney uncontroverted on this point.

THE COURT’S RULING

The court granted a declaratory judgment that Wells Fargo’s deed of trust was entitled to priority in Pittsylvania County. The court first discussed the general rule of “first in time, first in right,” and then discussed the exception controlling this case.

The court recognized that lien rights on real estate are “a creature of statute” not recognized at common law. It said that the purpose of the recording statutes was to give constructive notice to purchasers and encumbrancers of prior conveyances and encumbrances.1 The court also stated the general rule that “first in time will have priority over a subsequent recorded encumbrance.” It held, however, that inquiry notice could change this result:

[F]acts expressly stated in an instrument and other matters therein suggested . . . may require a purchaser or encumbrancer to inquire further and may place the purchaser or encumbrancer under a duty of inquiry. The failure to make that inquiry may defeat their claim as a bona fide purchaser.

Quoting Shaneen v County of Matthews,2 the court said:

[A] purchaser must look to the title papers under which he buys, and is charged with notice of all the facts appearing upon their face, or to the knowledge of which anything there appearing will conduct him. He has no right to shut his eyes or his ears to the inlet of information, and then say he is a bona fide purchase without notice.3

The court went on to say that, “only a purchaser without notice can take advantage of a failure to record an instrument.”4

After recognizing these general principles of law, the court turned to discussion of authorities on which it based its ruling that a lien creditor must be a bona fide purchaser for value without notice to gain protection under the recording statutes. Central to this analysis was Richardson v. AMRESCO Residential Mortgage Corp.5 Although Richardson did not involve the priority of liens, the court said that it stated controlling principles.

In Richardson, the Supreme Court of Virginia reaffirmed established principles of law demonstrating that a lien creditor is not entitled to priority under the recording acts if he has inquiry notice of a competing, though unrecorded, claim to real estate.6 In Richardson, the court said that a

1 The court cited Chavis v. Gibbs, 198 Va. 379, 94 S.E.2d 195 (1956). 2 265 Va. 462, 579 S.E.2d 162 (2003). 3 Id. at 477, 579 S.E.2d at 172. 4 Id. at 478, 579 S.E.2d at 172. 5 267 Va. 43, 592 S.E.2d 65 (2004). 6 Id. at 51, 592 S.E.2d at 70 (2004), citing Puckett v. Campbell, 151 Va. 213, 216, 144 S.E. 434,

435 (1928); Gordon v. Rixey, 76 Va. 694, 698 (1882); Cammack v. Soran, 71 Va. (30 Gratt.) 292, 295 (1878).

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mortgagee may assert the status of a bona fide purchaser if it acquired its interest in the property for value without actual or constructive notice of a latent equity of another.7 The court then articulated the following principles of constructive notice and held them applicable to the mortgagee:

The recordation of an instrument gives constructive notice of all the facts expressly stated in the instrument and other matters therein suggested which might be disclosed upon prudent inquiry. Thus, a purchaser of real property has constructive notice not only of the facts appearing on the face of recorded documents in the chain of title, but also of such other facts of which the purchaser is placed on inquiry based on those recorded instruments. In the present case, the recorded instruments in the chain of title to the property placed the mortgagees under a duty of inquiry.8

The court held that recorded documents in the chain of title placed the mortgagees under a duty of inquiry and put them on notice of the questionable validity of a guardian’s transfer of property to herself.

Applying Richardson, the Pittsylvania court then noted that the plat referenced in the legal description of each deed of trust showed that the majority of the parcel, along with the dwelling and outbuildings, were located in Pittsylvania County. Wells Fargo’s deed of trust as recorded in Henry County gave a complete description of the one parcel lying in both counties and divided by the county line. Access to the property was gained through Henry County. The court found that GMAC intended its collateral to include the dwelling and acreage in Pittsylvania County. Had Crowther taken notice of the facts apparent from the recorded documents and inquired further, he would have discovered this intent. He was charged with this knowledge.

Based on this reasoning, the court held that Crowther was not a bona fide purchaser. The court declared that Wells Fargo’s deed of trust as recorded in Pittsylvania County after Crowther’s was senior and entitled to priority.

ADDITIONAL AUTHORITY AND ANALYSIS

Two provisions of Virginia’s recording acts are pertinent when a parcel of real estate is located in more than one county. As applied in this case, a lien creditor cannot rely merely on the fact of recording to avoid the consequences of having actual, constructive or inquiry notice of a competing claim to or against the real estate.

The following excerpts from Virginia’s recording acts address the principle of notice:

Every . . . Deed of Trust . . . conveying real estate . . . shall be void as to all purchasers for valuable consideration without notice not parties thereto and lien creditors, until and except from the time it is duly admitted to record in the county or city wherein the property embraced in such . . . deed . . . may be.9

The next Code section refers back to “such” creditors and purchasers (that is, the creditors and purchasers addressed in § 55-96(A)(1) and applies this principle to multi-jurisdiction parcels:

Notwithstanding any such writing shall be duly admitted to record in one county or corporation wherein there is real estate . . ., it shall nevertheless be void as to such creditors and purchasers in respect to other real estate . . . without the same, until it is

7 267 Va. at 51, 592 S.E.2d at 70. 8 Id. at 51-52, 592 S.E.2d at 70 (citations omitted). 9 VA. CODE § 55-96(A)(1).

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duly admitted to record in the county or corporation wherein such other real estate . . . may be.10

Over a century ago, the Supreme Court of Virginia said that trustees under a deed of trust “unquestionably, under many decisions of this court, [are] purchasers for value” and that if they are “without notice,” then they are entitled to the protection of the recording acts.11 Likewise, the court has said, “[a] mortgagee stands in the shoes of a purchaser for value.”12 Stated conversely, such trustees “with notice” are not bona fide purchasers.

The Supreme Court of Virginia has held that the “bona fide purchaser for value” concept applies to lien creditors. Applying this concept under VA. CODE § 55-96(A)(1), the status of a bona fide purchaser for value is necessary for a party, including a lien creditor, to rely on the protections afforded by recording in the appropriate jurisdiction.

In Richardson, the court stated that, for a mortgagee to assert the status of a bona fide purchaser, the mortgagee must establish that he acquired his interest in the property for value, “without actual or constructive notice of the latent equity of another.”13 The court then cited Tauber v. Commonwealth, which said that a purchaser “has no right to shut his eyes or his ears to the inlet of information, and then say that he is a bona fide purchaser [for value] without notice.”14 The court in Pittsylvania likewise said that Crowther could not shut his eyes to the plain language of the legal description in Wells Fargo’s deed of trust.

CROWTHER’S AUTHORITIES ACTUALLY SUPPORTED WELLS FARGO’S SENIOR LIEN

Crowther relied on several cases in an effort to avoid the conclusion that he was not entitled to the status of a bona fide purchaser for value without notice of the extent of Wells Fargo’s lien.

He referenced Horsley v. Garth,15 which relates to Virginia’s recording acts as they were on the books nearly 200 years ago. Those recording acts were similar in some respects to the current VA. CODE §§ 55-96 and 55-97. Crowther’s reference to Horsley suggested that he perceived that case as a precursor to recording acts, rather than as an application of the recording acts in effect since 1814. The Plaintiffs argued, however, that any discussion of Horsley was not helpful in view of the Supreme Court of Virginia’s recent decision in Richardson.16

Crowther’s argument seemingly focused on facts of old cases, rather than understanding the law they represented, leading him to misconstrue Murphy’s Hotel, Inc. v. Benet.17 The law addressed in Murphy’s Hotel shows that it actually supports that a trustee, or a deed of trust lien creditor, is subject to the inquiry notice principles set forth in Richardson. Murphy’s Hotel dealt with Section 3570 of the Code of 1940, which required that, to claim of lien, a judgment creditor should docket his judgment in each

10 VA. CODE § 55-97 (emphasis added). 11 Chapman v. Chapman, 91 Va. 397, 400, 21 S.E. 813, 814 (1895). 12 Puckett v. Campbell, 151 Va. at 216, 144 S.E. at 435. 13 267 Va. at 51, 592 S.E.2d at 70. 14 263 Va. 520, 538, 562 S.E.2d 118, 127 (2002). 15 43 Va. (2 Gratt.) 471 (1846). 16 267 Va. 43, 51, 592 S.E.2d 65, 70 (2004) (a lien creditor is not entitled to priority under the

recording acts if he has inquiry notice of a competing, though unrecorded, claim to real estate). 17 119 Va. 157, 89 S.E. 104 (1916).

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jurisdiction where his debtor owned real estate. At issue was the priority between a judgment creditor and a deed of trust creditor.

In denying priority to a judgment creditor who had not docketed his judgment, the court in Murphy’s Hotel was explicit in finding no evidence in the record that deprived the deed of trust creditor of “his rights as a bona fide purchaser for value without notice.”18 Likewise, in the lengthy quote from that case that Crowther included in a trial memorandum, the court said that neither Toby (the deed of trust creditor), nor his trustee, had actual notice of the judgment, so that the issue became whether, on those particular facts, they had “such notice as the law would impute to them.” Murphy’s Hotel stands as authority that a deed of trust creditor may lose his lien priority if he has actual or imputed notice of a competing claim. No such notice existed on those particular facts.

The climax of Crowther’s argument was a curious misconstruction of a parol evidence rule case, Blair v. Rohrer’s Admin.19 In Blair, the court found that, because the legal description in a deed was “definite, certain, and unambiguous, extrinsic evidence” was inadmissible to show that the grantor intended to convey a different tract.20 The legal description at issue was a detailed and unmistakable metes and bounds description, involving no ambiguity, of a lot on the west side of a property. The court refused evidence that the lot allegedly was on the east side of the property. Because the deed unmistakably described a west lot, it was not constructive notice of an east lot.21

Crowther did not argue that the parol evidence rule had any bearing on the present case, and Blair, in fact, had no application to the present case. There, the court rejected the assertion that one clearly-described parcel actually was intended to reference a completely separate parcel at a different location.

Instead of involving two distinct parcels, the present case involved one parcel that straddled a boundary between two counties. The legal description of this 25.713-acre parcel was completely clear. The inconsistencies in the preliminary provisions, the tax parcel numbers, and the derivative clause did not negate this. Wells Fargo did not assert that this clear description should be ignored and a different parcel substituted. Instead, Wells Fargo’s position was that this detailed and unmistakable description placed Crowther on notice that the original secured creditor, GMAC Mortgage, intended a lien on the entire parcel. The Exhibit A legal description to the Wells Fargo deed of trust explicitly said that it covered “all that certain tract or parcel of land” shown on the recorded survey, not just a portion of it.

Murphy’s Hotel Did Not Reject Inquiry Notice

Contrary to Crowther’s argument, Murphy’s Hotel, Inc. v. Benet,22 did not reject the principle of inquiry notice. The court simply found that the particular facts before it in 1916 made inquiry notice inapplicable to the records at issue. Applying the law as articulated in Murphy’s Hotel to the facts of the present case defeated Crowther’s claim.

Principles of Notice and Value Apply to Mortgagees

The court explicitly stated in Murphy’s Hotel that a trustee under a deed of trust “can be … a purchaser for value and without notice” and that “[i]f he is a purchaser for value without notice, the beneficiary takes subject only to the rights” of senior lien creditors and is not affected by undocketed

18 119 Va. at 164, 89 S.E. at 106. 19 135 Va. 1, 116 S.E. 767 (1923) (cited in Crowther’s trial memorandum). 20 Id. at 44, 116 S.E. at 782. 21 Id. at 45, 116 S.E. at 782. 22 119 Va. 157, 89 S.E. 104 (1916).

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judgments.23 Clearly, the court’s view was that inquiry notice principles, discussed again nearly a century later in Richardson, apply to mortgagees.

The court in Murphy’s Hotel was explicit in finding that the record contained no evidence that deprived the deed of trust creditor of “his rights as a bona fide purchaser for value without notice.”24 Likewise, in the lengthy quote that Crowther included in his trial memorandum, the court said that neither Toby (the deed of trust creditor), nor his trustee, had actual notice of the judgment, so that the issue became whether, on those particular facts, they had “such notice as the law would impute to them.”

Murphy’s Hotel stands as authority that, depending on the particular facts of the case, a deed of trust creditor may lose his lien priority if he has actual or imputed notice of a competing claim. On the particular facts of Murphy’s Hotel, the deed of trust creditor did not lose his priority to a judgment creditor. Under the facts of the present case, however, Crowther did lose any claim to priority.

Recitals Did Not Create Inquiry Notice

Review of pertinent facts in Murphy’s Hotel reveals why Crowther’s reliance on that case was misplaced. A judgment creditor who had not docketed his judgment in Gloucester County attempted to rely on recitals in a deed to create inquiry notice against a deed of trust creditor. Those recitals referred to a prior deed that, in turn, mentioned lawsuits heard in Richmond. The actual language of the recitals does not appear in the opinion. The court found, however, that the recitals did not create an obligation for the mortgagee to investigate the lawsuits.25

In Murphy’s Hotel, the unrecorded judgment at issue did not contain a legal description of real estate. The concept of inquiry notice did not help the judgment creditor there because there was nothing in the record to place the deed of trust creditor on notice that the judgment had anything to do with the real estate at issue.

A CONTRARY VIEW

Several years before Richardson, the Circuit Court for the County of Loudoun stated a view at odds with that reached in the Wells Fargo case.26 The court stated in dictum that, unlike an innocent purchaser, a lien creditor’s rights under the recording statutes are not affected by notice outside of the record. The court said that, “[a] deed is void as to lien creditors until it is admitted to record whether or not the creditors know of the deed.”27 The Loudon court relied on a 1928 case decided under a now-superseded provision of the recording acts, Section 5194 of the VIRGINIA CODE of 1919.28

23 119 Va. at 159-60, 89 S.E. at 105. 24 Id. at 164, 89 S.E. at 106. 25 Id. at 164, 89 S.E. at 106. 26 Unit Owners Association of Plaza Village Townhouses v. Younger, 29 Va. Cir. 199 (Loudoun

Cir. 1992). 27 Id. 28 Id. (citing J.E. Neff’s Admin. v. Newman, 150 Va. 203, 142 S.E. 389 (1928)). Neff derives this

principle from a case decided a century earlier, Guerrant v. Anderson, 25 Va. (4 Rand.) 208 (1826). The recording statutes at that time stated categorically that deeds and other documents were void as to lien creditors, with no mention of the concept of notice.

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The United States District Court for the Eastern District of Virginia, Richmond Division, also has said that notice does not apply to lien creditors under the recording acts.29 The court quoted from VA. CODE § 55-96, but cited no case law from Virginia supporting this understanding.

CONCLUSION

The Supreme Court of Virginia has not ruled regarding whether the notice provisions of today’s recording statutes apply to lien creditors, or only to purchasers. Such a reading would place Virginia at odds with other jurisdictions. It also would require a dubious construction of the statutory wording at odds with the apparent purpose of the statute, as well as long-standing case law coexisting with the recording statutes.

Case law treats as fundamental that lien creditors are a subset of the broader class of purchasers. The wording of VA. CODE § 55-96 does not indicate that the General Assembly intended to vary this principle. Indeed, no apparent reason exists for treating purchasers and lien creditors differently from each other if a recorded document places them on notice of a claim to the property.

The Pittsylvania court concluded that lien creditors, like Wells Fargo, are entitled to the status of bona fide purchasers for value without notice. Because Crowther had inquiry notice of the extent of Wells Fargo’s lien, he was not entitled to protection under the recording statutes. Under the evidence, the recording acts, and the related principles of law stated by the Supreme Court of Virginia in Richardson, he had a duty to inquire about the extent of Wells Fargo’s lien. He could not close his eyes to the legal description, then attempt to claim priority.

29 Ameribanc Savings Banks, F.S.B. v. Resolution Trust Corp., 858 F. Supp. 576 (E.D. Va. 1994).

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THE EVOLUTION OF RESIDENTIAL FORECLOSURE LITIGATION IN VIRGINIA

by Robert R. Michael and Joseph M. LeNoir∗ Old time, in whose banks we deposit our notes, Is a miser who always wants guineas for groats; He keeps all his customers still in arrears By lending them minutes and charging them years.”

Oliver Wendell Holmes There is certain disdain toward the lending industry, which is highlighted in the poem by Justice Holmes comparing lenders to the ever-imposing foe - time. Notwithstanding public opinion, lending institutions are one of the cornerstones of the U.S. economy, without which the U.S. could not have enjoyed its prosperity in relation to the rest of the world. Rarely in our history has this been more evident than now, with the mass of residential real estate foreclosures constantly in the news and frequently cited as the cause of the current U.S. economic slump. Thus, it is not surprising that the frequency of litigation challenging foreclosures has spiked significantly in the recent past, which in turn has led to dramatic changes in the tactics and causes of action employed by borrowers’ attorneys. Until recently, judicial challenges to residential real estate foreclosures remained relatively uniform. A sale could be challenged due to inadequacy of price.1 However, because the value of land varies over time, and a foreclosure sale is a forced sale of property which rarely brings a price equivalent to that of a sale negotiated at arm’s length, attacks on foreclosure sales based upon inadequacy of price alone are seldom successful.2 Many cases have also been litigated over the sufficiency of required advertisements and notices of sale.3 Due to trustees’ compliance with the unambiguous requirements of VA. CODE § 55-59.24 and those usually found in deeds of trust, a challenge alleging insufficient advertisement is unlikely to be available to a borrower’s attorney, but remains as a possible challenge to a foreclosure sale. Challenges to foreclosure sales based on the sufficiency of notices of sale are precluded by VA. CODE § 55-59.1(C), which states that “[f]ailure to comply with the requirements of notice contained in this section shall not affect the validity of the sale, and a purchaser for value at such sale shall be under no duty to ascertain whether such notice was validly given.”

∗ Robert R. Michael is an associate with Bierman, Geesing, Ward & Wood, LLC, with offices in

Richmond and Arlington, Virginia, and Bethesda, Maryland, and is admitted to practice in West Virginia and Virginia. Mr. Michael has extensive litigation experience, including lending and foreclosure related defense, first and third party insurance defense, criminal defense, and domestic relations. He graduated summa cum laude with a B.A. from Concord University and received his J.D. from the University of Virginia School of Law.

Joseph M. LeNoir is an associate with Bierman, Geesing, Ward & Wood, LLC, in Richmond, Virginia. He is a graduate of Washington and Lee University and the University of Richmond School of Law. His practice focuses on lending and foreclosure related litigation defense.

1 However, the general rule established by the case law is that a foreclosure sale will not be set aside for mere inadequacy of price, unless the bid is so grossly inadequate “as to shock the conscience of the chancellor and raise a presumption of fraud.” Perdue v. Davis, 176 Va. 102, 10 S.E.2d 558 (1940) (quoting Hopkins v. Givens, 119 Va. 578, 89 S.E. 871 (1916)).

2 Cromer v. DeJarnette, 188 Va. 680, 51 S.E.2d 201 (1949); Perdue, 176 Va. at 106, 10 S.E.2d at 560.

3 See, e.g., Deep v. Rose, 234 Va. 631, 364 S.E.2d 228 (1988); Cromer, 188 Va. 680, 51 S.E.2d 201 (1949).

4 This section requires advertisements “in a newspaper having a general circulation in the city or county wherein the property to be sold” lies, “not less than once a week for two weeks” or “once a day for three days,” according to the terms of the Deed of Trust.

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Virginia courts have also seen the flow and ebb of defensive pleadings in unlawful detainer actions arising after foreclosure sales of residential real estate.5 This has proven ineffective and borrowers’ attorneys have largely ceased any attempt to challenge the foreclosure sale as a defense to an unlawful detainer action. Most unlawful detainer actions are initiated at the general district court level. The general district courts are courts of limited jurisdiction, and can only exercise the jurisdiction that is expressly conferred upon them by statute.6 The statutes conferring jurisdiction over matters of unlawful detainer upon the general district court do not expressly permit them to try matters of title to real property.7 Because Virginia courts are required to accept documents recorded in the land records as prima facie evidence of the truth of the facts asserted therein,8 a general district court does not have jurisdiction to address the validity of title to real property held by a purchaser at a foreclosure sale. Likewise, a circuit court exercises derivative jurisdiction on appeal from a general district court and therefore does not have jurisdiction to rule on the validity of a foreclosure sale purchaser’s title to real estate.9 Upon this reasoning, a motion for summary judgment in the circuit court has provided the procedural vehicle for upholding foreclosure sales in the face of defenses attempting to challenge the validity thereof in unlawful detainer actions. This article focuses on four of the most common residential foreclosure challenges that the current practitioner may encounter in the courts of the Commonwealth of Virginia. Section I addresses the right to rescind a consumer credit transaction as set forth in the Truth in Lending Act (“TILA”).10 Section II addresses the theory that the securitization of a loan results in the note and deed of trust being “split” and that the deed of trust is either no longer enforceable or is not enforceable by the party currently in possession of the note. Section III addresses a miscellaneous grouping of theories often accompanying the theory discussed in Section II. Finally, Section IV addresses a breach of contract theory which applies to loans insured by the Federal Housing Administration. This theory argues that such deeds of trust incorporate federal regulations which require the note holder to attempt a face-to-face meeting with the property owner before instituting foreclosure proceedings. I. TILA LOAN RESCISSION One traditional method used by borrowers and their counsel to challenge or delay a foreclosure sale is to allege statutory violations committed by various parties involved in the loan origination process. The borrower’s purported goal, in many cases, is to rescind the loan transaction under TILA and its implementing Regulation Z, 12 C.F.R. § 226.1 et seq. Consumers who engage in a credit transaction using their principal dwelling as a security interest are given the right to rescind the transaction within a three day period. 15 U.S.C. § 1635(f). If a lender does not give a consumer the required material disclosures11 and notice of the right to rescind, the

5 Any discussion of a tenant’s rights under a lease after foreclosure is beyond the scope of this

article. For information thereon, see the Virginia Residential Landlord and Tenant Act, VA. CODE § 55-248.2 et seq.

6 Addison v. Salyer, 185 Va. 644, 648-49, 40 S.E. 2d 260, 262 (1946). 7 See VA. CODE § 16.1-77 (1950); id. § 8.01-124 et seq. (1950); Addison, 185 Va. at 648-49. 8 VA. CODE § 8.01-389 (1950). 9 Afify v. Simmons, 254 Va. 315, 318, 492 S.E.2d 138, 140 (1997) (“It is settled law in this

Commonwealth that when a judgment is rendered in the general district court, the jurisdictional limits of that court carry over to the appeal of that judgment in the circuit.”); Plaza Motors, Inc. v. Walker, 8 Va. Cir. 451, 451-52 (City of Richmond 1987).

10 15 U.S.C. § 1601 et seq. 11 The required material disclosures are the annual percentage rate, the finance charge, the amount

financed, the total payments, the payment schedule, and the disclosures and limitations referred to in 12

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consumer’s right to rescind is extended from a three-day period to a three-year period. 15 U.S.C. § 1635(f). The right of rescission generally does not apply to a residential mortgage transaction.12 See 15 U.S.C. § 1635(e)(1). However, TILA provides an additional right of rescission in circumstances where a foreclosure process has been initiated “on the primary dwelling of an obligor securing an extension of credit.” 15 U.S.C. § 1635(i). Rescission is possible if: (1) a mortgage broker fee was not included in the finance charge; or (2) the notice of rescission provided to the borrower is not in the appropriate form. See id. Seeking loan rescission as a remedy raises the practical problem for the borrower that a person cannot simply rescind his or her loan without also tendering the loan proceeds to the lender.13 Borrowers attempting to avoid foreclosure by seeking rescission of a loan typically do not seek to rescind the loan and repay the loan proceeds. Instead, borrowers seek to rescind the loan and retain the property securing the loan without tendering the loan proceeds to the lender.

However, before it is necessary to address the factual issues of the borrower’s intent and ability to tender the loan proceeds,14 in many cases, the most practical way to defend statutory claims based on actions alleged to have occurred in the loan origination process is to first demur15 based on the applicable statute of limitations.

TILA’s three year statute of limitations applies to the right to rescission that arises when a foreclosure process has been initiated. See 15 U.S.C. § 1635(i)(1). This statute begins to run three years after “consummation of the transaction,” i.e., closing. Id. Many loans which currently reach the foreclosure stage were originated before housing prices began to decline several years ago. As a result, an available defense to many current TILA claims is found in the application of TILA’s statute of limitations.16 II. SECURITIZATION The central idea driving this particular attack on residential foreclosure in Virginia is that mortgagors no longer have a right to foreclose on real property when the underlying debt has been sold into a mortgage backed security. The argument most often attempts to reach one of two different conclusions: (1) either the deed of trust has been “split” from the underlying debt, rendering it a wholly unsecured debt; or (2) the property can only be foreclosed by a majority of the individuals holding an interest in the respective security. While both variants of this theory are unsupported in Virginia, the second has formed the basis for numerous recent lawsuits.

C.F.R. § 226.32(c), (d). Byron v. EMC Mortg. Corp., No. 3:09-cv-00197, 2009 WL 2486816, at *n. 2 (E.D. Va. Aug. 10, 2009) (citing 12 C.F.R. § 226.23(a)(3)).

12 The term “residential mortgage transaction” means a transaction in which a deed of trust or equivalent security interest is created or retained against the consumer’s dwelling to finance the acquisition or initial construction of such dwelling. 15 U.S.C. § 1602(w).

13 See American Mortg. Network, Inc. v. Shelton, 486 F.3d 815, 820 (4th Cir. 2007); Moore v. Wells Fargo Bank, N.A., 597 F. Supp. 2d 612, 616-17 (E.D. Va. 2009).

14 See Moore, 597 F. Supp. 2d at 616 (“Although Wells Fargo may be correct that rescission is not appropriate if this Court concludes that Plaintiff is unable to tender, at [the Motion to Dismiss] stage in the case, the Court cannot reach the factual question regarding Plaintiff’s ability to tender. . .”).

15 Depending on the jurisdiction and the facts alleged by the plaintiff, it may be necessary to file a motion to dismiss or plea in bar rather than a demurrer.

16 It should be noted that claims for civil damages under TILA are subject to a one year statute of limitations. 15 U.S.C. § 1640(e).

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A mortgage pass-through is an example of the simplest of mortgage-backed securities. A mortgage pass-through is a securitized interest in a pool of mortgages whereby all principal and interest payments (less a servicing fee) from the pool of mortgages are passed directly to investors each month.17 The pools of investors can range significantly in size. The securitization process allows individual banks to take debts from their balance sheets, allowing them to continue lending to potential borrowers, and spreads the risk of default widely among the investors in the security. A homeowner is not discharged from his obligation under a note because it is assigned away. VIRGINIA CODE § 8.3A-203(b) states that “[t]ransfer of an instrument, whether or not the transfer is a negotiation, vests in the transferee any right of the transferor to enforce the instrument, including any right as a holder in due course.” Further, the “split” of a promissory note from the deed of trust does not render a deed of trust unenforceable. In Virginia, a deed of trust continues to grant a promissory note holder security, and subsequent note holders may appoint substitute trustees under deeds of trust.18 This argument is typically advanced using a misconstruction of Virginia law. Whereas the Code permits “the holders of greater than fifty percent of the monetary obligations” to appoint a substitute trustee,19 this cause of action typically states that it is the only those who have “greater than fifty percent ownership” who may appoint a Substitute Trustee.20 This interpretation renders the word “holder” in the statute wholly ineffective. This method of foreclosure defense litigation has not found much success under Virginia law.21 III. CLAIMS OFTEN ACCOMPANYING THE SECURITIZATION THEORY In recent years a “foreclosure defense industry” has developed, largely based online, with web sites22 which promise to stop foreclosure and offer form pleading packages for sale which promise, for example, to provide a “forensic tour de force to stop foreclosure.”23 Perhaps the most well-known movement within this industry is the so-called “show-me-the-note” strategy. This foreclosure defense strategy essentially demands that a foreclosing lender prove its standing with the hope that, as sometimes

17 See Securities and Exchange Commission, at http://www.sec.gov/answers/mortgagesecurities

.htm (last visited Apr. 9, 2010). 18 “The party secured by the deed of trust, or the holders of greater than fifty percent of the

monetary obligations secured thereby, shall have the right and power to appoint a substitute trustee or trustees for any reason.” VA. CODE § 55-59(9).

19 Id. 20 See Plaintiff’s Consolidated Opposition to Motions to Dismiss First Amended Complaint by

Bank of New York, N.A., CWALT, Inc., Countrywide Home Loans, America’s Wholesale Lender, Mortgage Electronic Registration System, Inc., and Equity Trustees, LLC, No. 1:09-CV-01129-AJT-TCB, at 7 (E.D. Va.).

21 See Hammett v. Deutsche Bank National Co., No. 1:09-cv-1269, Dkt. No. 24 (E.D. Va. Apr. 2, 2010) (Lee, J.); Areebuddin v. OneWest Bank, F.S.B., No. 1:09-cv-01083, Dkt. No. 34 (E.D. Va. Mar. 24, 2010) (O’Grady, J.); Merino v. EMC Mortgage Corp., No. 1:09-cv-1121, Dkt. No. 26 (E.D. Va. Mar. 19, 2010) (O’Grady, J.); Pazmino v. LaSalle Bank, N.A., No. 1:09-cv-1173, Dkt. No. 51 (E.D. Va. Mar. 17, 2010) (Lee, G.); Tapia v. U.S. Bank, N.A., No. 1:09-cv-1025, Dkt. Nos. 29 & 56 (E.D. Va. Nov. 20, 2009 and Mar. 17, 2010) (Lee, J.); Horvath v. Bank of New York, N.A., No. 1:09-cv-1129, Dkt. No. 38 (E.D. Va. Jan. 29, 2010) (Trenga, J.).

22 See, e.g., http://www.documentaryclearinghouse.com/ (last visited Apr. 7, 2010); http://www .mortgage-solutions-911.com/ (last visited Apr. 7, 2010); http://www.livinglies-store.com/ (last visited Apr. 7, 2010).

23 http://documentaryclearinghouse.com/cart/index.php?dispatch=products.view&product_id=297 78 (last visited Apr. 7, 2010).

http://documentaryclearinghouse.com/cart/index.php?dispatch=products.view&product_id=297

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ss.

happens, the foreclosing lender has lost or will not be able to locate the original note.24 The arguments based on securitization discussed in Section II of this article are one variation of this strategy. However, borrowers and their counsel in Virginia have also assembled several other novel securitization based theories in defense of foreclosure.

One such theory is the general allegation that, in the absence of a note holder proving its standing to foreclose, Virginia’s non-judicial foreclosure process violates the borrower’s right to due process under the Fifth and Fourteenth Amendments. The law is settled in the Fourth Circuit that Virginia’s non-judicial foreclosure process does not involve sufficient state action to support a claim arising under the Fourteenth Amendment.25 Nevertheless, borrowers attempting to avoid foreclosure continue to allege that the actions of lenders and trustees, as governed by the VIRGINIA CODE, violate a borrower’s right to due proce

Other allegations raised in defense of pending foreclosures are based on contractual principles

and seek to “void” the deed of trust signed by the borrower on the basis that the deed of trust is unenforceable because it violates public policy in one way or another. One allegation is that loan origination is illegal gambling as defined by VA. CODE § 18.2-325 et seq. The basis for this claim seems to be rooted in the theory that if a note is securitized and placed in a mortgage loan trust and the trust is in turn insured or protected by a credit default swap,26 which will pay the lender in the event of default by the borrower, then the lender has gambled on whether or not the borrower will default.

Although it does not appear to have been cited by a borrower’s attorney in any case related to

foreclosure, VA. CODE § 11-14 governs the enforcement of gambling contracts and provides that “[a]ll . . . contracts . . . whereof the whole or any part of the consideration be money or valuable thing won . . . at any game . . . shall be utterly void.”27 Neither the consideration for a deed of trust nor the consideration for a residential loan transaction in its entirety is money won at a game and neither is void under § 11-14. Furthermore, an insurance policy or credit default swap is itself a separate contract from a deed of trust. Even if an insurance policy or a credit default swap could be found to be void as an illegal gambling contract, the result would be that the insurance policy or credit default swap contract itself would be unenforceable,28 not that the deed of trust or note secured by the deed of trust would be unenforceable.

A second public policy argument which has been raised by attorneys for borrowers seeking to

avoid foreclosure is that mortgage loan securitization is a pyramid scheme. A “pyramid promotional scheme” is any plan or operation by which a person “gives consideration for the opportunity to receive compensation a majority of which is derived from the introduction of other persons into the plan or operation rather than from the sale or consumption of goods, services, or intangible property . . . ” VA. CODE § 18.2-239(4). While the alleged relation of residential mortgage loan transactions to any such scheme is unclear, the facts which have been alleged in support of such claims appear to be that borrowers were induced to accept loans they could not afford, the loans were pooled, and asset-backed

24 Most promissory notes secured by residential property contain a standard provision waiving

any right of presentment, and VA. CODE § 55-59.1(B) allows a trustee to proceed to foreclosure if the beneficiary submits an affidavit that the note is “lost or for any reason cannot be produced.”

25 Levine v. Stein, 560 F.2d 1175 (4th Cir. 1977). 26 A credit default swap is a contract in which the protection buyer makes payments to the

protection seller and, in exchange, the protection seller is obligated to pay the protection buyer if certain credit events occur, such as the borrower’s failure to pay. See David A. Skeel, Jr. & Frank Partnoy, The Promise and Perils of Credit Derivatives, 75 U. CIN. L. REV. 1019 (2007). Credit default swaps differ in several ways from insurance. However, a detailed discussion of credit default swaps is beyond the scope of this article.

27 See Hughes v. Cole, 251 Va. 3, 13, 465 S.E. 2d 820, 827 (1996). 28 See VA. CODE § 11-14.

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securities were then sold to investors. The only apparent relation between securitization and the components of a pyramid scheme is that both involve multiple entities. That shared characteristic is not a sufficient basis for a cognizable claim that securitization is a pyramid scheme and the resulting conclusion that securitized deeds of trust are unenforceable.

IV. BREACH OF CONTRACT PER FHA REGULATIONS One of the most recent and developing arguments offered as a challenge to the authority to foreclose on a deed of trust rests on a breach of contract theory. The theory asserts that the deed of trust, which secures a loan insured by the Federal Housing Administration (“FHA”), incorporates the FHA regulations of the federal Department of Housing and Urban Development (“HUD”) into its terms. If so, this theory follows, a lender must fully comply with those regulations prior to foreclosing; which requires a mortgagee to “have a face-to-face interview with the mortgagor.” 24 C.F.R. § 203.604(b). This theory is more striking than most due to its appeal to the terms of the deed of trust itself.29 Although no final order has been issued by a court upholding such a theory under Virginia law,30 the increasing frequency of legal actions based upon this argument warrants an analysis of the practical and legal issues surrounding it. The practical limitations of the breach of contract theory outweigh its benefits to homeowners, especially in the current economy. This theory asserts that the deed of trust incorporates federal regulatory requirements into its contractual terms, yet it has only been plead as an action for declaratory judgment.31 A declaratory judgment cause of action asserting this theory is only available prior to a foreclosure sale and is mooted if the homeowner does not obtain a temporary injunction or if the foreclosure sale is not voluntarily cancelled.32 As a breach of contract action after a foreclosure sale, the property may be lost entirely if conveyed to a bona fide purchaser for value.33 Given the current economy, it is likely that the amount owed on the loan would exceed property value, preventing the homeowner from proving monetary damages. A successful declaratory judgment action premised upon the breach of contract theory will only provide the homeowner with a short-term remedy. 24 C.F.R. § 203.604 states:

(a) [Reserved] (b) The mortgagee must have a face-to-face interview with the mortgagor, or make a reasonable effort to arrange such a meeting, before three full monthly installments due on

29 One example of a potentially incorporating clause is: “In many circumstances regulations

issued by the Secretary will limit Lender’s rights, in the case of payment defaults, to require immediate payment in full and foreclose if not paid. This Security Instrument does not authorize acceleration or foreclosure if not permitted by regulations of the Secretary.” Chesterfield County, Va., Land Records, Deed Book 6555, Page 52, at ¶9(d).

30 In Kersey v. PHH Mortgage Corporation, a case which rests upon this legal theory, the U.S. District Court for the Eastern District of Virginia issued a Memorandum Opinion on January 22, 2010 overruling a Defendant’s Motion to Dismiss pursuant to Fed. R. Civ. P. 12(b)(6), holding that the Plaintiff’s Complaint stated a cause of action. No. 3:09-cv-726 (E.D. Va. Jan. 22, 2010) (memorandum opinion).

31 Id. 32 See City of Fairfax v. Shanklin, 205 Va. 227, 135 S.E.2d 773 (1964) (The Virginia Supreme

Court overturned a declaratory judgment holding that the Fairfax Board of Zoning Appeals had no authority to grant special use permits for the construction of apartments. In so doing, the Court noted that any standing Plaintiff may have had was mooted when the only pending application for a special use permit was denied by the Board).

33 See VA. CODE §§ 55-59.1(c), 55-80.

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the mortgage are unpaid. If default occurs in a repayment plan arranged other than during a personal interview, the mortgagee must have a face-to-face meeting with the mortgagor, or make a reasonable attempt to arrange such a meeting within 30 days after such default and at least 30 days before foreclosure is commenced, or at least 30 days before assignment is requested if the mortgage is insured on Hawaiian home land pursuant to section 247 or Indian land pursuant to section 248 or if assignment is requested under §203.350(d) for mortgages authorized by section 203(q) of the National Housing Act. (c) A face-to-face meeting is not required if: (1) The mortgagor does not reside in the mortgaged property, (2) The mortgaged property is not within 200 miles of the mortgagee, its servicer,

or a branch office of either, (3) The mortgagor has clearly indicated that he will not cooperate in the

interview, (4) A repayment plan consistent with the mortgagor's circumstances is entered

into to bring the mortgagor's account current thus making a meeting unnecessary, and payments thereunder are current, or

(5) A reasonable effort to arrange a meeting is unsuccessful. (d) A reasonable effort to arrange a face-to-face meeting with the mortgagor shall consist at a minimum of one letter sent to the mortgagor certified by the Postal Service as having been dispatched. Such a reasonable effort to arrange a face-to-face meeting shall also include at least one trip to see the mortgagor at the mortgaged property, unless the mortgaged property is more than 200 miles from the mortgagee, its servicer, or a branch office of either, or it is known that the mortgagor is not residing in the mortgaged property. (e) (1) For mortgages insured pursuant to section 248 of the National Housing Act,

the provisions of paragraphs (b), (c) and (d) of this section are applicable, except that a face-to-face meeting with the mortgagor is required, and a reasonable effort to arrange such a meeting shall include at least one trip to see the mortgagor at the mortgaged property, notwithstanding that such property is more than 200 miles from the mortgagee, its servicer, or a branch office of either. In addition, the mortgagee must document that it has made at least one telephone call to the mortgagor for the purpose of trying to arrange a face-to-face interview. The mortgagee may appoint an agent to perform its responsibilities under this paragraph.

(2) The mortgagee must also: (i) Inform the mortgagor that HUD will make information regarding the

status and payment history of the mortgagor's loan available to local credit bureaus and prospective creditors;

(ii) Inform the mortgagor of other available assistance, if any; (iii) Inform the mortgagor of the names and addresses of HUD officials

to whom further communications may be addressed. For those homeowners who expect a financial windfall which will allow them to catch up on their

arrearages, this theory may result in delaying the foreclosure sale. However, during the pendency of the litigation the homeowner who remains unable or unwilling to pay their monthly mortgage will continue to accrue arrearages and late fees. Further, the logical result is that the mortgagor attempts a face-to-face meeting with the homeowner. Because there are no regulations mandating the discussion of any particular topic at such a meeting, this theory offers the homeowner, if anything, only hollow relief from foreclosure. The legal basis for the breach of contract theory is no better than the limited practical benefits it may confer. First, it is uncontroverted that the FHA regulations do not confer a private cause of action upon homeowners. Second, the Plaintiff’s nonpayment of his mortgage is a material breach, which

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should prevent him from suing to enforce his own contract rights thereunder. Third, the practical legal implications to upholding such a theory support its denial. Finally, VA. CODE § 55-59(7) potentially exonerates a Trustee from liability under this theory, which could leave a homeowner without a remedy for any contractual rights he may have under this theory. The FHA regulations do not confer a private cause of action upon homeowners. This has been recognized by the Fourth Circuit, and is generally undisputed.34 Pursuant to 24 C.F.R. § 203.17(B), the FHA Commissioner “[m]ay also prescribe the language or substance of additional provisions for all mortgages as well as the language or substance of additional provisions for use only in particular jurisdictions or for particular programs.” If this theory rests upon a breach of contract, any incorporation of federal regulations must represent “mutual assent to a bargained-for exchange of promises.”35 Since the federal regulations permit the FHA to prescribe the language of a deed of trust, it seems unlikely that the mortgagee ever intended to be so bound. In fact, if the FHA or the Mortgagee ever intended to be required to attempt a face-to-face meeting, it seems more likely that they would have included that provision specifically into the deed of trust, rather than incorporating a volume’s worth of federal regulations by reference. A homeowner should not be permitted to complain over the mortgagee’s failure to seek a face-to-face meeting when that homeowner has himself proven unable or unwilling to abide by the terms of his own contract. “[A] party who commits the first breach of contract is not entitled to enforce the contract.”36 Although there are exceptions to the rule, such as where the first breach “did not go to the ‘root of the contract’ but only to a minor part of the consideration,”37 they do not seem to be present with this theory. Indeed, nothing could be more soundly at the root of a deed of trust than the homeowner’s agreement to pay the secured loan. Far from being only a minor part of the consideration, payment of the note is the only consideration offered by the homeowner to prevent foreclosure. Therefore, it is unlikely that the breach of contract theory will be upheld, as it contemplates rewarding the party who has first breached his contract. The practical legal implications to the breach of contract theory are untenable. First, if a deed of trust is interpreted as incorporating federal regulations into its terms, properties with inferior liens may be sold much more often under those security instruments, decreasing the likelihood that the mortgagee will recover.38 Additionally, to the extent this cause of action arises out of contract under Virginia law, it could cause a substantial burden upon Virginia’s Courts whose judges are not familiar with these federal regulations and were never intended to have jurisdiction to consider them. For example, the relevant regulations require or exempt a face-to-face meeting based upon whether or not the mortgagee or servicer or a branch office of either are located within 200 miles of the mortgaged property.39 Asking a Virginia Court to determine whether this is to be measured by land or highway, what type of office is required, and whether “the mortgagor has clearly indicated that he will not cooperate in the interview” could render an unreasonable burden on Virginia’s judiciary. Finally, due to the volume of the FHA regulations, the potential violations arising under such a breach of contract theory are too vast to even list.

34 See In re Miller, No. 02-1050, 2005 WL 269728, at *3 (4th Cir. 2005); Perry v. Housing Auth.,

664 F.2d 1210, 1215-17 (4th Cir. 1981). 35 Charbonnages de France v. Smith, 597 F.2d 406, 414 (4th Cir. 1979). 36 Horton v. Horton, 254 Va. 111, 115, 487 S.E.2d 200, 203 (1997). 37 Id. at 116, 487 S.E.2d at 204. 38 “With the prior approval of the Secretary, the mortgaged property may be subject to a second

mortgage held by a mortgagee not described in paragraph (b) of this section.” 24 C.F.R. § 203.32(c). 39 Id. § 203.604(c)(2).

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Although the attorney whose client faces foreclosure will often find himself seeking any cause of action which may protect his client, the action for breach of contract where the federal regulations are incorporated into the deed of trust is likely to become a footnote in the history of residential foreclosure litigation in Virginia. If successful, the action results in only short term relief. As a legal matter, the theory’s basis is questionable and the negative implications from its approval are great. In the end, those lenders who wish to avoid this cause of action can simply draft around it, which one would expect to see in the near future.

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FORECLOSURES—PART DEUX1

by Stephen C. Gregory*

I know that some of you who read Foreclosures—Part One last spring have been awaiting this installment with bated breath.2 My apologies for the delay, but because of a number of changes in my life, I was unable to get this written until now. Among those changes was a switch over to the “dark side;”3 as of September 1, I have taken a position with Samuel I. White, P.C., one of the oldest and largest foreclosure firms in Virginia. The benefit for me is that I was able to stay here in my adopted home, Almost Heaven.4

On with the show: § 55-59.1. Notices required before sale by trustee to owners, lienors, etc.; if note lost.5

A. In addition to the advertisement required by § 55-59.2 the trustee or the party secured shall give written notice of the time, date and place of any proposed sale in execution of a deed of trust, which notice shall include either (i) the instrument number or deed book and page numbers of the instrument of appointment filed pursuant to § 55-59, or (ii) said notice shall include a copy of the executed and notarized appointment of substitute trustee by personal delivery or by mail to (i) the present owner of the property to be sold at his last known address as such owner and address appear in the records of the party secured, (ii) any subordinate lienholder who holds a note against the property secured by a deed of trust recorded at least 30 days prior to the proposed sale and whose address is recorded with the deed of trust, (iii) any assignee of such a note secured by a deed of trust provided the assignment and address of assignee are likewise recorded at least 30 days prior to the proposed sale6, (iv) any condominium unit owners' association which has filed a lien pursuant

* Stephen C. Gregory joined Samuel I. White, P.C. in September 2009 as title curative counsel in

the Charleston, WV, office. He had previously been with Stewart Title as West Virginia District Manager, Virginia and West Virginia State Counsel, Associate Senior Underwriter and Claims counsel. He has been an area representative and member of the Title Insurance Subcommittee of the Real Property Section of the Virginia State Bar.

1 French makes me sound suave and debonair. (That Latin that we lawyers have to use every day just makes us sound—well—dead.) Voulez-vous coucher avec moi? (Those of you who might think this a bit risqué, I would commend you to e.e. cummings 1922 poem known by its first line, “little ladies more.”) [righteous indignation stance]

2 Unlike the cat who ate cheese, and awaited mice with baited breath. [rim shot] 3 There is a perception, methinks, that foreclosure firms are “the dark side.” I have to say,

though, since I’ve been here, I’ve found it to be remarkably light. As stated in Part I, foreclosure firms and REO closing agents are not enemies.

4 Yes, I do still have all my teeth. Well, most of them, anyway. So many phone books, so few last names . . . .

5 Because this treatise concerns the statutory (and contractual) aspects of foreclosure, the subject of notice of default and right to cure is left for another day (and perhaps another author). See, however, §55-59.1(C), discussed infra.

6 My friend and colleague Doug Dewing has queried regarding search requirements for assignments, considering that (a) there is no requirement that assignments be recorded at all, and (b) when they are, the parties often omit the name of the borrower from the instrument.

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to § 55-79.84, (v) any property owners' association which has filed a lien pursuant to § 55-516, and (vi) any proprietary lessees' association which has filed a lien pursuant to § 55-472. Written notice shall be given pursuant to clauses (iv), (v) and (vi), only if the lien is recorded at least 30 days prior to the proposed sale. Mailing of a copy of the advertisement or a notice containing the same information to the owner by certified or registered mail no less than 14 days prior to such sale and to lienholders, the property owners' association or proprietary lessees' association, their assigns and the condominium unit owners' association, at the address noted in the memorandum of lien, by ordinary mail no less than 14 days prior to such sale shall be a sufficient compliance with the requirement of notice. The written notice of proposed sale when given as provided herein shall be deemed an effective exercise of any right of acceleration7 contained in such deed of trust or otherwise possessed by the party secured relative to the indebtedness secured. The inadvertent failure to give notice as required by this subsection shall not impose liability on either the trustee or the secured party.

Let’s begin by revisiting the intro to part one, which is the overriding concept behind foreclosure procedures: The law abhors a forfeiture.8 For this reason, courts frequently are requested to scrutinize the notice given to property owners and to set aside foreclosures in which the notice is found to be lacking.9 The Code requires that any notice of sale shall include a copy of the executed substitution of trustee or the information where the substitution of trustee is recorded. Section 55-59(9) allows the substitution to be recorded contemporaneously with the trustee’s deed,10 which is a common practice in the Commonwealth, suggesting that the notices sent pursuant to §55-59.1 would necessarily include a copy of the instrument rather than the recordation information. The author is unable to find any cases which address the validity of a sale in which the notice failed to comply with this part of the notice, but prudence would dictate following the statute precisely. The remaining notice requirements in §55-59.1 likely are fatal if not followed, if not to the validity of the sale then to the foreclosure of the subordinate liens. The owner of the property is the only party entitled to notice by certified mail; all others entitled to written notice may be given it by regular mail.11 All notices under subsection A of the section must be given at least 14 days prior to the sale date. Within the notice section are a few interesting provisions. For example, the noteholder is not required to track down the heirs of a deceased borrower; the obligation for notice is only to the owner as the owner appears in the records of the lender. Thus, for heirs to have rights under the Code, they would have to have informed the lender of their interest in the property and their addresses. Note too that subordinate lien holders (or their assignees) are only entitled to written notice if the address of the lien holder or the assignee is recorded with the instrument.

7 But see Bayview Loan Servicing v. Simmons, 275 Va. 114 (2008), holding that the language

regarding acceleration does not obviate the necessity for giving notice of default, and that no right of acceleration arises until the notice of default is given.

8 E. H. Crump Co. v. Millar, 391 S.E. 2d 775 (Ga. Ct. App. 1990). 9 Also (especially) for tax sales: c.f. Jones v. Flowers, 574 U.S. 220 (2006) (appeal from Supreme

Court of Arkansas); Plemons v. Gale, 396 F. 3d 569 (4th Cir. 2005). 10 See part I. 11 Prudence would seem to dictate that the trustee obtain a certificate of mailing on all notices,

although not required by the Code.

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[The author has encountered numerous—numerous—property owner associations which have determined that if they only wait to record their lien until after the foreclosure, they can collect the past due fees. These associations thumb their collective noses at the statute, apparently on the theory that the amount due is too small for anyone (especially title companies) to litigate. When post-foreclosure owners attempt to avail themselves of the facilities in the associations, they are turned away until the account is brought current.12 The next action by the owner is to file a claim under the title insurance policy. The theory of the associations is then reinforced by title underwriters who have been willing to write the $1000 checks on behalf of the post-foreclosure owner rather than spend the $5000 or so in counsel fees to take the association to court.] The last sentence of subsection A (“The inadvertent failure to give notice as required by this subsection shall not impose liability on either the trustee or the secured party.”) should not be interpreted to validate a sale that otherwise has defective notices. However, §55-59.1(C) provides:

C. When the written notice of proposed sale is given as provided herein, there shall be a rebuttable presumption that the lienholder has complied with any requirement to provide notice of default contained in a deed of trust. Failure to comply with the requirements of notice contained in this section shall not affect the validity of the sale, and a purchaser for value at such sale shall be under no duty to ascertain whether such notice was validly given.

It’s difficult to imagine that a court would refuse to invalidate a sale in which no or improper notice was given to the owner of the property, and most title insurers would refuse to insure a sale with such defective notice. However, for a discussion of the effect of improper actions by the Trustee and/or defective notices on the validity of the sale itself, see MacDonald v. Lawyers Title Insurance Corporation, 79 F.3d 1141 (1996) (unpublished). Subsection B is likely the most obscure section or subsection, and mostly unknown (in the author’s experience) to noteholders and trustees:

B. If a note or other evidence of indebtedness secured by a deed of trust is lost or for any reason cannot be produced and the beneficiary submits to the trustee an affidavit to that effect, the trustee may nonetheless proceed to sale, provided the beneficiary has given written notice to the person required to pay the instrument that the instrument is unavailable and a request for sale will be made of the trustee upon expiration of 14 days from the date of mailing of the notice. The notice shall be sent by certified mail, return receipt requested, to the last known address of the person required to pay the instrument as reflected in the records of the beneficiary and shall include the name and mailing address of the trustee. The notice shall further advise the person required to pay the instrument that if he believes he may be subject to a claim by a person other than the beneficiary to enforce the instrument, he may petition the circuit court of the county or city where the property or some part thereof lies for an order requiring the beneficiary to provide adequate protection against any such claim. If deemed appropriate by the court, the court may condition the sale on a finding that the person required to pay the instrument is adequately protected against loss that might occur by reason of a claim by another person to enforce the instrument. Adequate protection may be provided by any reasonable means. If the trustee proceeds to sale, the fact that the instrument is lost or cannot be produced shall not affect the authority of the trustee to sell or the validity of the sale.

Again, there appear to be no cases deciding the validity of the sale in the absence of the statutory procedure being followed. It seems likely, though, that based upon the decision in MacDonald, supra, the

12 This of course doesn’t apply to electric bills, which must be current. [rim shot]

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Fourth Circuit would not consider it to be fatal. Still, prudence13 dictates that the noteholder would be well advised to take this additional step. States such as Ohio in which foreclosure is judicial have required lenders to produce the original note before ordering the sale;14 if the note truly is lost, the lender is required to prove such to the satisfaction of the court.

The final subsection of 55-59.1 is: “D. In the event of postponement of sale, which may be done in

the discretion of the trustee, no new or additional notice need be given pursuant to this section.” It should be stressed that the notice referred to applies only to the notices required by subsection A; advertisement in the event of postponement is governed by §55-59.2(D), infra. [Note: §55-59.1:1, pertaining to procedures for “high-risk” mortgages in default, has a 1 July 2010 sunset, so will not be discussed here.]

ADVERTISEMENT

Even though §55-59.1 and 55-59.2 were adopted as part of a single enactment, there is a significant difference between them.15

§ 55-59.2. Advertisement required before sale by trustee.

A. Advertisement of sale by a trustee or trustees in execution of a deed of trust shall be in a newspaper having a general circulation in the city or county wherein the property to be sold, or any portion thereof, lies pursuant to the following provisions:

1. If the deed of trust itself provides for the number of publications of such

newspaper advertisement, which may be done by using the words "advertisement required" or words of like purport followed by the number agreed upon, then no other or different advertisement shall be necessary, provided that, if such advertisement be inserted on a weekly basis it shall be published not less than once a week for two weeks and if such advertisement be inserted on a daily basis it shall be published not less than once a day for three days, which may be consecutive days, and in either case shall be subject to the provisions of § 55-6316 in the same

13 Prudence used to take dictation until she went to law school. 14 See In re Foreclosure Cases, 2007 WL 4589765 (S.D. Ohio) (not reported in F. Supp.). 15 Deep v. Rose, 234 Va. 631 (1988).

16 Section 55-63 provides:

§ 55-63. Construction of deeds requiring notice by advertisement in newspaper. (a) Whenever any deed of trust to secure debts or indemnify sureties contains a provision requiring the giving of notice of sale thereunder for a specified number of days by advertisement in one or more newspapers and such advertisement be published in a newspaper published daily or in a newspaper published daily except Sunday, it shall be deemed a sufficient compliance with such provision if such notice be published in consecutive issues of such newspaper for the number of days specified, counting both the day of the first publication and the day of the last publication and intervening Sundays, whether or not such newspaper be published on Sunday. Both the first publication and the last publication may be on Sunday. The publication shall in all other respects comply with the provisions of §§ 55-59.2 and 55-59.3.

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manner as if the method were set forth in the deed of trust. Should the deed of trust provide for advertising on other than a weekly or daily basis either of the foregoing provisions shall be complied with in addition to those provided in such deed of trust. Notwithstanding the provisions of the deed of trust, the sale shall be held on any day following the day of the last advertisement which is no earlier than eight days following the first advertisement nor more than thirty days following the last advertisement.

2. If the deed of trust does not provide for the number of publications of

such newspaper advertisement, the trustee shall advertise once a week for four successive weeks; provided, however, that if the property or some portion thereof is located in a city or in a county immediately contiguous to a city, publication of the advertisement five different days, which may be consecutive days, shall be deemed adequate. The sale shall be held on any day following the day of the last advertisement which is no earlier than eight days following the first advertisement nor more than thirty days following the last advertisement.

Subsection A sets forth the minimum standards for advertising the sale. If the deed of trust requires

fewer advertisements than the statute, the statute must be followed. Note that if the deed of trust were to require advertising once a month for two consecutive months, the trustee must still advertise either daily or weekly.

There are a couple of provisions that should attract scrutiny, however. One is: “Advertisement of sale…shall be in a newspaper having a general circulation in the city or county wherein the property to be sold, or any portion thereof, lies.” The CODE OF VIRGINIA establishes the standards for newspaper publication:

§ 8.01-324. Newspapers which may be used for legal notices and publications.17 A. Whenever any ordinance, resolution, notice, or advertisement is required by law to

be published in a newspaper, such newspaper, in addition to any qualifications otherwise required by law, shall:

1. Have a bona fide list of paying subscribers; 2. Have been published and circulated at least once a week for twenty-four

consecutive weeks without interruption for the dissemination of news of a general or legal character;

3. Have a general circulation in the area in which the notice is required to

be published;

(b) Whenever such deed of trust requires advertisement once a week for a specified number of weeks, sale may be had on the day after the last advertisement appears or any day thereafter and all sales made in conformity herewith prior to January 1, 1972, and otherwise valid, are hereby validated. 17 It should be interesting, over the next few years, to see how this section is affected by the trend

of newspapers to be available online, in some cases exclusively. As more and more people get their news online and the cost of publication continues to rise, newspapers are folding, reducing circulation except online, or becoming available online only. Some communities are no longer served by print newspapers at all, with local news disseminated by television and the web.

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al:

4. Be printed in the English language; and 5. Have a second-class mailing permit issued by the United States Postal

Service. B. However, a newspaper which does not have a second-class mailing permit may

petition the circuit court for the jurisdiction in which the newspaper is located for authority to publish ordinances, resolutions, notices or advertisements. Prior to filing the petition, the newspaper shall publish a notice of intention to file a petition pursuant to this section in a newspaper published or having general circulation in the jurisdiction in which the petition will be filed. The court shall grant the authority for a period of one year upon finding that the newspaper (i) meets the requirements of subdivisions A 2, A 3, and A 4; (ii) has been continually published for at least one year, employs a full-time news staff, reports local current events and governmental meetings, has an editorial page, accepts letters to the editor and is, in general, a news forum for the community in which it is circulated; (iii) has a circulation within the community to which the publication is directed and maintains permanent records of the fact and substance of the publication; and (iv) has an audit of circulation certified by an independent auditing firm or a business recognized in the newspaper industry as a circulation auditor. The authority shall be continued for successive one-year periods upon the filing of an affidavit certifying that the newspaper continues to meet the requirements of this subsection.

C. If a county with a population of less than 15,000 had regularly advertised its

ordinances, resolutions, notices in a newspaper published in the county which had a general circulation in the county, a bona fide list of paying subscribers, a second class mailing permit and the newspaper continued to be published in the county and continued to have a general circulation in the county but failed to maintain its bona fide list of paying subscribers and its second class mailing permit, any advertisement of ordinances, resolutions, notices in the newspaper by the county shall be deemed to have been in compliance with this section.

Agents should not assume that the advertisement was placed in a complying newspaper, but should verify18 that the publication satisfies the statutory requirements.19

Finally as to subsection A, the sale date relative to the publication is critical. Any sale that is held

sooner than the eighth day after the first publication or later than the thirtieth day after the last publication should be considered invalid. For these reasons, agents should not accept a generic statement from the trustee that “the sale was advertised as provided by law.” Although obtaining the certificate of publication may not be necessary, at a minimum prudence demands20 the agent confirm the newspaper and the dates of publication.

Subsections B and C of §55-59.2 are not germane21 to this discussion; however, Subs D and E

are critic

18 Most Clerks of Court maintain a list of newspapers which may be used for legal notices. This procedure should be followed for “unfamiliar” newspapers; it would be folly, for instance to insist on proof that the Richmond Times-Dispatch is proper for Henrico County notices.

19 The author has seen a notice of sale published in one of those “free” newspapers that are found in boxes on street corners. Um . . . no.

20 She certainly is an insistent person, isn’t she? 21 Nor are they Tito, Jackie, or Janet.

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D. In the event of postponement of sale, which postponement shall be at the discretion of

the trustee, advertisement of such postponed sale shall be in the same manner as the original advertisement of sale.

E. Failure to comply with the requirements for advertisement contained in this section

shall, upon petition, render a sale of the property voidable by the court. Unlike §55-59.1, the publication provisions are mandatory, and the sale may be set aside if they

are not followed. In the interest of fairness to the defaulting property owner, the public must be informed of the sale and given the opportunity to appear and bid on the property if any choose to do so. For this reason, the sale must be readvertised in the event of a postponement, even though the owner and subordinate lien holders are not entitled to further written notice.

Code § 55-59.2 evidences a strong legislative concern with the sufficiency of

advertisements preceding foreclosure sales, with a purpose to insure a degree of publication that will generate sufficient interest to obtain the highest price available as well as to offer the debtor a reasonable time to redeem the debt. That legislative concern has increased with the passage of time.22

Section 55-59.3 mandates the information required to be included in any publication: § 55-59.3. Contents of advertisements of sale.

The advertisement of sale under any deed of trust, in addition to such other matters as may be required by such deed of trust or by the trustee, in his discretion, shall set forth a description of the property to be sold, which description need not be as extensive as that contained in the deed of trust, and shall identify the property by street address, if any, or, if none, shall give the general location of the property with reference to streets, routes, or known landmarks. Where available, tax map identification may be used but is not required. The advertisement shall also include the time, place and terms of sale and shall give the name or names of the trustee or trustees. It shall set forth the name, address and telephone number of such person (either a trustee or the party secured or his agent or attorney) as may be able to respond to inquiries concerning the sale.

And: § 55-62. Permissible form for notice of sale under deed of trust.

Notice of sale under any deed of trust whether the same be in conformity with § 55-59 or not, in the absence of provision therein requiring other or additional matter, may be substantially in the form following:

Trustee's Sale of ..................... (brief description or identification of property) In execution of a deed of trust, (name or names of grantor or grantors unless

grantor or grantors request in writing that the same be omitted,) dated ............., recorded in the Clerk's Office of the ................. court of ......................... in Deed Book ................. page ................. , ......, the undersigned trustee will offer for sale at public auction (a brief description of the property to include street number or, if none, the general location of

22 Deep v. Rose, 234 Va. 631, 635 (1988). The case also provides an interesting history of

publication in foreclosure matters.

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property and place of sale) on the .......... day of .................... , 20 ...... at .......... (ante meridian) (noon) (post meridian), the property described in such deed.

Terms: (Cash) (...............) ..................... Trustee(s) ... FOR INFORMATION CONTACT .........................

(A trustee or the secured party or his agent) ......................... Address ......................... Telephone number

Again, the purpose of the publication is to inform the public and attempt to obtain the highest

price possible for the property to be sold. For that reason, the Code uses “shall” for the terms that are important to ensure fairness and reasonableness of the opportunity for the public to appear.23

If a trust deed requires the trustee to advertise the time, terms and place of sale

before making sale, and he advertises the time and place of sale, but says nothing as to the terms, the sale made by him will be set aside as invalid at the instance of the grantor, or a prior grantee from him, who was ignorant of the time and place of sale.24

And: The advertisement failed to state whether the terms of sale would be cash or

credit, or part cash and part credit, or, if the latter, what part would be cash and what part credit and what time would be given as to the deferred payments, if any, permitted by the credit. When analyzed, the language of the advertisement in question plainly conveyed no other meaning, which the public could rely and act upon in attending or not attending the sale, than that they would not know the terms of the sale until the day of sale, when the announcement at the sale would determine whether the terms of sale would be cash, or part cash and part credit, and, if the latter, what part cash and what part credit, and the time given on the deferred payments, if any. That is to say, it is plain that the advertisement failed to contain any terms of sale fixed and determined upon by the trustees prior to or at the time of the commencement of the advertising, notice of which, after so determined upon, was to be given in the manner and for the period mentioned in the trust deed, as required by such deed; and merely contained the statement, in substance, that the terms of sale would be announced at the sale. This, in

23 For a discussion of the effect of substantial compliance with §55-59.3, see Wood v. MorEquity,

331 Fed. Appx. 243, 2009 WL 1426906 (4th Cir. 2009) (on appeal from the District Court of the Western District of Virginia).

24 Preston v. Johnson, 105 Va. 238 (1906).

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effect, left the terms of sale wholly undetermined and unadvertised prior to the day of sale.

Under the rule on the subject applicable in a suit in equity, such as that before

us, as established by the great weight of authority, and by the unbroken line of decisions in Virginia, such advertisement was not a substantial compliance with the requirements of the deed of trust with respect thereto, but was such a material departure therefrom as vitiated the sale, and because of which the conveyance to the purchaser and the trust deed executed by the latter, mentioned in the bill, must be canceled and adjudged null and void.25 As Karen and Richard Carpenter once sang, “we’ve only just begun.” Issues on foreclosures are

far too numerous to cover here,26 and the practitioner is well-advised to research any perceived irregularity in the sale, whether the irregularity may have occurred before or after the auction.

I am indebted to my friend and colleague, Doug Dewing, the preeminent authority on real estate

law in this state, for taking the time to review my material and make comments and suggestions on the content.

And so, to borrow the Toastmaster General George Jessel’s27 famous exit line, “My plane is on

the runway…”28

25 Tabet v. Goodman, 136 Va. 526 (1923). See also Morris v. Scruggs, 147 Va. 166 (1927). 26 For example, the Trustee is bound to sell only so much of the property as is necessary to satisfy

the debt, but may advertise the whole of the property because the Trustee will not know how much may be necessary to sell.

27 If you have to ask, well… 28 This doesn’t translate well without the high-pitched, somewhat nasally voice.

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THE POWERFUL “PROTECTING TENANTS AT FORECLOSURE ACT”

by Whitney Jackson Levin* On May 20, 2009, President Obama signed into law the Helping Families Save Their Homes Act of 2009, Pub. L. No. 111-22, 123 Stat. 1632, which includes broad sweeping federal protections for tenants of residential properties that are subject to foreclosure proceedings. Specifically, Title VII of this new law, entitled Protecting Tenants at Foreclosure Act, (the “PTFA or “Act”) was enacted in response to the wave of foreclosures that have swept the nation over the past several years. 1 The Act is intended to provide a minimum time period for tenants in foreclosed properties to find alternative housing.

In sum, the Act applies in the case of any foreclosure on a federally-related mortgage loan or on any dwelling or residential real property after May 20, 2009 and requires any immediate successor in interest in such property pursuant to the foreclosure to take such interest subject to the rights of any bona fide tenant under a bona fide lease that was entered into before the notice of foreclosure, unless (1) a successor in interest intends to live in the property as his or her primary residence or (2) the tenant does not have a lease or the lease is terminable at will under state law. In either of the circumstances under (1) or (2) above, the successor in interest must give the tenant at least ninety (90) days notice to vacate the property. These time periods are minimum requirements and do not affect any state or local laws that would give tenants longer time periods or other additional protections. Accordingly, unless one of the above exceptions applies, tenants may remain in the property for the remainder of their lease, assuming they comply with the terms of such lease.

In order to qualify as a “bona fide” tenant and lease, (1) the tenant cannot be the mortgagor or the

child, spouse or parent of the mortgagor, (2) the lease must be a result of an arms-length transaction, and (3) the rent cannot be substantially less than fair market value (with the exception of government subsidized tenancies2). Interestingly, the Act does not address enforcement of the new law, nor does it impose any penalties for its violation. Furthermore, the Act is set to terminate on December 31, 2012, so the protections that it provides are temporary.

Some have criticized the federal government for overstepping its bounds in enacting the new law

by upsetting established state property rights, especially since the PTFA applies to all residential foreclosures and not just foreclosures on federally-related mortgage loans. Others have praised the law as a needed protection for tenants in an unprecedented era of foreclosures. Either way, the Act has created numerous practical questions related to how practitioners should proceed with regard to the new law.

One approach that lenders have taken is to proceed with foreclosure as usual and address the Act

only if an astute tenant raises the new law as a defense to an eviction notice. At first, some lenders argued that the PTFA would not apply to a bank that purchased property at a foreclosure sale. However, on August 13, 2009, the Comptroller of the Currency, Administrator of National Banks, issued a bulletin to all national banks making it clear that the phrase “any immediate successor in interest” includes a bank that takes title to a property after foreclosure, and advised that the Office of the Comptroller of the Currency would be evaluating bank compliance in the course of its supervisory process. (OCC Bulletin 2009-28.) Accordingly, the better approach upon taking title to a foreclosed property is for the bank to work with the tenant to facilitate a smooth transition with regard to the lease. The bank, or other successor in interest, and the tenant will have to work together to address the practical matters of the transition, such as the collection of rent and transfer of any security deposit.

* Mrs. Levin is an associate at the firm of Wharton Aldhizer & Weaver PLC in Staunton and

Harrisonburg, Virginia and focuses her practice on commercial real estate, property law, business law, and estate planning. She is an Area Representative for the Real Property Section of the Virginia State Bar.

1 The text of the PTFA is attached to this article for reference. 2 Section 703 of the PTFA specifically addresses Section 8 tenancies.

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Tenants, on the other hand, appear to be widely unaware of the new protections unless they seek

legal counsel. However, upon receiving a notice to vacate from the new owner in violation of the Act, tenants should send a letter to the new owner stating their rights, and if eviction proceedings have already begun, then the tenants will need to bring the Act to the state court’s attention, if the court is not already aware of it. The National Housing Law Project, which was one of the parties that was instrumental in the enactment of the PTFA, maintains a helpful website (www.nhlp.org) on which it posts sample letters and notices from both the tenant and new owner’s perspectives, which can be useful guides in situations where the PTFA has been invoked. On the other hand, if tenants would prefer moving from the property after the foreclosure, but before the expiration of their lease, they may be able to negotiate a settlement with the new owner in exchange for the termination of such lease.

Although there is a dearth of case law with regard to the Act, given its infancy, the coming year

should bring new guidance to practitioners as more tenants become aware of the law and attempt to enforce their rights. Until then, you should be aware of the Act and proceed accordingly when representing any party to a transaction that involves a property subject to a residential foreclosure.

* * *

ATTACHMENT

123 STAT. 1662 PUBLIC LAW 111-22—MAY 20, 2009 Protecting Tenants at Foreclosure Act of 2009.

TITLE VII—PROTECTING TENANTS AT FORECLOSURE ACT

12 USC 5201 note.

SEC. 701. SHORT TITLE. This title may be cited as the “Protecting Tenants at Foreclosure Act of 2009”.

12 USC 5220 note.

SEC. 702. EFFECT OF FORECLOSURE ON PREEXISTING TENANCY. (a) IN GENERAL.—In the case of any foreclosure on a federally-related mortgage

loan or on any dwelling or residential real property after the date of enactment of this title, any immediate successor in interest in such property pursuant to the foreclosure shall assume such interest subject to—

(1) the provision, by such successor in interest of a notice to vacate to any bona fide tenant at least 90 days before the effective date of such notice; and

(2) the rights of any bona fide tenant, as of the date of such notice of foreclosure—

(A) under any bona fide lease entered into before the notice of foreclosure to occupy the premises until the end of the remaining term of the lease, except that a successor in interest may terminate a lease effective on the date of sale of the unit to a purchaser who will occupy the unit as a primary residence, subject to the receipt by the tenant of the 90 day notice under paragraph (1); or

(B) without a lease or with a lease terminable at will under State law, subject to the receipt by the tenant of the 90 day notice under subsection (1),

Except that nothing under this section shall affect the requirements for termination of any Federal- or State-subsidized tenancy or of any State or local law that provides longer time periods or other additional protections for tenants. (b) BONA FIDE LEASE OR TENANCY.—For purposes of this section, a lease or

tenancy shall be considered bona fide only if— (1) the mortgagor or the child, spouse, or parent of the mortgagor under the

contract is not the tenant; (2) the lease or tenancy was the result of an arms-length transaction; and (3) the lease or tenancy requires the receipt of rent that is not substantially

less than fair market rent for the property or the unit’s rent is reduced or

Notice. Deadline.

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subsidized due to a Federal, State, or local subsidy. (c) DEFINITION.—For purposes of this section, the term “federally-related

mortgage loan” has the same meaning as in section 3 of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2602).

SEC. 703. EFFECT OF FORECLOSURE ON SECTION 8 TENANCIES. Section 8(o)(7) of the United States Housing Act of 1937 (42 U.S.C. 1437f(o)(7))

is amended— (1) by inserting before the semicolon in subparagraph (C) the following:

“and in the case of an owner who is an immediate successor in interest pursuant to foreclosure during the term of the lease vacating the property prior to sale shall not constitute other good cause, except that the owner may terminate the tenancy effective on the date of transfer of the unit to the owner if the owner—

“(i) will occupy the unit as a primary residence; and

“(ii) has provided the tenant a notice to vacate at least 90 days before the effective date of such notice.”; and

(2) by inserting at the end of subparagraph (F) the following: “In the case of any foreclosure on any federally-related mortgage loan (as that term is defined in section 3 of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2602)) or on any residential real property in which a recipient of assistance under this subsection resides, the immediate successor in interest in such property pursuant to the foreclosure shall assume such interest subject to the lease between the prior owner and the tenant and to the housing assistance payments contract between the prior owner and the public housing agency for the occupied unit, except that this provision and the provisions related to foreclosure in subparagraph (C) shall not shall not [sic] affect any State or local law that provides longer time periods or other additional protection for tenants.”.

Notice. Deadline.

12 USC 5201 note. 12 USC 5220 note. 42 USC 1437f and note.

SEC. 704. SUNSET This title, and any amendments made by this title are repealed, and the

requirements under this title shall terminate, on December 31, 2012.

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THE SHORT SALE ERA: SUCCESSFULLY WORKING-OUT & CLOSING SHORT SALES

by Todd E. Condron and Larry McElwain*

Those of a certain age will remember when the assumption of residential mortgages constituted a notable portion of many residential real estate practitioners’ portfolios. When, in the late 1970s and early 1980s, interest rates spiked well into the double digits, wraparound mortgages became an essential tool. The introduction of the predecessor to the current Section 18 “Due on Sale” clause in the Uniform Fannie Mae single family Virginia deed of trust all but terminated the practice of residential loan assumptions and the use of wraparound mortgages in residential transactions. The authors are of the opinion that the current trend of short sales will run its course much in the same manner as residential assumptions, which is to say that short sales will comprise a significant portion of the residential real estate market for the next few years, before waning as the housing market stabilizes. Nonetheless, for the foreseeable future short sales will constitute an essential component of any successful residential practice. Short sales should be viewed in the context of other methods of reaching an accommodation between the Note holder and the “underwater” borrower, which include loan modification, deed in lieu of foreclosure (DIL), and foreclosure. This article will address only the short sale option in any depth. For purposes of this article references to “lender,” “servicer,” and “Note holder,” shall be interchangeable and shall be deemed to refer to the current owner of the debt. For some time now there has been in place federal legislation concerning loan modifications in the form of the Home Affordable Modification Program (HAMP). The results of this voluntary program have not been encouraging as well more than half of the modified loans have fallen into default again within one year of the modification. Among the reasons for such a high rate of failure has been the lenders’ reluctance to reduce the principal balance of delinquent loans, opting instead to adjust interest rates and lower monthly payments. Acknowledging the need to supplement HAMP, the Home Affordable Foreclosure Alternatives Program (HAFA) was enacted, which layers short sales and DIL’s onto the loan modification framework of HAMP. On April 5, 2010, this new set of Treasury Department rules, HAFA, took effect. They substantially alter relief provisions available to the seller and the loan servicer of a short sale property provided that the loan servicer opts to be a participating lender, as the program is voluntary. (A list of participating lenders can be found at http://www.makinghomeaffordable.com/contract servicer.html). Loans held by Fannie Mae or Freddie Mac are not qualified for the program. The rules stipulate that a loan servicer must offer the short sale program to any borrower who does not qualify for, or who did not sustain, a loan modification, therefore application for a loan modification under HAMP is a prerequisite for consideration under HAFA. Incentive payments have been written into HAFA which are intended to offset some of the losses incurred by the Note holder when it agrees to a short sale. Loan servicers may receive up to $1,000 from the government for completion of a short sale. The same incentive applies to some junior lien holders that cooperate with a short sale. Standardized documentation has been adopted in an attempt to streamline the processing of a short sale application, as well as to establish an acceptable

© Reprinted with permission of the authors and Virginia CLE from the 2010 Update on Avoiding

Foreclosure: The Practicalities of Dealing with Mortgages in Arrears seminar. Visit www.vacle.org for more information on this seminar.

* Todd E. Condron is an attorney with the firm of Leggett, Simon, Freemyers & Lyon, PLC in Vienna, Virginia. He is an Area Representative of the Real Property Section of the Virginia State Bar.

Larry J. McElwain is a partner in the firm of Parker, McElwain & Jacobs, PC in Charlottesville, Virginia. He is the Co-Chair of the Membership Standing Subcommittee, and he is also an Area Representative and a member of the Programs Standing Subcommittee and the Ethics Substantive Subcommittee of the Real Property Section of the Virginia State Bar.

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sales price before the property is put on the market, both of which should greatly simplify a process that previously has been lengthy and problematic. Under the new guidelines sellers are allowed between 120 days and one year to market their property before foreclosure proceedings can be initiated. As an additional benefit the government will give short sale sellers up to $1,500 as reimbursement for relocation expenses. The Note holder is prohibited from receiving either a cash contribution or a promissory note from the borrower as a part of the sale. Another requirement of the program provides that the lender forfeit the ability to pursue a deficiency judgment against the borrower. Participating lenders are also prohibited from negotiating real estate commissions on any contract they receive. There are additional requirements for the borrower to qualify for participation in HAFA. The property must be the borrower’s principal residence; the subject lien must be a first lien securing a debt that originated prior to January 1, 2009; payment on the debt is delinquent or “default is reasonably foreseeable;” the outstanding principal balance of the debt is $729,750, or less; and the borrower’s total monthly mortgage payment exceeds 31% of the borrower’s gross income. Parenthetically, the single largest obstacle to successful completion of a short sale under HAFA appears to the authors to be the treatment of junior lien holders. Their recovery is capped at $3,000, and they are required to release the borrower from all personal liability on the debt. Since HAFA is voluntary and just getting started, the majority of the short sales in the immediate future will not be subject to its requirements. The following is directed toward a short sale occurring outside the scope of HAFA. I. Short Sale Fundamentals

a. Short Sale, defined: The sale of property where the net proceeds from the sale will not be

sufficient to satisfy the debt(s) owed to any and all creditors who hold a lien attached to the subject property.

b. Short Sale Package: The written financial data and supportive documentation package that the creditor will require in order for it to decide if the requested short sale will be approved, and, if so, how that approval will be structured. The Short Sale Package will usually contain the following: i. Hardship Letter - A letter where the Seller details the current financial difficulties that

justify both the sale at this time and the creditor’s grant of debt relief. The letter must be signed, must reference the Property, creditor, loan number and should specifically request a short sale approval (vs. a loan modification). The letter should also include a signed 2nd page itemizing the Seller’s monthly income and expenses.

ii. Written Authorization - The individual or entity that is negotiating for the Seller, the Seller’s attorney/agent, will need separate written authority to discuss the matter with each creditor. The authorization should reference: Property address, borrower(s), lender, loan number, and include contact information for the agent being granted authorization.

iii. Contract - Send only the best fully ratified contract. (There is a contrary school of thought that if multiple contracts, with appropriate contingency language, have been entered into, that all such contracts should be forwarded with the short sale package. The authors are of the opinion that the process should be kept as simple as possible, and in that light only the “best” contract should be forwarded. It goes without saying that extreme care must be exercised with respect to the contingency language of multiple contracts.)

iv. Draft HUD1 Settlement Statement - This preliminary settlement statement must contain the exact realtor commissions, costs (recording tax, attorney’s fee, incidental charges), tax proration and any negotiated Purchaser subsidy. It must also show the net due to the primary lien creditor, and any offers to junior lien creditors for the release of their respective liens.

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v. Purchaser’s Loan Pre-Approval Letter - If the offer is for cash, in lieu of the pre-approval letter include substantive evidence of the Purchaser’s ability to perform.

vi. Realtor Listing Agreement vii. Last Two Pay Stubs (if applicable) - If the Seller is unemployed, include proof (eg. a copy

of the most recent unemployment check), and make specific reference thereto in the Hardship Letter. If the Seller is self-employed include a current profit and loss statement covering at least the immediately preceding twelve months.

viii. Last Two Monthly Bank Statements - Disclosing the balances of the primary checking and savings accounts will usually suffice.

ix. Last Two Years’ Tax Returns - If the Seller has not filed, then include that information and an explanation with the Hardship Letter.

x. Current Balance Statement for All Liens - Each lien creditor will require proof of the up-to-date status of all lien debt balances.

c. Short Sale Approval: A written letter from the creditor/lien holder where the creditor specifically agrees to accept an amount which is lower than the actual amount owed in order to release the referenced lien from the Property. i. A goal of every short sale approval is for Line 603 of the HUD1 Settlement

Statement to read “Cash From/To Seller: $0.” Depending upon the result of negotiations with the creditor, the Seller may be required to bring funds to settlement to cover costs that the creditor will not be willing to absorb, however, on the HUD1 accompanying the initial submission Line 603 should read “$0.” Letters of Approval will contain conditions, and will be wholly revocable upon breach of any of these conditions. Hence, the reason that the short sale is a title insurer’s nightmare.

d. Typical conditions in Short Sale Approval: i. Cutoff Date - Study the relevant language. Some approval letters will require that

settlement “close by” a certain date, while other letters will require the Seller’s attorney/agent to “fund by” a certain date. The difference may be critical to the successful completion of the sale.

ii. Approved Price - Any deviation in price (even an increase) will require a new approval letter to be issued.

iii. Commissions and Closing Cost Allowances - These can be lumped together as a single line item allowance, however it is preferable to itemize them as separate allowances. Any closing cost credit given by the Seller should be broken out as a separate line item.

iv. Junior Lien Allowance - Junior lien creditors are frequently the primary impediment to a successful short sale. Junior lien creditors are notorious for asking for unrealistic amounts, thus stalling or terminating the short sale workout. The short sale approval letters from all creditor/lien holders must “match” and be accurately reflected on the HUD1 Settlement Statement--- the amount that the primary lien holder allows to be paid to the junior lien(s) must match the amount(s) that the junior lien holder(s) agrees to accept to release its lien.

v. Approved Purchaser - Many creditors make their approvals specific to the Purchaser on the submitted Contract to protect against “inside” transactions. All subsequent contract Purchasers will need to be “re-approved.”

vi. Future Collection - Although some creditors remain silent on this issue, most approvals will cite whether the creditor will pursue the Seller for the remaining balance on the loan after the short sale. Alternatively, the creditor may include language that after acceptance of the short sale proceeds the debt will be considered settled. If the approval letter is silent on this issue, the Seller’s attorney/agent should vigorously attempt to obtain written verification as to how the creditor will deal with this matter as it is often the principal concern of a short sale Seller once approval has been given. Not infrequently creditors will reserve the right to pursue a deficiency judgment, thus leaving the Seller in limbo. Ultimately the creditor will either have to pursue a deficiency or issue a 1099 form. The latter event constitutes irrevocable evidence that the creditor has forgiven the shortage.

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vii. Net Loan Proceeds - The amount that the creditor sets as the least that it will accept in order to release the lien. The approval letter frequently sets forth the required method of transfer of the net loan proceeds. If not, the Seller’s attorney/agent should obtain written instructions regarding the creditor’s desire in this regard.

II. The Short Sale Listing & Retainer (Engagement) Agreements

a. Listing Agreement: In Virginia, unlike other jurisdictions (e.g., Maryland and the

District of Columbia) the listing agent is not allowed to disclose that the listing is a potential short sale without the written permission of the Seller. The listing broker should make a thorough inquiry of the Seller, and check the land records and tax assessment of each property prior to agreeing to list a property for sale. The short sale broker listing agreement (also known as Exclusive Authorization To Sell) should contain many of the terms that appear in a standard listing agreement (so much so that the Virginia Association of Realtors (VAR) has recently issued a Short Sale Addendum (see the Appendix) to supplement its standard listing agreement rather than having a “stand alone” document). If the VAR forms are not used, the listing agreement should contain language that authorizes either party to terminate the agreement unilaterally without penalty in the event of a short sale denial, or if, in the opinion of the broker, short sale approval will not be reasonably obtainable. The Property should be listed at fair market value, as the pricing will be closely scrutinized by the creditor(s). It is imperative to emphasize to the Seller that the listing agreement binds the Seller to pay the commission as set forth in the Agreement; if the creditor reduces the amount of the commission set forth on the preliminary HUD1 Settlement Statement as a condition for approval of the short sale, the Seller must be made aware in writing that the broker is not obligated to agree to the reduction in commission, which could effectively block the sale. Generally creditors do not attempt to alter the commission, recognizing that without the realtor there would probably be no offer. The listing agent should inquire about foreclosure notices, and if any have been received by the Seller, should review them with the Seller’s attorney/agent.

b. Short Sale Retainer (Engagement) Agreement: The retainer agreement for representation of a distressed Seller in a short sale should be specific in addressing the purpose and scope of the representation. It should state that Seller has retained the attorney/agent to negotiate with all relevant creditors on the Seller’s behalf in an effort to obtain the necessary approval(s) for the sale of the Property. In the event of approval by the creditor(s), the agreement should stipulate that attorney/agent is authorized to affect closing on the approved terms. If you are not versed in tax law and its implications with respect to the effect of a short sale on the Seller, it is imperative that you include relevant disclaimer language and advise/instruct the Seller to obtain competent advice on such matters. The retainer/engagement agreement should note that the Seller alone must decide if the approval and its conditions are acceptable. The agreement should explain the effect that a foreclosure could have on the process. The agreement should also note that while a goal of the representation will be to obtain a waiver by the creditor(s) of any rights to pursue a deficiency, this decision is solely within the discretion of the creditor(s). The agreement should inform the Seller that the attorney/agent cannot guarantee success in any aspect of the negotiations. The amount of time spent by the Seller’s closing attorney/agent on the completion of a successful short sale will almost always exceed that spent on a normal sale by a significant amount, and therefore the fee cited should be reflective of the additional work. Ultimately the creditor will be paying the Seller’s attorney/agent’s fee. Most creditors are aware of the additional work involved and do not object to a fee that reasonably anticipates the effort that will necessarily be involved, however there are occasions when creditors require that the Seller pays the fee due his closing attorney/agent. The retainer/engagement agreement should contain language to this effect. Not infrequently the creditor will reject the proffered terms and the contract will be terminated by the Purchaser. In such event the Seller’s closing attorney/agent will nonetheless have devoted time, in some instances a great deal of time, to the project.

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Whether or not a fee is due under these circumstances should be expressly addressed in the retainer/engagement agreement.

III. The Short Sale Contract

a. Ratification - NVAR Regional Sales Contract definition: “. . . final acceptance in writing of

all the terms of the Contract (not the date of expiration or removal of any contingencies).” Ratification of an offer, and the formation of a contract, occurs only at the express time when

all parties to the contract have agreed in writing to all terms and conditions of the contract, and become bound to them. In the event of a counter to any original or subsequent offer, ratification occurs only when all parties have signed the contract and agreed in writing to all changes from the initial offer. In some quarters an “unconventional wisdom” has arisen to the effect that the fully signed contract is not considered ‘ratified,’ and thus not binding on any party, until the creditor(s) involved have given their written approval of the short sale. This theory is based upon the concept that the creditor is a “necessary party” to any short sale. The authors are of the opinion that this theory does not hold up to legal scrutiny and could lead to catastrophic consequences, eg. by having the Seller enter into a subsequent contract containing more favorable terms without the appropriate contingency language, and attempting to unilaterally terminate the initial contract. A creditor’s approval of a short sale is a contingency built into a ratified contract (the VAR Short Sale Addendum To Residential Contract of Purchase is included in the Appendix), not unlike any other contingency. A creditor is no more a party to the contract than a lender is where there is a financing contingency. The existence of contingencies does not make a contract unenforceable or subject it to unilateral withdrawal by one of the parties. The parties are still bound by the terms of the contract. The contingencies are simply obstacles which must be overcome prior to the requirement of performance of the parties’ other duties and obligations. Whether stated or not, the parties are obligated to affect due diligence in an attempt to satisfy all contingencies.

b. The Short Sale Contingency: i. Each short sale contract must contain a provision which makes the performance of the

Seller fully contingent upon the delivery of a short sale approval letter(s) to the Purchaser within a stated time period. The expiration of the time period should not automatically void the contract, rather it should give rise to the option for either party to terminate the contract, i.e. lapse of the time period should make the contract voidable by either party. Time periods for approval in short sales are among the most frustrating of the variables of the short sale process, however as the frequency of short sales continues to increase and creditors become more familiar in handling requests, the turnaround time will inevitably shorten. For the draftsman, a widow of sixty (60) days for creditor approval is generally reasonable.

ii. The contingency should contain a clause which anticipates that the approval letter’s conditions may alter certain financial aspects of the contract, such as any Seller subsidy to the Purchaser.

iii. The contingency should establish the settlement date (eg. “30 days from the date that the short sale approval letter(s) is delivered to Purchaser.”). Such language is preferable to agreeing to establish a settlement date upon receipt of the approval letter, which could be construed as an agreement to agree upon a material condition of the contract, thus jeopardizing the existence of the contract. The Purchaser is well advised to avoid locking the interest rate until the creditor has approved the short sale and the settlement date has been firmly established (most interest rate locks are for 30-60 days which is usually not sufficient time to obtain approval and prepare for settlement).

c. Home Inspection Contingency: Every Purchaser in a residential purchase transaction should have a home inspection contingency built into the contract with a unilateral right to void the contract based upon the results of the inspection. This is even more critical in a distress sale. By and large creditors anticipate such a contingency. The Purchaser should be made aware

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that generally there will not be an opportunity to renegotiate financial terms of the contract if deficiencies are discovered. Most creditors adhere to the position that the Property will transfer “As Is.” This is understandable given the circumstances. If significant defects are discovered creditors will occasionally be amenable to a renegotiation of the purchase price, however this is the exception to the rule. Another potential exception regarding “As Is” condition occurs when the Purchaser’s lender requires repairs. In such event the creditor typically requires a written list of the repair items from the lender, and estimates from the repair provider(s). If approved, the cost of repairs will be identified as a separate line item on the HUD1 Settlement Statement. While creditors generally won’t permit the Seller to accept responsibility for termite/well/septic inspections, or defects that would be disclosed by a current survey, they generally will accept such contingencies provided that the Purchaser bears all costs associated with them. The inspection contingency should provide for the Purchaser to have the right for a “walk through” of the property immediately prior to the settlement in order to ascertain if the condition of the Property has deteriorated since the inspection.

d. Title: A title examination should be done at the very beginning of the short sale process. This will determine what matters in addition to the liens could inhibit a successful transaction. The short sale contract should require the Purchaser to promptly obtain a professional title examination of the Property, and an obligation to share the results of the examination with the Seller.

e. Pricing: Given the amount of effort that goes into compiling an application, and the level of scrutiny to which it will be subjected, the parties are well advised to submit a realistic offer. “Basement pricing” will almost certainly be rejected without the opportunity for further negotiation.

f. Subsequent Offers: The creditor may require, as a condition of its consideration of a short sale request, for the Seller to continue to solicit purchase offers during the period that the request is being considered. The contract should affirmatively address the possibility of such a requirement by the creditor and the possibility of a competing offer containing a higher purchase price subsequent to ratification of the contract.

IV. Framework of The Short Sale Transaction

a. Pre-Contract: Once the retainer/engagement agreement has been ratified, the Seller’s

attorney/agent should collect and maintain an updated (at least monthly) financial statement of the Seller. Immediately subsequent to ratification of the retainer/engagement agreement the Seller’s attorney/agent should contact the creditor(s) and obtain its requirements for authorization to act as the Seller’s attorney/agent and other relevant information, including any creditor forms that will be required to process an application and the format and delivery conditions of the application. Note that most creditors have different fax numbers for the submission of the short sale package and for the submission of the authorization. Without an acknowledged authorization by the correct department, the creditor will not communicate with the Seller’s attorney/agent. The Seller’s attorney/agent should promptly ascertain the status of any potential foreclosure and counsel the Seller that he must maintain vigilance in opening mail and promptly making known to the Seller’s attorney/agent any foreclosure notices sent to the Property. It is imperative that the Seller, Seller’s attorney/agent, and the real estate agent have a clear understanding as to the status of the mortgage(s) in default. Not infrequently there is a race against time to obtain a ratified contract prior to a scheduled foreclosure. Generally, if a ratified contract is presented to a creditor at least 24 hours prior to a scheduled foreclosure, the foreclosure will be postponed to allow for the short sale work-out. If a delay of the foreclosure has been agreed to the Seller’s attorney/agent should obtain written confirmation from the foreclosing creditor and the Trustee, as well as a statement regarding any costs or fees that are due in connection with the process. In the event that there are any such fees or costs, they must be set forth as separate items on the HUD1 Settlement Statement, or included in the payoff. (In the event

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of a foreclosure sale at any time prior to the settlement of the short sale, title will have passed by the foreclosure regardless of the fact that the deed may not be recorded until weeks after the sale.)

b. Subsequent to Contract Ratification: The ratified contract and short sale application package, including the creditor’s form authorization for the attorney/agent to act on behalf of the Seller, must be sent to the creditor(s) without delay. The Seller’s side of the HUD1 Settlement Statement to be included in the package must be completed in its entirety. In compiling the HUD1 Settlement Statement the Seller’s attorney/agent must take into consideration the following: i. Commission: Communicate with the real estate agents to ensure that the commission

percentage and breakdown are accurate. ii. Arrearages: Check with the Seller and the HOA (where applicable) regarding the status

of relevant accounts. Update the title to determine what, if any, arrearages for taxes or other impediments to the transfer of title need to be addressed. These matters need to appear as separate line items on the HUD1 Settlement Statement and must be accurate as of the anticipated closing date, which should be set at 90-120 days from the date of submission of the request.

iii. Seller Subsidy: This should be shown as a separate line item as spelled out in the contract. As a general rule creditors will allow up to (but rarely more than) three percent (3%) of the purchase price to be credited to the Purchaser.

c. Costs: The HUD 1 Settlement Statement should list only normal and customary closing costs, such as attorney’s fees, grantor’s tax, etc.

d. Offer to Junior Lien(s): i. Junior Mortgage Liens/Credit Lines: It is customary to offer subordinate lien holders ten

percent (10%) of the current balance of the subject debt to release their lien, however frequently this is where the Seller’s attorney/agent will find his greatest challenge.

ii. Judgment liens and other miscellaneous liens: Due to the fact that these liens are largely uncollectable, they are usually released for pennies on the dollar. Sometimes it is best if the Seller negotiates these items directly, however in either event it is strongly advised to address these matters prior to the submission of the short sale application.

e. “Work-Out”: i. Broker Pricing Opinion (“BPO”): The creditor will have one of their local approved

agents visit the Property to compile a BPO upon receipt of an application deemed reasonable. The obvious purpose of the BPO is to determine if the tendered purchase price is reasonable.

ii. Updating Numbers: It is a primary responsibility of the Seller’s attorney/agent to keep the creditor aware of any changes in the Seller’s financial condition as well as any changes that might affect the net proceeds to be paid to the creditor. The financial status of the Seller should be affirmatively addressed on a weekly basis. Upon issuance, copies of pay check stubs and bank records should be obtained promptly from the Seller.

iii. Keeping in Touch: It is critical that the Seller’s attorney/agent keep in direct contact with the representative(s) of the creditor assigned to the Seller’s file. A rule of thumb is two phone calls each week.

f. “Counter Offer” By Creditor: i. Acceptance: In order for a creditor counter offer to be accepted, the parties must agree to

the creditor’s terms regarding any revision of the purchase price, adjustment to the commission, subsidy and/or costs if applicable, and must resubmit the revised contract and HUD1 Settlement Statement for approval.

ii. Counter the Counter: Given particular circumstances, a counter offer to the creditor may be advisable. If so, revise the contract and HUD1 Settlement Statement accordingly and resubmit for approval.

iii. The Appraisal Solution: If the purchase price is countered by the creditor to a significantly higher number, the following should be considered: Have the Seller and Purchaser execute a contract addendum reading: “ will pay for an appraisal to

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be performed on Property by an unbiased licensed appraiser. Both parties agree to adjust the purchase price to the appraised value.” Once the appraisal is completed, adjust the purchase price to conform to the appraised value. Submit the appraisal, contract amendment, and adjusted HUD1 Settlement Statement to creditor for reconsideration.

V. The Closing

If the Seller’s attorney/agent is not the closing agent, the Seller’s attorney/agent should attend settlement.

a. Prior to conducting the settlement the Seller’s attorney/agent should make sure that the closing agent has: i. Cutoff dates for funding the creditor in writing;

ii. Type of payment requested by creditor in writing; iii. The creditor’s approval letter with the Seller’s signature or initial on every page; iv. Verification that all financial conditions of the approval letter have been met; and v. Possession of all Seller contributions in “collected” funds.

b. At settlement the Seller’s attorney/agent should verify that the closing agent: i. HAS NOT allowed any funds to be paid to junior liens “off the HUD1.” Many short

sale Sellers are pressured by collection agents, creditor negotiators and settlement agents alike to bring funds payable toward junior liens or other creditors to closing in the form of a separate check. This is not only a violation of CRESPA, as annotated by VA. CODE § 6.1-2.23:1 (see Appendix) which carries all penalties stated in VA. CODE § 6.1-2.27 (see Appendix), but is a direct violation of the primary lien creditor’s approval conditions. Such action would jeopardize the primary creditor lien release agreement, put the Property in jeopardy of a foreclosure action, and give rise to a monster of a title claim;

ii. HAS NOT closed the transaction without a written HUD1 approval from all of the creditors involved;

iii. HAS NOT closed/recorded the transaction unless title updates have been completed immediately prior to closing and again immediately prior to recordation;

iv. HAS NOT closed the transaction unless the closing agent (or Seller’s attorney/agent) has verified (e.g., through PACER) that the Seller is not currently in a bankruptcy proceeding;

v. HAS NOT closed the transaction unless the Seller’s attorney/agent has verified that the Seller has reviewed and approved the short sale approval letters and their conditions;

vi. HAS verified in writing that the sale is not to a relative or other confidant of the Seller; vii. HAS verified that the sale is to a bone fide unrelated Purchaser, without any agreement

between the parties allowing the Seller to remain in possession of the Property, either through lease or otherwise; and

viii. HAS verified that there is no agreement between the parties whereby the Seller intends to “flip” the Property for profit and share a portion of the profit with Seller.

VI. Bankruptcy and the Short Sale Transaction

a. Effect of Bankruptcy: If a “stay” is put on the Property by the Federal Bankruptcy Court, it

will effectively bar the Seller from conveying the Property by short sale (or otherwise). b. Closing Short Sale Transactions in Bankruptcy: Under the following circumstances the

Seller’s attorney/agent may proceed with a short sale: i. Discharge of Debtor from Bankruptcy, along with expiration of creditors’ appeals period;

ii. Order Granting Motion for Relief From Stay: This Order must be derived from a Motion for Relief from Stay that is specific to the short sale. If the creditor has obtained an Order Granting Relief From Stay that allows the creditor the relief to specifically move forward with foreclosure, then this will not suffice to give the Bankruptcy Debtor/Seller the right

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to sell the Property by short sale. Specific relief must be requested by the Debtor/Seller for short sale purposes; or

iii. Notice of Abandonment of Property by Trustee: This is not as clear as the above cited instances. A Notice of Abandonment of Property occurs when the Bankruptcy Trustee files a report with the Bankruptcy Court that declares that the Property has no value, and thus serves no purpose in the Bankruptcy proceeding. However, the Property can be recalled into the Bankruptcy by the Trustee if desired. Therefore, the Seller’s attorney/agent, and the closing agent if different from the Seller’s attorney/agent, will need to obtain a written, signed document by the Bankruptcy Trustee that certifies that the Trustee has no plans for the Property in the Bankruptcy and that the short sale of the Property by Debtor/Seller has the approval of the Trustee.

c. Effect of Bankruptcy on Financial Conditions of Short Sale: The Bankruptcy discharges the Debtor/Seller from personal liability on the mortgage debt. However, the mortgage lien remains. Nonetheless, this relieves the Seller from financial conditions on the debt and/or shortfall after closing. The creditor should simply evaluate the Property’s value, review the HUD1, and issue an approval (barring any haggling by junior liens for their allotment).

VII. Tax Consequences: (Neither of the authors profess expertise on tax matters. The Seller in a

short sale should obtain advice from a tax attorney or accountant. The following is intended only as a general guide.)

The term “short sale” as used in the Internal Revenue Code refers to a sale of a borrowed item, usually a security, to be replaced at a future date. For purposes of the following the term “short sale” is used as it pertains to the sale of real property for less than the debt secured by the property. The IRS generally treats any forgiveness of debt by a creditor in excess of $600.00 as ordinary taxable income to the recipient. a. Recourse/Nonrecourse Debt: The threshold question in determining the tax

consequences of a short sale is whether or not the debt is with recourse, i.e. whether or not the debtor is personally liable for the debt. (In some jurisdictions, eg. California, purchase money debt is statutorily defined as nonrecourse debt.)

b. Tax Relief for Recourse Debt/Principal Residence: Under normal circumstances the cancelation of indebtedness is deemed to result in ordinary income to the borrower, however federal legislation (the Mortgage Forgiveness Debt Relief Act of 2007, as extended by the Federal Bailout Legislation, which pertain to loan modifications and foreclosures, as well as short sales), effectively excludes from taxable income the discharge of “Qualified Principal Residence Indebtedness.” Expressly excluded from this Act are second homes, rental properties and business properties. Whether or not the real property in question qualifies for IRS purposes as a principal residence is determined by eligibility for the residential mortgage interest deduction. The cited legislation is due to lapse on December 31, 2011, and is relevant only to acquisition indebtedness. The maximum amount of the exclusion is $2,000,000 for married taxpayers filing jointly ($1,000,000 for individuals or married persons filing separate returns). The election to exclude income from the discharge of principal residence acquisition indebtedness is made on Form 982. The relevant debt reduction is only for amounts used to “buy, build or substantially improve” a principal residence. If the debt in question arose pursuant to a refinance where the borrower used a portion of the loan proceeds for the payment of anything other than home improvements (eg. for the payment of credit card or other debt) the exclusion is not applicable to the extent of such payments, however that portion of the refinance proceeds attributable to renovations and capital improvements would qualify. In such instances it is imperative that the taxpayer be able to document where the loan proceeds were applied. Notwithstanding the tax relief cited above, the Seller in a short sale may still be obligated to pay taxes depending upon the tax basis of the Property. Example: Purchase price (tax basis) $700,000, mortgage balance, $500,000, short sale price, $450,000. The foregoing results in cancellation of debt income of $50,000, which

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is non-taxable pursuant to tax relief. It also results in a loss of $250,000, which, for a personal residence, is non-deductable. The lender will issue IRS form 1099-C, a “Cancellation of Debt” notice as evidence of its forgiveness of all or a portion of the debt.

VIII. Afterthoughts

A Purchaser’s attorney/agent should always, at a minimum, check the tax records of any property on which a client intends to make an offer (in addition, a search of the land records for the period of ownership by the Seller is strongly recommended). If the property is listed for less than the tax assessed value, and especially if the cumulative amount of the liens exceeds the listing price, the issue of a potential short sale should be raised with the Seller prior to making an offer. If the Seller acknowledges that the sales price may not be sufficient to pay off the debts secured by the property, and intends to make up the shortage out of other assets, the Purchaser’s attorney/agent is well advised for the offer to include language along the lines of the following:

Promptly upon ratification of this offer the Seller shall make a deposit (the Seller’s Deposit) of $_____ with the Purchaser’s closing agent. Notwithstanding anything to the contrary in the contract, should the Seller fail to tender title in a timely manner as set forth in the contract for any reason not the fault of the Purchaser, the Purchaser may void the contract by delivery of written notice to the Seller, in which event the Seller’s Deposit shall be promptly delivered to the Purchaser as liquidated damages. Purchaser hereby consents to the release of the Seller’s Deposit to the Seller upon tender of Seller’s performance in accordance with the terms of the contract.

Once the creditor has agreed to a short sale the Seller’s attorney/agent should attempt to get the creditor to forward a fully executed Certificate of Satisfaction to the closing agent in advance of the settlement, to be held in escrow pending settlement.

APPENDICES

Virginia Association of Realtors (VAR) Short Sale Addendum to Residential Contract of Purchase 9/09 VAR Short Sale Addendum to Exclusive Authorization to Sell VAR Short Sales: Information for Purchasers VAR Short Sales: Information for Sellers Chicago Title Insurance Company Short Sale Affidavit – Seller Virginia Code Section 6.1-2.23:1 Falsifying Settlement Statements Prohibited Virginia Code Section 6.1-2.27 Penalties and Liabilities

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VIRGINIA’S PROPERTY OWNERS ARE NOT SAFE FROM KELO-STYLED ECONOMIC TAKINGS

by Joshua E. Baker*

“No person shall be deprived of his . . . property without due process of law;” which requires that private property not be “taken or damaged for public uses, without just compensation.”1

“The specter of condemnation hangs over all property. Nothing is to prevent the State from replacing any Motel 6 with a Ritz-Carlton, any home with a shopping mall, or any farm with a factory.”2

In the spring of 1999 Jay and Stephanie Burkholder purchased 3.88 acres at 217 Reserve Avenue

in Roanoke, Virginia. At the time they were relocating their flooring installation company, Surfaces, Inc., to its newly purchased home, the Burkholders had no idea that their property would become ground zero for a case heralded a decade later by the national and statewide media as “Virginia’s Kelo.”3

In 1999 the Burkholders knew that Carilion Health Systems, one of their largest clients and the

largest employer in the Roanoke Valley, was expanding along the Reserve Avenue corridor. It made sense to the Burkholders to purchase the 3.88 acres because the tract provided 1) a home for their business and 2) an opportunity for future development as a retirement investment near what was becoming Carilion’s center of operations.

The Burkholders’ intuition was confirmed when the Carilion Biomedical Institute was announced

in late 1999 and its location in the Reserve Avenue corridor was announced in May of 2000. It appeared as though the Burkholders had taken a risk that would be rewarded.

Unbeknownst to the Burkholders, the City of Roanoke was making a deal with Carilion Health

Systems in the fall of 1999 to acquire 110 acres of property, including the Burkholders’ tract. The City was pledging to make the property available to Carilion without having to navigate the free market.

The City first committed to take property in February of 2000.4 Writing to Carilion officials,

Roanoke City Manager Darlene Burcham stated that the City had “developed a conceptual plan (shaded area in attached map) to answer the needs of both the CBI, Carilion, technology based business, and the city.”5 The shaded areas on this map became the boundaries of the 110-acre South Jefferson Redevelopment Plan.

* Joshua E. Baker is a graduate of Hillsdale College and William & Mary Law School. He joined

Waldo & Lyle, P.C. in 2006 after graduating from Law School. Mr. Baker and Mr. Joseph T. Waldo continue to represent the Burkholders and other property owners throughout the Commonwealth of Virginia.

1 VA. CONST. art. 1, § 11. 2 Kelo v. City of New London, 545 U.S. 469, 503 (2005) (O’Connor, J., dissenting). 3 See, e.g., Fox & Friends Interview (Dec. 17, 2009); Craftily Taken: A Roanoke Couple get

Kelo’d, FREDERICKSBURG FREE-LANCE STAR, Dec. 4, 2009; Roanoke’s Eminent Domain Shame, WASHINGTON TIMES, Oct. 18, 2009; A. Barton Hinkle, Roanoke: Eminent-Domain Case Looks Like Kelo Redux, RICHMOND TIMES-DISPATCH, Sept. 29, 2009. These articles and interviews, along with many others, are available at www.emdomain.com.

4 Letter from Darlene Burcham, Roanoke City Manager, to Thomas L. Robertson, President and CEO Carilion Health System (Feb. 15, 2000).

5 Id.

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Before ever directing the Roanoke Redevelopment and Housing Authority (RRHA) to determine

whether the area qualified for redevelopment using the eminent domain power under the Housing Authorities Law (VA. CODE § 36-1 et seq.) the City pledged that it would “rezone the redevelopment plan area for the Carilion Biomedical Institute, Carilion, and future technology based companies . . . Once the parcels in the redevelopment area are acquired by RRHA, they will be made available for purchase by Carilion/CBI.”6

But first the City needed a reason to seize the property with its eminent domain power.

ECONOMIC DEVELOPMENT BECOMES A “PUBLIC USE” FOR AN ECONOMIC TAKING

A purported “public use” justifying the use of eminent domain was created when the City

directed the RRHA to prepare a study finding “blight” in the area shown on the February 2000 map. But the Plan and the City Council’s authorizing resolution stated that the “primary goal of the Redevelopment Plan is to provide for private reinvestment and economic growth through redevelopment by private enterprise.”7

Meeting notes, correspondence between experts and memos between experts and lawyers for

RRHA all document that the very persons who were publicly engaged to render an objective opinion regarding blight in the Area understood that their job was to generate data to support a finding that the 110-acre Area was blighted and sought direction on how to legally defend their findings.8 Perhaps the clearest expression of this understanding came from the environmental firm used by RRHA, Huggins, Faulkner & Flynn. Their letter to RRHA’s lawyers stated: “We are well aware of the importance of the blight determination, and the timing, in the overall funding of the project and we feel that our work can greatly support this effort. It is critical that our work be carefully scrutinized so that we can reliably defend our positions down the road.”9

The Housing Authority’s experts were able to find “blighting influences” to justify the taking of

private property by including such things in their reports as weeds growing in parking lots, cracks in sidewalks, chipped paint on buildings, cracked cement floors inside buildings and a host of other characteristics typically cured with routine maintenance. Storing chemicals in locked cages within locked warehouses, but which warehouses were in a floodplain, qualified numerous acres as “blighted.”

6 Id. 7 110-Acre South Jefferson Redevelopment Plan at 7 [herenafter cited as “Plan”]; Roanoke City

Council Resolution No. 35248-031901 (Mar. 19, 2001) (stating the primary purpose is to provide “private reinvestment and economic growth through redevelopment by private enterprise”).

8 Numerous of the experts engaged by the RRHA produced documents during discovery, which included statements such as: “I get the impression that our main task is to prepare a study that will justify declaring the area as a redevelopment area, so that everything else can fall into place;” “some additional targeted inspections of properties that are likely to support the blight determination are warranted;” “we feel confident that as we collect more evidence and documentation in support of these issues, we will be able to maintain at least a level of 50% blighted acreage within the redevelopment area;” “I remain confident that we can still justify the greater than 50% total blighted acreage. However, I would be prepared to make some adjustments to the boundaries of the redevelopment zone by cutting out some of the undeveloped and recently developed acreage in Area 2 north of 581 and near the Community Hospital).”

9 Letter from Andrew T. Flynn, Principal, Huggins, Faulkner & Flynn to Daniel F. Layman, Jr., Woods Rogers, Attorneys for RRHA 4 (Sept. 29, 2000).

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The Plan included as “blighted areas” rights-of-way owned and controlled by the City—seemingly an admission that the City was contributing to the blighting of the area. The Plan also included property owned by railroads that could never be taken by eminent domain. The inclusion of these areas artificially inflated the percentage of area that could be considered blighted.

Throughout the process, the Burkholders’ property was never deemed blighted. But because it

was in a “blighted area,” their property was deemed eligible for acquisition through eminent domain. On March 19, 2001, the Roanoke City Council adopted the Plan, empowering the RRHA to acquire property through the use of eminent domain.

For the Burkholders, the City Council’s approval meant that in less than a year their retirement

investment had been turned into a looming question mark. Though a plethora of questions now confronted the Burkholders, they never hesitated in their resolve to fight for their constitutional right to private property ownership. And fight the Burkholders did.

TAKING ON THE TAKING

The Burkholders did not want to forfeit their property and the opportunities that were available

when they purchased it. They were determined to contest the taking of their property as an improper use of eminent domain. For six years after the Plan was adopted in 2001, the RRHA acquired property all around the Burkholders’ and transferred it to Carilion for development or resale. In 2007 the General Assembly amended the VIRGINIA CODE to require that when eminent domain is used to take property for reasons relating to blight the property taken must itself be blighted.10 If applied to the Burkholders’ case, the new law would prohibit the RRHA from taking the property because it had never been found to be blighted. The Burkholders believed that the General Assembly’s action guaranteed their property would remain their own. But the new law didn’t take effect until Monday, July 1, 2007. Unfortunately for the Burkholders, the RRHA filed its petition for condemnation on Friday, June 29, 2007 – the last possible day it could seize the property and avoid complying with the General Assembly’s new law strengthening private property rights.

After the condemnation was filed, the Burkholders contested the jurisdiction of the City of

Roanoke Circuit Court to hear the eminent domain case on several grounds. Chief among them was that the RRHA lacked the statutory authorization to condemn property for economic development reasons. The Burkholders took literally the Plan’s statement that the “primary goal of the Redevelopment Plan is to provide for private reinvestment and economic growth through redevelopment by private enterprise.”11

Virginia law is clear that the statutes conferring the power of eminent domain and prescribing the

procedure for using the power are to be strictly construed against the condemnor and that the power of eminent domain may not be used if the reason for which the power is being exercised is not a public use recognized by the statutes.12

10 VA. CODE § 1-219.1 was adopted to prohibit under the Virginia Constitution what the United

States Supreme Court’s decision in Kelo v. City of New London, 545 U.S. 469 (2005), permitted under the Federal Constitution, the transferring of private property to a preferred private owner for economic development.

11 Plan, supra note 7, at 7. 12 See, e.g., Hoffman Family, L.L.C. v. City of Alexandria, 272 Va. 274, 283, 634 S.E.2d 722, 727

(2006) (stating “The statutes confirming the power of eminent domain must be strictly construed, and a locality must comply fully with the statutory requirements when attempting to exercise this right.”) (citations omitted); C and C Real Estate v. Norfolk Redevelopment and Housing Authority, 272 Va. 2, 15-16 (2006) (finding that “[t]he plan must be consistent with the grant of authority set out in the statutes

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The Burkholders argued that using eminent domain to make private property available to private

enterprise for redevelopment should only be an incidental feature of a redevelopment plan, not its primary purpose. The Burkholders claimed that:

under the provisions of the 1946 Act authorizing ‘Redevelopment Projects‘ (Code, § 36-48 ff.), the primary purpose is the elimination of blighted or slum areas, and the provision in Code § 36-53, making property available for redevelopment by private enterprise is merely incidental to such main purpose. The Act contemplates that in the course of a large slum clearance operation there will be some sections which are not needed or suitable for long-range public use, and that after being purged of their unwholesome characteristics they will be returned to a restricted private use.13 The Burkholders averred that because blight removal was not the purpose of the Plan, the RRHA

was not authorized to use its power of eminent domain to take the property. Where a plan “contains authorization for acts beyond those delegated, such authorization is invalid.” Norfolk Redevelopment and Housing Authority v. C and C Real Estate, Inc., 272 Va. 2, 15-16 (2006).

The Burkholders also argued that the public use requirement is not satisfied merely because the

person to whom the state gives the property will devote it to a more profitable use, such as a use that will generate increased tax revenue or more jobs. “The public interest ‘must dominate any private gain.’”14

and, if the plan contains authorization for acts beyond those delegated, such authorization is invalid”) (emphasis added); Bristol Redevelopment and Housing Authority v. Denton, 198 Va. 171, 178, 93 S.E.2d 288, 293 (1956) (“It should be remembered that statutes conferring the power of eminent domain are strictly construed and every reasonable doubt is to be resolved adversely to the right. The power can only be exercised for the purpose, to the extent, and in the manner provided by law.”) (citations omitted); Charles v. Big Sandy & C.R. Co., 142 Va. 512 (1925) (“[S]tatutes conferring the power of eminent domain are strictly construed and the authority conferred in such statutes must be carefully observed and followed.”); City of Richmond v. Carneal, 129 Va. 388 (1921) (Finding unconstitutional an enabling ordinance that permitted condemnation of land to be made available to private entities the Court stated that “[t]he Legislature is forbidden to enact ‘any law whereby private property shall be taken or damaged for public uses, without just compensation,’ which in effect carries out the fundamental law of England and America that private property cannot be taken for private use, with or without compensation, but can only be taken for a public use;” and later that “in the construction of statutes conferring the power of eminent domain, every reasonable doubt is to be solved adversely to the right; that the affirmative must be shown, as silence is negation; and that unless both the spirit and letter of the statute clearly confer the power, it cannot be exercised”) (emphasis added); City of Richmond v. Childrey, 103 S.E. 630, 631 (1920) (The “one claiming the power [of eminent domain] must bring himself strictly within the grant, both as to the extent and manner of its exercise”); Core v. City of Norfolk, 99 Va. 190, 37 S.E. 845 (1901) (holding that the Norfolk City Council acted illegally to authorize the condemnation of property where the City Council could not affirmatively show compliance with the procedural requirements for exercising the power of eminent domain, which are to be “regarded as in the nature of conditions precedent, which are not only to be powers to deprive the owner of his land, but the party instituting such proceedings must show affirmatively such compliance.”); City of Charlottesville v. Maury, 96 Va. 383 (1898) (“There is no better settled rule of law than this, that statutes which encroach on the personal or property rights of the individual are to be strictly construed; and this is especially the case where it is claimed that the statute delegates to a corporation, whether municipal or private, the right of eminent domain,–one of the highest powers of sovereignty pertaining to the state itself, and interfering seriously, and often times vexatiously, with the ordinary rights of property.”).

13 Hunter v. Norfolk Redevelopment & Housing Authority, 195 Va. 326 (1953) (emphasis added). 14 Town of Rocky Mount v. Wenco of Danville, Inc., 256 Va. 316, 322, 506 S.E.2d 17, 21 (1998);

accord Phillips, 215 Va. at 547, 211 S.E.2d at 96; Rudee Inlet Auth. v. Bastian, 206 Va. 906, 911, 147 S.E.2d 131, 135 (1966); Mumpower v. Housing Auth. of Bristol, 176 Va. 426, 448, 11 S.E.2d 732, 740

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Specifically, the Burkholders argued that an incidental public benefit of removing some blight

does not satisfy the “public use” requirement when the overwhelming benefit is economic gain to a known private entity and is not authorized under the Housing Authorities Law of Title 36.

The salient consideration is not whether a public benefit results, but whether a public use is predominant. ‘Public use’ and ‘public benefit’ are not synonymous terms.’ Richmond v. Carneal, 129 Va. 388, 393, 106 S.E. 403, 405 (1921). It is of no importance . . . that the public would receive incidental benefits, such as usually spring from the improvement of lands or the establishment of prosperous private enterprises: the public use implies a possession, occupation, and enjoyment of the land by the public at large, or by public agencies; and a due protection to the rights of private property will preclude the government from seizing it in the hands of the owner, and turning it over to another on vague grounds of public benefit to spring from the more profitable use to which the latter may devote it.15

The Burkholders also argued and presented evidence over three days in the summer of 2009 that the area found to be blighted was not actually blighted, but that the inclusion of a host of minor maintenance problems, City controlled land, railroad property that could not be taken by eminent domain and the description of properties as blighted simply because they were in a floodplain were all tools specifically used to generate a finding of blight where actual blight did not exist.

In its letter opinion, the Court found that it was “certainly clear that the City had an interest in seeking redevelopment of an area that was acceptable to Carilion” and that:

B&B produced documentary evidence of correspondence between the City Attorney's office and RRHA clearly suggesting that the City was pressuring RRHA to come up with findings that would correspond with the terms the City had reached with Carilion. There is also correspondence between RRHA's counsel and the firm doing the environmental impact studies that suggest that a sufficient proportion of the target area could be designated as ‘blighted’ by changing the quantity of properties under review. This conduct clearly suggests to the Court that the City was responding to pressure from Carilion in trying to direct the conclusions that RRHA would reach. This overreaching, coupled with the City's participation in status meetings, gives substance to B&B's accusation that the blight conditions found by RRHA did not exist.16 However, the Court was not persuaded that these considerations ultimately drove the finding that

the Area was blighted because there was evidence “that, if believed, justified a finding that the majority of the properties that were ultimately included in the Plan area actually suffered from blight.” Because the Court found that reasonable experts could disagree as to their interpretation of the evidence, it was not persuaded by “clear and convincing proof that the facts found by RRHA were invalid or that the Plan’s adoption was arbitrary or capricious.”17

(1940); Nichols v. Central Va. Power Co., 143 Va. 405, 415-16, 130 S.E. 764, 767 (1925). See also Ottofaro v. City of Hampton, 265 Va. 26, 32 (2003), cited approvingly in Hoffman Family, L.L.C. v. City of Alexandria, 272 Va. 274, 286, 634 S.E.2d 722, 729 (2006).

15 Ottofaro v. City of Hampton, 265 Va. 26, 31-32 (2003) (citations omitted) (emphasis added). 16 City of Roanoke Redevelopment and Housing Authority v. B&B Holdings, LLC, Case No.

CL07-1348, letter op. at 5 (Roanoke Cir. Ct. Va. Nov. 12, 2009). 17 Id. at 9. The Court went on to note that “the Court might have weighed that evidence

differently than RRHA upon a de novo consideration of the matter. . . . This Court is not free to substitute its own findings of fact as to the condition of the properties . . .”

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The Court disagreed with the Burkholders that blighting conditions had to pose a “menace to the

health, safety, morals and welfare of the residents of the Commonwealth,” to permit the use of eminent domain,18 but that the conditions of the property only need to be “detrimental to the safety, health, morals or welfare of the community.”19

The Court’s ruling permitted RRHA to take the Burkholders’ property. Within weeks of the Court’s ruling, Carilion’s spokesman told the ROANOKE TIMES that it did not

want and had no plan for the property.20 At the same time RRHA’s counsel confirmed that there was “no firm plan that's been approved for what's to be done with that property.”21 These statements contradicted ten years of documents and facts learned in discovery, as well as the public record.

These revelations prompted the Burkholders to move for the evidence to be reopened. In so

moving, they argued that the RRHA’s condemnation of the “property without a plan to further the Plan’s goal of removing blight and blighting influences, as found by this Court, is arbitrary and capricious and is devoid of a rational basis for action.” Their motion was denied and the case moved forward to a just compensation trial.

SEEKING JUST COMPENSATION

Before the Burkholders could appeal any of the jurisdictional issues relating to the validity of the

Plan, there had to be a just compensation trial, in which five jurors would determine the just compensation owed to the Burkholders for the taking of their property. In March 2010 a just compensation jury decided that RRHA’s original offer of $1,025,000 was insufficient as a measure of just compensation by a factor of two and awarded the Burkholders $2,200,000 for the taking of their property. The Burkholders are presently considering their options for an appeal of the jurisdictional issues.

CONCLUSION

The Burkholders’ case has been properly compared to the economic development taking in Kelo.

The postscript in Kelo is that the homes taken for Pfizer are now vacant weed lots, and the planned economic development has been abandoned. Given the public statements by Carilion and the RRHA that there is no use planned for the property, the comparisons to Kelo are also prescient of the likely result in Roanoke.

The Burkholders’ case, like all condemnations for economic development, illustrates how the

rights of ordinary citizens can be subrogated to the desires of the politically connected class who can corrupt and bend the government’s power to their will. When local governments force ordinary citizens to compete in a distorted marketplace, the fundamental right of private property ownership demonstrably is not guaranteed by the VIRGINIA CONSTITUTION.

The Burkholders’ case shows us that the definition of “public use” in Virginia is only as strong as

our General Assembly’s commitment to define it narrowly in the statutes. The time has come for the

18 Id. at 6, quoting VA. CODE § 36-48. 19 Id. at 7, quoting VA. CODE § 36-49. 20 Laurence Hammack, Roanoke couple’s land condemned – but why?, ROANOKE TIMES, Dec. 2,

2009 (quoting Carilion spokesman Eric Earnhart as saying, “Carilion does not need the land and has not requested it from anybody.”).

21 Id.

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General Assembly to pass a constitutional amendment that will ensure that Virginians’ property cannot be taken and given to a preferred private owner for economic development.

Virginians must once again take seriously George Mason’s recognition that all men “have certain

inherent rights, of which, when they enter into a state of society, they cannot, by any compact, deprive or divest their posterity, namely, the enjoyment of life and liberty, with the means of acquiring and possessing property, and pursuing and obtaining happiness and safety.”22

22 VA. CONST. art. 1, § 1.

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TITLE INSURERS ARE ENTITLED TO RECOVERY UNDER A VIRGINIA SETTLEMENT AGENT SURETY BOND

by Brian O. Dolan and Christopher R. Papile*

Too frequently, title insurance companies receive a notice of claim from an insured lender or borrower asserting that a settlement agent failed to record a deed of trust, failed to include the proper legal description, failed to obtain a necessary release of lien, etc. Situations like these typically are covered claims, requiring the title insurance company to step in and rectify the situation. Sometimes a title insurance company must pay off a prior lien or surrender the face value of a policy. Not surprisingly, therefore, a title insurer faced with a claim from an insured may want to explore ways to obtain recoupment. One available option for recoupment is to file a claim under the settlement agent’s surety bond (the “Bond”), which settlement agents are required to maintain by VIRGINIA CODE § 6.1-2.19, et. seq., the Consumer Real Estate Settlement Protection Act (“CRESPA”). Title insurance companies in Virginia have been successful in recouping from a CRESPA surety when its agent violated a duty in conducting the closing. This article discusses the legal basis for title insurance companies to obtain recovery under the Bond.

VIRGINIA CODE § 6.1-2.21(C) requires a settlement agent to comply with the applicable requirements of CRESPA and its “licensing authority.”1 Moreover, VIRGINIA CODE § 6.1-2.21(D) requires a settlement agent to maintain a Bond “to the satisfaction of the appropriate licensing authority.” CRESPA does not define, limit or restrict the scope of the Bond. Nor does it limit coverage to CRESPA violations. The statute likewise is silent as to the obligees or beneficiaries of the Bond. Instead, VIRGINIA CODE § 6.1-2.25 provides that the licensing authority may issue rules, regulations, and orders to carry out the provisions of CRESPA. Thus, the General Assembly vested the licensing authority with full power to establish the specific terms of the Bond, including identifying the parties and defining the rights protected by the Bond. Exercising that grant of authority, the Bureau of Insurance, a division of the State Corporation Commission, mandated specific language to be used for each Bond. Accordingly, the language of the Bond determines whether a title company is entitled to recover from the surety.

The Bond language mandated by the Bureau of Insurance states that the surety is bound to “any

aggrieved person who may be injured by the Principal as hereinafter provided. . . .” (Emphasis added.) In addition, the Bond requires settlement agents to act “in full compliance with the provisions of the laws of the Commonwealth of Virginia and rules, regulations, and orders prescribed by the Virginia State Bar and the State Corporation Commission pertaining to Settlement Agents.” The plain language of the Bond requires compliance with all laws of the Commonwealth, not just CRESPA. This includes the common law as well as statutes such as the Wet Settlement Act, VIRGINIA CODE § 6.1-2.10, et seq., pursuant to which “the settlement agent shall cause recordation of the deed, the deed of trust, or mortgage or other documents required to be recorded and shall cause disbursement of settlement proceeds within two business days of settlement.” VA. CODE § 6.1-2.13. The Wet Settlement Act further provides that “any persons suffering losses due to the failure of [] the settlement agent to cause disbursement as required by this chapter, shall be entitled to recover, in addition to other actual damages . . . reasonable attorneys’ fees incurred in the collection thereof.” VA. CODE § 6.1-2.15.

* Brian O. Dolan and Christopher R. Papile are partners in the Newport News office of Kaufman

& Canoles. In addition, Mr. Dolan is the Chair of the Title Insurance Subcommittee and an Area Representative for the Real Property Section of the Virginia State Bar. The authors wish to thank James L. Windsor of Kaufman & Canoles for his assistance in the preparation of this article, as well as the Honorable Mary Jane Hall, for her contributions prior to taking the bench. In recent years, members of the Kaufman & Canoles Title Insurance Practice Group have represented title insurance companies in recovering surety bond funds in a number of matters in state and federal courts.

1 “Licensing authority” is defined in VIRGINIA CODE § 6.1-2.20 as the State Corporation Commission, the Virginia State Bar or the Virginia Real Estate Board.

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Neither the Bond, CRESPA, nor the Virginia State Bar or State Corporation Commission rules,

regulations and orders define the term “aggrieved person.” BLACK’s LAW DICTIONARY defines an “aggrieved person” as a party that has “a burden or obligation.” BLACK’s LAW DICTIONARY 60-61 (5th ed. 1979). Moreover, CRESPA defines a “person” as “a natural person, partnership, association, cooperative, corporation, limited liability company, trust or other entity.” No provision of the Bond or applicable law precludes a title insurance company from being an “aggrieved person.” Accordingly, a title insurer is an aggrieved person under the Bond and entitled to a distribution of proceeds from the Bond.

One surety, however, has recently succeeded in challenging the right of a title insurance company

to obtain payment under the Bond, arguing that CRESPA does not create a private right of action. Chicago Title Ins. Co. v. Main Street Title & Escrow, LLC, CL 2008-7406 (Fairfax County, Va. 2008), appeal dismissed as premature, No. 090466 (July 28, 2009).2 In Main Street Title, the court did not specifically address the above arguments. Instead, it adopted the ruling of Judge McGrath in Koschene v. Hutchinson, 73 Va. Cir. 103 (Frederick County, Va. 2007).

In Koschene, the settlement agent paid off the incorrect loan of the seller, one secured by a

different piece of property. 73 Va. Cir. at 103-04. After discovering the error, the seller filed suit against the settlement agent. Id. at 104. The court granted the defendant’s demurrer, in part, on the basis that CRESPA did not imply a private cause of action. Id. at 105. Importantly, though, the court overruled the demurrer in part, finding that the seller stated a viable cause of action under the Wet Settlement Act and for common law breach of a fiduciary duty. Id. at 106. The ability of a title insurance company to recover under a settlement agent bond was not an issue in the case. In recognizing that the plaintiff had causes of action against the settlement agent for violating the Wet Settlement Act and common law fiduciary duties, however, the opinion supports the position that a title insurance company is entitled to recovery under the Bond.

In First American Title Insurance Company v. Western Surety Company, 1:09-cv-403, 2009 U.S.

Dist. LEXIS 44231 (E.D. Va. May 27, 2009), the District Court held, contrary to the decision in Main Street Title, that a title insurer had a cause of action against a surety and that it was an aggrieved person under the bond. The case arose after a settlement agent’s employee diverted funds from a refinance loan. As a result, the insured lender’s deeds of trust were in third and fourth priority, behind the prior deeds of trust. Id. at *1-*2. After paying the insured lender’s claim and also obtaining a judgment against the settlement agent, the title company submitted a claim under the settlement agent’s surety bond. The surety refused to pay, prompting the title company to file suit against it. Id. at *2. The surety moved to dismiss the case on the basis that a title company could not bring suit against it because CRESPA does not create a private cause of action. Id. at *3. The District Court rejected that argument. The court reasoned that in Virginia, a statute must plainly manifest the General Assembly’s intent to abrogate the common law. Although CRESPA only allows the state licensing authority to bring actions for statutory violations of CRESPA, the statute contains no express statement or indication that it was intended to abrogate the common law. Therefore, title insurers may proceed against the bond for common law claims. Id. at *4-*5. The court also found that the title company was an “aggrieved person” under the bond. Id. at *6-*8.

Furthermore, regardless of whether a title insurance company is an “aggrieved person” under the

Bond, a title insurer would be subrogated, under the well established doctrine of subrogation, to the rights of its insured as an aggrieved person under the Bond.3 Virginia courts have liberally applied subrogation

2 Main Street Title reached the opposite conclusion from First American Title Ins. Co v. Classic

Title & Escrow, Inc., No. 2008-7383 (Fairfax County, Va. 2008), creating a split within the circuit. 3 In First American Title, after concluding that the title company had standing to pursue a

common law breach of contract action against the surety, the District Court also allowed a claim asserting subrogation rights to proceed to discovery. 2009 U.S. Dist. LEXIS 44231, at *8 n.1.

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for many years to place the party paying the obligation of another in the shoes of the obligee that received payment. Fed. Land Bank v. Joynes, 179 Va. 394, 402, 18 S.E.2d 917, 920 (1942) (“Virginia has long been committed to a liberal application of the principle of subrogation. . . . In no other jurisdiction has the doctrine been more firmly adhered to or more liberally expounded and applied, to meet the exigencies of particular cases, than in Virginia”). The doctrine of subrogation provides that “[w]henever one person is compelled to pay a debt or discharge an obligation for which he is only secondarily liable, in person or in property, and hence has recourse over against the person or the property primarily liable, for exoneration or contribution, a court of equity will subrogate the person thus secondarily liable to the position of the creditor whom he has satisfied, as to every lien, preference or other special advantage possessed by the latter at the time of such payment.” Thompson v. Miller, 195 Va. 513, 519-20, 79 S.E.2d 643, 647 (1954) (emphasis in original) (citation omitted) (sureties who paid a corporation’s debt were subrogated to the position of the mortgagee bank). As a result of a settlement agent’s breaches of duties owed to a title insurance company’s insureds, the title insurance company may discharge the settlement agent’s obligation to them in order to secure first priority lien positions for their insured deeds of trust. Under the long established doctrine of subrogation, a title insurance company is subrogated to the insureds’ rights against the settlement agent, who is the Principal named in the Bond.

Moreover, VIRGINIA CODE § 38.2-207 expressly establishes a title insurance company’s right of

subrogation in this scenario. It provides, in relevant part: [w]hen any insurer pays an insured under a contract of insurance which provides that the insurer becomes subrogated to the rights of the insured against any other party the insurer may enforce the legal liability of the other party. This action may be brought in its own name or in the name of the insured or the insured's personal representative.

Standard American Land Title Association (“ALTA”) loan policies specifically provide for the title insurer to be subrogated to the rights of the insured. For example, ALTA Loan Policy (10/17/92), paragraph 12(a), entitled “Subrogation Upon Payment or Settlement,” provides:

Whenever the Company shall have settled and paid a claim under this policy, all right of subrogation shall vest in the Company unaffected by any act of the insured claimant. The Company shall be subrogated to and be entitled to all rights and remedies which the insured claimant would have had against any person or property in respect to the claim had this policy not been issued.4

Likewise, VIRGINIA CODE § 8.01-13 notes that an assignee or “beneficial owner” of any bond

may maintain an action in its own name against the obligor. The term “beneficial owner” includes a subrogee. Nationwide Mut. Ins. Co. v. Minnifield, 213 Va. 797, 799, 196 S.E.2dd 75, 77 (1973). This statute provides an additional basis for a title insurance company to obtain recovery under the Bond.

Several courts have recognized that the rights of subrogation apply to title insurance companies to the same extent they apply to other subrogees. In In r`e Dameron, 155 F.3d 718 (4th Cir. 1998), a title insurer paid the claims of its insured lenders arising from the misappropriation of settlement funds by an attorney settlement agent. The Court stated: “Old Republic issued insured closing letters to [the lenders] in connection with the four settlements at issue. When called upon to do so, Old Republic paid [two of the lenders] for their losses and thereby became subrogated to their rights in the funds.” Id. at 721 n.4.

In Spring Constr. Co. v. Harris, 614 F.2d 374 (4th Cir. 1980), a title insurance company bonded

off mechanic’s liens and then defended mechanic’s lien enforcement actions brought by subcontractors and materialmen. The title insurer settled the mechanic’s lien claims and asserted a claim in a federal

4 The 6/17/06 ALTA Loan Policy contains a similarly worded provision.

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court proceeding against the owners. The general contractor took the position that the title insurer was not entitled to a recovery because of its voluntary settlement with the subcontractors. The Fourth Circuit Court of Appeals rejected this argument, stating that “[t]he right of LTIC to the funds in question in this case . . . is based upon the equitable rights of LTIC to the funds by reason of its subrogation to the claims of the subcontractors and materialmen against the properties after LTIC . . . had paid those claims.” Id. at 379.

At least one Virginia state court has recognized a title company’s subrogation rights. See Lawyers

Title Ins. Corp. v. P.R.T. Enters., Inc., 65 Va. Cir. 271 (Norfolk, Va. 2004) (title company purchased a judgment to clear title for its insured and became subrogated to the rights of the judgment creditor).

A title insurance company’s insured lender is undoubtedly an aggrieved person under the Bond.

A title insurance company, having made payments for the benefit of the insured lender or borrower, is subrogated to the insured’s rights as an aggrieved party under the Bond. The VIRGINIA CODE and above cases make it abundantly clear that even if a title insurer were not an aggrieved person under the Bond in its own right, it would be subrogated to the rights of its insured and may pursue recovery in its own name against the surety.

Although CRESPA does not create a private cause of action for title insurance companies, the issue is whether title insurance companies have any cause of action against a bonding company that fails to comply with the terms of the surety bond. When settlement agents violate laws, rules, regulations, and orders, a title insurance company may have a cause of action against the sureties under the plain terms of the Bond. Should the surety refuse to pay a title insurance company’s claim, it would be in breach of the terms of the Bond, and a direct common law breach of contract cause of action would exist against it.

In sum, CRESPA created supervision and enforcement rights in favor of the Commonwealth

against settlement agents. CRESPA allows the licensing authority to establish the parameters of surety bonds. Under the terms of the Bond, the surety is held and bound unto any aggrieved person, including a title insurance company, injured by the Principal under the Bond. If the surety breaches its obligations under the Bond by refusing to pay a claim, a title insurance company has a direct cause of action against it, without needing to allege a CRESPA violation.

As a final point, denying a title insurance company’s claim elevates form over function and

delays the inevitable. Nothing prohibits insured lenders or borrowers from filing individual claims under the Bond and then reimbursing their title insurance company, or executing formal written assignments of their rights in favor of a title insurance company. In fact, under the usual title insurance policy each insured is required to do so upon its title insurer’s request. Hopefully, in future cases, sureties will take the practical approach and not unnecessarily increase title insurance companies’ costs by forcing each insured to submit individual claims or execute assignments.

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BRAMBLETON COMMUNITY ASSOCIATION V. THAN: ARE BANKRUPTCY FILERS RECEIVING BAD ADVICE TO VACATE THEIR HOMES?

by Mary N. Peacock*

It began as a regular collections matter; however, the case of Brambleton v. Than (Fairfax Circuit Court case no. CL 2009-9174) took an odd turn in General District Court. The effect of the lower court’s decision would have been deleterious for already sinking property values of homes within community associations. However, fortunately the Circuit Court disagreed with the General District Court’s ruling, and issued an opinion consistent with logic and the law regarding a homeowners association’s ability to pursue the collection of unpaid assessments from an owner who filed for bankruptcy and later vacated the property.

This article, written by the attorney who tried the case in the Fairfax General District Court and then Fairfax Circuit Court on appeal, will provide a summary of the facts of the case, the law relied on by the parties, and the reassuring ultimate outcome.

Some Background: Pursuit of Collections Notwithstanding Debtors’ Bankruptcy Filings

The state of the economy coupled with the recent reduction in home values has resulted in a significant increase in the number of property owners who cease paying their homeowners association assessments. Collections cases arising from the nonpayment of assessments are normally straight forward; usually the goal of these cases is to secure a judgment which will be paid off when the debtor is able. The pairing of a bankruptcy filing by a property owner and subsequent foreclosure of the relevant property is frequent. Consequently, associations must simply do the best they can to protect their assets, fulfill fiduciary obligations to their members, and discourage the nonpayment of assessments by continuing collections efforts as consistently as possible.

In that vein, it is the general practice of my law firm’s collections department to continue

collections efforts even after discovering that a debtor has filed a petition in bankruptcy, so long as doing so is cost effective. If the bankruptcy court has discharged a debtor’s debts, and the debtor continues to own the relevant property, the association would sue for the payment of assessments that became due after the filing of a bankruptcy petition. Assessments imposed after the filing of a bankruptcy petition are not discharged by the bankruptcy petition since they arise after the filing of the petition. Accordingly, it is our position that assessments accruing after the filing of a bankruptcy petition are legally collectible by the association. Homeowners Assessments are a Covenant Running with the Land

Regular annual assessments as well as special assessments are the obligation of the owners of

property within homeowners associations by virtue of recorded covenants pertaining to such associations. The covenants of an association, generally contained in the “Declaration of Covenants, Conditions and Restrictions” or similarly titled instrument, consist of requirements both the association and property owners must obey. See White v. Boundary, 271 Va. 50, 55, 624 S.E.2d 5, 8 (2006).

* Mary (“Molly”) N. Peacock is an associate with the law firm of Chadwick, Washington,

Moriarty, Elmore & Bunn, P.C. in Fairfax, Virginia, having joined the firm in June 2006. Mary’s practice focuses on community association law, and civil and appellate litigation. Before joining the firm, Mary represented clients in the area of insurance defense and coverage as well as general civil and appellate litigation. Upon graduating from law school, she served as law clerk for the judges at the Circuit Court for the City of Alexandria. She is licensed to practice in Virginia and the District of Columbia.

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Facts of Brambleton v. Than Brambleton Community Association v. Than presented the frequently occurring fact scenario

discussed above. Like many during these difficult economic times, the defendant in the case determined he must file for bankruptcy, and did so in May 2007. Approximately ten months later, in March 2008, the house was foreclosed and title transferred from the defendant to the new purchaser at the foreclosure sale. Counsel for the plaintiff Association (“Association”) was tasked with its usual duties of collecting the unpaid debt.

The Parties’ Legal Arguments

During the course of trying the case at the General District Court level, it was revealed that that some debtors may be receiving confusing, misleading, or bad information about whether they continue to owe homeowners association assessments after filing a bankruptcy petition, and bad information about what they should do with their property after so filing.

At trial, in the Fairfax General District Court, the Association sued for unpaid assessments accruing from May 2007 through March 2008. May 2007 was when the defendant filed for Chapter 7 bankruptcy protection; the property foreclosed in March 2008.1 The Association did not seek to collect the unpaid assessments dating prior to the May 2007 bankruptcy filing because the bankruptcy court discharged the defendant’s debts listed in the May 2007 bankruptcy petition.2 Thus, the amount in the case comprised unpaid assessments arising during the ten-month period between May 2007 and March 2008. This amount was $1,666.89 not including attorneys’ fees.3 The defendant did not dispute the Association’s calculation of this sum.

What the defendant did dispute was the Association’s legal basis for seeking post-petition and

pre-foreclosure assessments. The defendant made a few different arguments as to why he did not owe the amount sought by the Association. The primary argument was that he moved out of the house around when the bankruptcy filing occurred in May 2007, with the intention of abandoning it since he could no longer pay the mortgage. The defendant noted that he was told (supposedly by an attorney) that this abandonment of the house would mean he was no longer obligated to pay homeowners assessments to the Association. The defendant seemed to think that the act of moving out of the house in May 2007 contemporaneous with filing for bankruptcy would result in an extinguishment of any further duties as to the house and as to the Association.

The Association did not agree with the defendant’s abandonment theory, there being no law to

support it. The Association had neither constructive nor express notice that the defendant had abandoned the property. However, even if it had been given such notice, legal title of the property did not transfer until March 2008, upon foreclosure of the property. The bankruptcy court discharged only those debts listed in the petition of May 2007, and did not discharge future debts. The defendant continued to be the legal title holder to the property until March 2008. Thus, if the defendant did not owe the assessments for the ten-month period between May 2007 and March 2008, who did? No one in the courtroom had an

1 A recorded Declaration of Covenants (“Declaration”) governed the operation, rights, and

obligations of the plaintiff Association and its members, including the imposition of regular annual assessments on all lots within the Association. The lot owned by the defendant in the case was not exempt from the obligations in the Declaration.

2 This bankruptcy discharge was handed down in August 2007, about three months after the defendant filed his bankruptcy petition in May 2007.

3 VA. CODE § 55-515, as well as the Declaration for the Association, provides that attorneys’ fees may be awarded to the prevailing party in collections cases for unpaid assessments. Thus, the Association also sought reasonable attorneys fees expended to pursue the unpaid assessments. These amounted to approximately $1,000.00; the defendant did not dispute this amount.

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answer for that question. Nevertheless, the court ruled against the Association, and in favor of the defendant, much to the surprise (and chagrin) of counsel for the Association. Effect of General District Court Ruling

The implications of this General District Court ruling were significant for associations having to collect unpaid assessments. The above fact scenario of associations seeking to collect unpaid assessments accruing after an owner’s bankruptcy filing is common among associations trying to properly manage their increasingly difficult budget issues. Homeowners often file for bankruptcy, but stay in their homes for several months or years before legal title to the property transfers. If homeowners associations were indeed legally precluded from suing for the payment of post-petition assessments, then assessments would have to be increased for all other members of associations, services would have to be reduced, and stress would be added to the already stressful workload for the executive bodies that run associations on a volunteer basis. In short, the General District Court’s ruling meant that property values would become depressed even further.

On Appeal at Circuit Court

Because of the potential landscape change suggested by the General District Court’s ruling, the

Association and its counsel concluded it would be prudent to appeal the case to the Fairfax Circuit Court. As the reader is doubtless aware, cases appealed from General District Court to Circuit Court in Virginia are heard de novo by the Circuit Court. Accordingly, the parties arrived at Circuit Court on the date of trial in early September 2009 ready to try the case from scratch.

The defendant did not dispute any significant factual matter.4 The amount in controversy

remained $1,666.89 which represented assessments imposed on the relevant property from the date of the bankruptcy petition filed in May 2007 through to the date of the foreclosure sale in March 2008. The defendant also did not dispute the amount of attorneys fees which remained at $1,054.00; counsel did not charge for the time spent appealing the case.

Thus, at Circuit Court, the case revolved around the following question of law: whether homeowners associations in Virginia are permitted to seek unpaid assessments accruing after the filing of a bankruptcy petition by the owner of the relevant property. Both parties cited the cases of In re Rivera, 256 B.R. 828 (Bankr. M.D. FL 2000) and In re Rosenfeld, 23 F.3d 833 (4th Cir. 1994). The Association also relied on the Bankruptcy Code itself for its position; however, most of the discussion at trial involved analysis of the two cases. These cases largely held that association assessments accruing after a bankruptcy petition filing were collectible. The Rivera case went on to discussed three lines of cases, two of which suggested that post-petition assessments might not be collectible by the association. Conclusion of the Case

The Fairfax Circuit Court took the case under advisement and issued a letter opinion sent to the parties a short time after trial. The opinion discussed the parties’ arguments based on the above two cases, and stated that the cases were less relevant since the Bankruptcy Code itself governed this fact scenario. The court noted that the 2005 amendments to the Bankruptcy Code address this issue specifically. 11 U.S.C. §523(a) states:

(a) A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title

does not discharge an individual debtor from any debt–…

4The defendant moved to add a party, his wife. This additional party did not change the analysis

or outcome of the case.

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(16) for a fee or assessment that becomes due and payable after the order for relief to a membership association with respect to the debtor's interest in a unit that has condominium ownership, in a share of a cooperative corporation, or a lot in a homeowners association, for as long as the debtor or the trustee has a legal, equitable, or possessory ownership interest in such unit, such corporation, or such lot, but nothing in this paragraph shall except from discharge the debt of a debtor for a membership association fee or assessment for a period arising before entry of the order for relief in a pending or subsequent bankruptcy case;

The court found that the Association had met the three requirements imposed by the Bankruptcy Code, namely (1) that the debt in question consists of homeowners assessments, (2) the assessments became due after the defendant’s filing of his bankruptcy petition, and (3) the assessments sought were imposed while the defendant had “legal, equitable, or possessory ownership interest” in the property. The defendant’s confusion over what debt was discharged may have arisen from the 2005 amendment to the Bankruptcy Code. In any event, the result of the case is that counsel’s collections practice is not faced with a sea change, nor must associations make wholesale increases in assessments to cover for the increased debt that would have resulted from the General District Court’s ruling in this case.

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A TALE OF TWO COUNTIES: HOW THE LEGAL QUILLOTINE CAN SEVER YOUR LIEN

by John A. Dezio*

Historically, Commissioners of the Revenue in rural areas of Virginia assessed real property located in two counties by sitting in front of tax maps and, using a “give and take” approach, assigned whole parcels to one county or the other, rather than dividing the parcels by county, as required by law. As a result many property owners, title examiners, appraisers, lenders and attorneys believed, erroneously, that a parcel of land was all in one county, and deeds and deeds of trust tended to be recorded only in the Clerk’s Office of the Circuit Court of the County in which the real estate was assessed.

In more recent years, Commissioners of the Revenue have properly divided parcels with each county assessing only its portion of the parcel. This, too, however, has continued to plague property owners, title examiners, lenders and attorneys who begin their work relating to the property with a street address in one county and perform title work in that county only, when there is no reference in the recorded documents to the fact that a portion of the property lies in another county.

As an example, a parcel of land lying mostly in Fluvanna County and partly in Albemarle County was historically assessed in Fluvanna County, and all recordings were done in Fluvanna County. When the property was subdivided, the subdivision plat made no reference to the fact that a portion of Lot 1 was in Albemarle County, and the plat cited that the subdivision was in Fluvanna County. The subdivision plat was recorded only in Fluvanna County, and the deed transferring Lot 1 from the developer was recorded only in Fluvanna County.

The lot and improvements continued to be assessed in Fluvanna County until the Commissioners of the Revenue for Albemarle County and Fluvanna County divided Lot 1 for assessment purposes, so that the improvements and the larger portion of Lot 1 were assessed in Albemarle County, and the smaller portion was assessed in Fluvanna County.

Lender One, before making a loan to be secured by Lot 1, obtained a title abstract indicating that the property was in Fluvanna County and that nothing of record indicated that the property was mostly in Albemarle County. Lender One, however, reviewed a tax assessment from Albemarle County showing that the improvements and majority of the property were in Albemarle County and recorded the deed of trust in Albemarle County. Lender One intended to record its deed of trust in Fluvanna County but forgot to do so.

Lender Two, before making a loan to be secured by Lot 1, obtained a title commitment indicating that the property was in Fluvanna County and recorded its deed of trust only in Fluvanna County. The purpose of this loan was to refinance debts of the owner of Lot 1. The owner disclosed his debt to Lender One to Lender Two who contacted Lender One for a pay-off. Because the pay-offs due Lender One and other lenders were more than the Lender Two loan, Lender Two asked Lender One to accept a lower pay-off. Lender One refused to do so.

When Lender Two received the title binder and did not find a deed of trust securing Lender One (the title work having been done only in Fluvanna County), Lender Two treated Lender One as unsecured and recorded the Lender Two deed of trust in Fluvanna County only and did not pay Lender One.

* John A. Dezio received his undergraduate and law degrees from the University of Virginia. He

is a former Commonwealth’s Attorney for the County of Albemarle and an Assistant Commonwealth’s Attorney for the City of Charlottesville. He has served on the Mid-Year Seminar Committee and has been a member, as well as Chairman, of the Virginia State Bar Disciplinary Committee.

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Subsequently, Lender One realized that it had failed to record its deed of trust in Fluvanna County, and Lender One then did so.

Thus, Lot 1 was subject to a first lien deed of trust in favor of Lender One for that portion in Albemarle County and was subject to a first lien deed of trust in favor of Lender Two and a second lien deed of trust in favor of Lender One for that portion in Fluvanna County.

Lender Two claims that it had no actual knowledge that the property was located in two counties but could have known by reviewing the tax assessments for Lot 1 and had actual knowledge of the loan of Lender One.

Both lenders now want to foreclose.

Can Lender One foreclose in Albemarle County as a first lien holder and in Fluvanna County as a first lien holder?

Can Lender One foreclose in Albemarle County as a first lien holder and in Fluvanna County as a second lien holder?

Can Lender Two foreclose as a first lien holder in Fluvanna County and in Albemarle County as either a first or second lien holder?

Prior to the current economic downturn, Lot 1 could have been sold at a foreclosure sale for a price sufficient to pay both liens, but today this is not so, and both lenders are looking to the court for guidance.

The issues raised include actual notice, constructive notice, equitable subrogation, priority of liens, estoppels and the effect of liens filed in one county only against property located in two counties.

The answers may be found in a matter decided on July 10, 2009, styled Wells Fargo Bank, NA, Trustee for Carrington Mortgage Loan Trust v. Crowther, Case No.: CL 08000 583-00, in the Circuit Court of Pittsylvania County. The opinion of Judge Charles J. Strauss is attached and would indicate that Lender One has a first lien on all of Lot 1 for the reasons set forth therein.

The Wells Fargo case was settled subsequent to the court order and prior to appeal to the Virginia Supreme Court, and the opinion of the Circuit Court of Pittsylvania County is now final.

The doctrine of equitable subrogation could be available to substitute the Lender One lien as a first lien in Fluvanna County. Equitable subrogation is a remedy recognized in Virginia as an equitable doctrine to maintain the parties in the priority lien position they intended to have. Since Lender Two did not intend to pay the Lender One lien, the doctrine of equitable subrogation would be applicable to subrogate the Lender Two lien to the Lender One lien in Fluvanna County. See Federal Land Bank of Baltimore v. Joynes, 179 Va. 349, 401, 18 S.E.2d 917, 920 (1942).

The cases in Virginia on equitable subrogation do not require actual notice at the time of recordation since the theory of equitable subrogation is simply that all parties remain in the same position as intended.

The problems could have been eliminated if the lenders had intelligently reviewed the tax assessments and compared the assessments with the deed acreage and improvements; if the lenders had required a physical survey which would have indicated the location of the county line; if Lender One had appreciated the necessity of establishing a chain of title in Albemarle County and of recording the deed of trust in Fluvanna County; and if Lender Two had inquired further into the status of Lender One’s loan.

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No attorneys were involved in either transaction, and now both lenders are involved in litigation that would have been avoided if counsel were involved in the closings. Also, the title underwriter for Lender Two relied on a title opinion from a lay settlement agent who did not inquire when he saw an acreage in the deed and on the plat significantly different from the tax assessment and deeds of trust (old and new) more than one hundred times higher than the tax assessment of an unimproved parcel of land.

* * *

ATTACHMENT

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“HOT” 1031 TOPICS IN A “NOT SO HOT” 2010 REAL ESTATE ENVIRONMENT

by Susan E. Hayden*

A §1031 tax deferred exchange allows real estate investors the ability to preserve the value of

their investment portfolio. By using an exchange, an investor is able to defer the recognition of capital gain taxes that would otherwise be incurred on the sale of investment property. A §1031 exchange is essentially a typical sale and purchase transaction with some additional documentation. Unless two parties are actually “swapping” properties, the IRS requires the use of a Qualified Intermediary to act as assignee of the sale and purchase contracts and to hold the sale proceeds. The use of a Qualified Intermediary preserves the safe harbor treatment under the 1991 Treasury Regulations and provides a proper paper trail validating the flow and structure of the transaction.

Even in this “not so hot” real estate environment, there are still many §1031 tax deferred

exchange issues for the real estate practitioner to consider. These “hot” topics are discussed below.

HB 417 EXCHANGE FACILITATORS ACT AND REVENUE PROCEDURE 2010-14

In recent years, some taxpayers have suffered losses due to poor funds management practices and bankruptcy of the exchange facilitator (also referred to as Qualified Intermediary or “QI”). As a result, many states have enacted laws regulating or providing rules for Qualified Intermediaries. Virginia is the latest to adopt a law that mandates prudent funds management practices by QIs to prevent future losses. In addition, the IRS has weighed in to assist taxpayers who fail to complete their exchange as a result of a Qualified Intermediary entering bankruptcy or receivership.

Governor McDonnell has signed the Virginia Exchange Facilitators Act that goes into effect July

1, 2010. HB 417 will protect the clients of exchange facilitators and prevent future losses by:

• Requiring that clients’ exchange funds be held in separately identified accounts, with written client consent for all withdrawals;

• Prohibiting commingling of exchange funds with the facilitator’s operating funds; • Prohibiting loans of exchange funds to parties related to the exchange facilitator; • Prohibiting exchange funds from being subject to execution or attachment on any claim against

the exchange facilitator; • Prohibiting material and continued misrepresentations, fraudulent activity and failure to fulfill

contractual obligations, including timely accounting for funds held by the exchange facilitator; and

• Providing for a monetary penalty of $2500 per violation, consistent with the Virginia Consumer Protection Act.

In addition, on March 5, 2010, the IRS issued Revenue Procedure 2010-14 which provides a safe

harbor method of reporting gains or losses for certain taxpayers who initiate deferred like-kind exchanges under §1031 but fail to complete the exchange because a Qualified Intermediary defaults on its obligation to acquire and transfer replacement property to the taxpayer. Revenue Procedure 2010-14 applies to taxpayers who:

* Susan Hayden is the attorney manager of the Southeast Region for Investment Property

Exchange Services, Inc. (IPX1031®). IPX1031®, a Qualified Intermediary, is a national leader in 1031 tax-deferred exchange transactions and is a wholly owned subsidiary of Fidelity National Financial, Inc. (NYSE:FNF). The FNF family of title companies includes Chicago Title, Fidelity National Title, Commonwealth Title, Lawyers Title, Security Union Title, Ticor Title and Alamo Title. For questions or more information on exchanges, call 866-889-1031or visit the website at www.ipx1031.com.

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1. Transferred relinquished property to a QI; 2. Properly identified replacement within the identification period (unless the QI’s defalcation

occurred during the identification period); 3. Did not complete the like-kind exchange solely because of a QI default involving a QI that

becomes subject to a bankruptcy or receivership proceedings; 4. Did not, without regard to any actual or constructive receipt by the QI, have actual or constructive

receipt of the proceeds from the disposition of the relinquished property or any property of the QI prior to the time the QI entered bankruptcy or receivership; and

5. Had a pending like-kind exchange which failed due to a QI default occurring on or after January 1, 2009. (Note that a taxpayer who meets all other criteria listed above, but whose exchange failed prior to 1/1/2009 is permitted to file an amended return for the year of the failure and report the transaction in accordance with the Revenue Procedure.)

§ 1031 EXCHANGE OUT OF DISTRESSED INVESTMENT PROPERTY

Sad, but true, it happens in real estate cycles that there is a period of time when property values

decrease. If the decrease is significant enough, there can be a substantial negative impact on a real estate investor’s equity. In fact, the equity may be completely wiped out, leaving the investor owing more on an investment property than it is currently worth. If an investor needs to dispose of the property, they may be looking at a short sale in hopes of avoiding foreclosure.

Hopefully, they consult with their attorney or tax advisor because there may be serious tax

ramifications, even if they have no equity in the property. If the investor acquired the property through a previous IRC §1031 exchange or if they refinanced and pulled cash out of the property, their debt may exceed the tax basis as well as the fair market value of the property. Distressed transactions may trigger capital gains, depreciation recapture and ordinary income taxes. The Short Sale Problem

In 2004 an investor accomplished a §1031 exchange and acquired a $400,000 rental house. In 2005 they refinanced to free up some cash and now have $300,000 in debt outstanding against the rental house. In today’s down market, the property is only worth $250,000. Because they rolled over their basis in the original property into the rental house (and deferred the capital gains taxes on that sale), the investor has a very low basis of only $100,000 in the rental house. If they short sell the property at $250,000, they will realize $150,000 in capital gain ($250,000 selling price less $100,000 basis), even though there is no net equity in the property. Additionally, if the loan was a typical recourse loan (i.e., the investor is personally liable for the full amount of the loan), they will also realize $50,000 of cancellation of debt (“COD”) income. Debt relief occurs because the lender is agreeing to take a loss, accepting the $250,000 of sale proceeds as payment in full and forgiving the remaining $50,000 of debt. Debt relief is treated differently from capital gain and is taxed at ordinary income tax rates. For the purpose of simplicity, we are ignoring closing costs and depreciation recapture in this example. The 1031 Exchange Solution

A §1031 exchange is still a viable solution, even if the investor has no equity upon the sale of the property, because they will realize gain in the transaction. By structuring the short sale as an exchange, and acquiring replacement property worth $250,000, the investor can avoid recognizing all of the $150,000 of gain and fully defer all of the capital gains and depreciation recapture taxes that otherwise would be due on a taxable sale. The $50,000 of COD income cannot be avoided by doing a 1031 exchange. Nevertheless, the tax liability has been lowered by at least $22,500.

If the $300,000 loan was non-recourse, a §1031 exchange is even more valuable, because there is

no COD income on non-recourse loans. However, the deemed sale price for tax purposes would be the outstanding amount of the non-recourse loan, regardless of the fact that the actual sale price was $50,000

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less than the outstanding balance. The capital gain under these circumstances would be $200,000, the difference between the $300,000 non-recourse loan balance and the $100,000 tax basis. Even though the short sale price was $250,000, to fully defer capital gains and depreciation recapture taxes, the investor would need to acquire replacement property costing at least $300,000. Making It Happen

A reputable Qualified Intermediary and a resourceful real estate agent can be extremely helpful in dealing with distressed transactions. If an investor has an independent source of cash with which to finance the purchase of the replacement property, the exchange should go smoothly. Absent the investor’s own cash, the biggest challenges to completing an exchange out of a short sale property will be funding the replacement property purchase without any equity from the relinquished property sale to use as a down payment and finding a lender willing to provide 100% financing.

A high quality Qualified Intermediary will provide exchange documents and can walk both the

investor and their advisors through the exchange process. The key is contacting the Qualified Intermediary as soon as the investor has a contract for the short sale, but prior to closing on the sale. The investor must enter into an Exchange Agreement and assign the short sale contract to the QI prior to closing.

DO VACATION HOMES AND SECOND HOMES QUALIFY FOR IRC § 1031 TREATMENT?

It has been established that vacation homes or second homes held by the Exchanger primarily for

personal use do not qualify for tax deferred exchange treatment under IRC §1031. There has been no clear direction as to what proportion of rental versus personal use would qualify the property as held in a trade or business when a second home has mixed use. Neither has there been clear direction when a second home qualifies as held for investment. In Moore v. Commissioner, T.C. memo 2007-134, the Tax Court held that properties held for personal use with the mere hope or expectation of gain did not establish investment intent.

The IRS issued Revenue Procedure 2008-16, providing safe harbors effective March 10, 2008,

under which the IRS will not challenge whether a dwelling unit that is either a relinquished property or a replacement property in a §1031 exchange qualifies as property held for use in a trade or business or for investment purposes. A dwelling unit is defined as “real property improved with a house, apartment, condominium, or similar improvement that provides basic living accommodations including sleeping space, bathroom and cooking facilities.”

The safe harbor for a second home to qualify as a relinquished property in a §1031 exchange

requires the Exchanger to have owned it for twenty-four months immediately before the exchange, and within each of those 12-month periods the Exchanger must have 1) rented the unit at fair market rental for fourteen or more days, and 2) restricted personal use to the greater of fourteen days or ten percent of the number of days that it was rented within that 12-month period.

In addition, the safe harbor for a second home to qualify as replacement property in a §1031

exchange requires the Exchanger to own the vacation home for twenty-four months immediately after the exchange, and during each of those 12-month periods the Exchanger must 1) rent the unit at fair market rental for fourteen or more days, and 2) restrict personal use to the greater of fourteen days or ten percent of the number of days it was rented within that 12-month period.

COMMONLY MISUNDERSTOOD RELATED PARTY RULES

Exchanges between related parties are allowed but the Exchanger must follow specific rules before the exchange will qualify for tax deferral. Related parties are defined in IRC § 267(b) and §

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707(b)(1) as any person or entity bearing a relationship to the Exchanger, such as certain members of a family (brothers, sisters, spouse, ancestors, and lineal descendents); a grantor and fiduciary of any trust; two corporations that are members of the same controlled group; and corporations and partnerships with more that 50% direct or indirect ownership of the stock, capital or profits in these entities. Under IRC §1031(f) it is clear that two related parties, owning separate properties, may “swap” those properties with one another and defer the recognition of gain as long as both parties hold their replacement properties for two years following the exchange. This rule was imposed to prevent taxpayers from using exchanges to shift the tax basis between the properties to avoid paying taxes upon the subsequent sale of the original low basis property now in the hands of the “high basis” taxpayer.

Typically, an Exchanger uses a Qualified Intermediary to facilitate an exchange with either a

related party buyer who purchases the Exchanger’s relinquished property or a related party seller from whom the Exchanger acquires the replacement property. Exchanges in which the seller of replacement property is the related party are less likely to qualify for tax deferral unless the related party seller also does an exchange. Under Revenue Ruling 2002-83, exchange treatment will be denied to an Exchanger who, through a Qualified Intermediary, acquires replacement property from a related party seller that receives cash or other non-like-kind property, regardless of whether the Exchanger holds the replacement property for the requisite two years. The IRS will generally view this transaction as yielding the same result as if the Exchanger swapped properties with a related party, and then the related party immediately sold the property acquired, violating the two-year requirement. The related party rules of §1031(f) cannot be avoided by interposing an unrelated Qualified Intermediary. Sometimes advisors not familiar with Revenue Ruling 2002-83 mistakenly advise clients that all the related party needs to do is to hold the replacement property for two years following the exchange. The bottom line is that the IRS will likely deny § 1031 exchange treatment if one of the related parties “cashes out,” i.e. begins the transaction with property and ends up with cash.

Exceptions to the two-year holding period are allowed only if (a) the subsequent disposition of

the property is due to (i) the death of the Exchanger or related person or (ii) the compulsory or involuntary conversion of one of the properties under IRC §1033 (if the exchange occurred before the threat of conversion), or (b) the Exchanger can establish that neither the exchange nor the disposition of the property was designed to avoid the payment of Federal income tax as one of its principal purposes. Under §1031(f) (4), a related party exchange will be disallowed if it “is a part of a transaction (or series of transactions) structured to avoid the purposes of the related party provisions.” It is also important to note that under §1031(g), the two-year holding period is “tolled” for the period of time that 1) either party’s risk of loss with respect to their respective property is substantially diminished because either party holds a put right to sell their property, 2) either party is subject to a call right to be purchased by another property, or 3) either party engages in a short sale or any other transaction.

The Tax Court denied exchange treatment in Teruya Brothers, Ltd., 124 T.C. No. 4 (2005),

because it found that one of the principal purposes of the transaction was the avoidance of income taxes, notwithstanding that there was no basis shifting between the related parties. When the related party sold the property it had acquired from the Exchanger within the two years of acquisition, it was able to take advantage of net operating losses to offset the gain recognized on sale, resulting in less tax paid than if the Exchanger had sold the property outright. In 2009, the Ninth Circuit court affirmed the Tax Court’s decision and on February 22, 2010, the Supreme Court declined to review the decision.

The IRS clarified in PLRs 200709036, 200712013, and 200728008 that there is no basis shifting

or tax avoidance when the Exchanger, through an unrelated Qualified Intermediary, transfers relinquished property to a related buyer, but acquires replacement property from an unrelated seller. The exchange will be respected even if the related buyer voluntarily disposes of the property it acquired from the Exchanger within two years of acquisition. The IRS’s rationale was that only the Exchanger owned property before the exchange and the Exchanger continued to be invested in like-kind property following the exchange. Because the related party buyer did not own property prior to the exchange, its subsequent disposal would not result in cashing out or basis-shifting by the Exchanger. Based on this indication of

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the IRS’s thinking, it appears that in a four-party exchange involving the Exchanger, a related buyer of relinquished property, an unrelated seller of replacement property, and an unrelated Qualified Intermediary, there is no requirement that the related buyer hold the asset received from the Exchanger for two years following the exchange.

Although Private Letter Rulings provide a good indication of the IRS’s interpretation of this

complicated section of the tax code, their use is limited to the specific requesting taxpayer and may not be used as precedential authority by others. Exchangers contemplating an exchange with a related party need careful analysis of their options before going forward.

POSSIBLE § 1031 TAX RISKS WITH PARTNERSHIP DISTRIBUTIONS

The IRS revised Form 1065, U.S. Return of Partnership Income, for tax years ending on or after December 31, 2008. The revised Schedule B to Form 1065 asks for information on like-kind exchanges that the partnership may have participated in at any time during the tax year.

Question 13 states: “Check this box, if during the current or prior tax year, the partnership

distributed any property received in a like-kind exchange or contributed such property to another entity (including a disregarded entity).”

Question 14 states: “At any time during the tax year, did the partnership distribute to any partner

a tenancy-in common or other divided interest in partnership property?” Because of this addition, 1031 commentators think the IRS may begin taking a closer look at

“drop and swap” or “swap and drop” strategies. A “drop and swap” occurs when a partnership is liquidated before an exchange and each partner receives a tenancy in common interest in the real property. Each co-tenant then exchanges his or her real property interest for a separate property under §1031. In a “swap and drop”, each partner can designate a separate replacement property and the partnership purchases the designated properties. At a later date, the partnership dissolves and each partner receives their respective selected property in a distribution.

As discussed above, there is more to §1031 tax deferred exchanges than just holding proceeds.

There is much more. It is essential for the real estate practitioner to stay informed and know where to get accurate information. In addition to the services of the real estate attorney and a knowledgeable tax adviser, it is vital to use a high quality Qualified Intermediary to round out the team of professionals and best serve the client in a §1031 transaction.

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NEW LAW SCHOOL GRADUATES MAY BE PARTICULARLY ADEPT AT DEFEATING THE TECHNICAL LANGUAGE TRAP

by Erin McNeill*

In the current economy, as banks seek to foreclose on deeds of trust, attorneys for banks and borrowers in default will be pouring over deeds to discover—and defeat—defects in the title. Newly-graduated associates fresh from the Bar exam may be particularly helpful when examining unusual deeds with complicated remainder interests or archaic, technical language that every lawyer learns for the Bar exam, but that rarely appears in actual practice. Firms that are able to bring on new associates are likely to see a direct benefit to their clients, particularly in title defense and examination work. In a recent case in Westmoreland County, a bank attempted to foreclose on a house after the owners failed to pay their mortgage on a home improvement loan. It seemed like just another foreclosure until the bank examined the deed to the house. Instead of the fee simple ownership interest they were expecting to find, the deed granted the land to the owner and the owner’s son for life, with “the remainder to the issue of the body” of the owner’s son, and if the owner’s son should die without issue, the remainder was directed to go to the owner’s nephew. The bank was concerned about moving forward with the foreclosure, because they feared they would be foreclosing on merely the life estates of the owner and his son, who were both parties to the mortgage. Attorneys at Sands Anderson Marks & Miller, who represented the bank, were suddenly immersed in a fact pattern not seen since the Bar exam, as they attempted to determine the remainder interests, if there was a reversion, and when the property rights would vest (or were they already vested?). Throw in the Rule Against Perpetuities and the Rule in Shelley’s Case and it was a perfect first year law school property exam hypothetical – but a thorny problem for experienced practitioner Ben Lacy. Lacy realized that the complicated contingent remainders in the deed were similar to the hypothetical questions on the Bar exam and called in the firm’s newest associate to research the problem. Having just finished a review of estates in land for the Bar exam a few months earlier, she quickly identified the construction “to owner’s son for life, then to the issue of the body” as creating a fee tail estate. The fee tail creates a series of life estates in each successive generation, until there are no more blood heirs left to inherit, then the estate reverts back to the grantor or the alternate remainderman. Virginia abolished the fee tail in 1776, to prevent landowners from creating dynastic estates that would pass from generation to generation, sheltered from creditors who could only foreclose against a life estate. The statute converts the fee tail into a fee simple, which allows the creditor to foreclose and make good on a bad debt. In this case, the grantor who requested this unusual deed knew the owner and his son had financial difficulties that were likely to last throughout their lives. The deed language appeared to be an attempt to create an estate that would be sheltered from creditors by granting the owner and his son life estates only, and then leave the remainder to future generations, in the hope they would be more prosperous. But by using the specific construction that created a fee tail, with the technical phrase “issue of the body,” the drafting attorney inadvertently did the very thing his client did not want: he created an interest the bank could foreclose on when the owner and his son defaulted on their mortgage.

* Erin R. McNeill is an attorney with the law firm of Sands Anderson Marks & Miller, P.C. in the

Richmond, Virginia office. She is a member of the Risk Management practice group as well as the Animal Law and Title Insurance Coverage, Claims, and Litigation teams. She focuses her law practice on the defense of private companies and individuals in insurance litigation related to toxic torts, general liability, products liability, and real estate litigation in state and federal courts.

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There are several lessons practicing attorneys can learn from this unique case. New graduates may have insights into the black letter law that is taught in every first year law class, but is only seen in practice once in a career. Attorneys are also cautioned to carefully research (or have that eager new associate research) the chain of title in real estate transactions to avoid hidden pitfalls found in technical language that might have been incorporated into a form deed over a hundred years ago. Of course, attorneys should also review the interests they are creating when drafting deeds, particularly if they deviate from the standard language. Lawyers involved in mortgages, foreclosures, or title examinations could brush up on the meaning of technical language used a century ago to determine the estates created. Or they could just hire a recent law school graduate.

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To: All Licensed Title Agents, Title Insurance Companies, and Other Interested Parties

Re: Remittance of Title Premium and Issuance of Title Policy

It has come to the Bureau of Insurance's attention that many title insurance agents are failing to remit premium to insurers and/or to issue corresponding lenders’ and owners’ title policies to policyholders in a timely manner. We have identified instances where agents have held title premium and failed to issue policies in excess of two years. The purpose of this letter is to remind all licensed title agents of the importance of remitting premium and issuing title policies in a timely manner.

Section 38.2-1813 of the Code of Virginia sets forth the requirements agents must adhere to when handling premiums. Specifically, the law states that funds must be paid to the insurer or other party entitled to payment in the “ordinary course of business.” The Bureau considers the ordinary course of business to be equivalent to the length of time specified in the agency contract for remitting premium to the insurer. For example, if the contract provides that the agent must remit premium to the insurer within 30 days of receipt, this would be considered the ordinary course of business, and any payment that occurs after this time period would be a violation of the statute. If the agent’s contract is silent on the matter, then the Bureau would expect the agent to remit the funds to the insurer as soon as is reasonably possible. If an agent holds funds for 30 days or more and is unable to provide a valid explanation for why the funds have not been remitted, this could be considered a violation.

The Bureau also expects agents to issue title insurance policies in a timely manner. This should typically occur at the same time the agent remits the premium to the insurer. Issuing policies in a timely manner ensures all requirements outlined in the title commitment have been met and affords protection to the consumer and lender who have paid premium and are entitled to receive a policy shortly after settlement.

The Bureau will continue to review and investigate any complaints it receives regarding an agent’s failure to remit premium and issue policies in accordance with their respective contractual agreements, and it fully expects insurers to notify it when they become aware of any potential violations.

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Administrative Letter 2009-11 November 16, 2009 Page Two

Access to the related Virginia insurance laws, regulations, administrative letters and the Consumer Real Estate Settlement Protection Act statutes may be reviewed at www.scc.virginia .gov/division/boi/webpages/boiadministrativeltrs.htm

Each organization to whom this letter has been sent should ensure that it is directed to the proper persons, including appointed representatives.

Any questions related to this administrative letter may be directed to:

Virginia Bureau of Insurance Steven Shipman

CRESPA Investigations Section P.O. Box 1157

Richmond, VA 23218 (804) 371-9465

Cordially,

Alfred W. Gross Commissioner of Insurance AWG/ifg

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REPORT OF THE COMMERCIAL REAL ESTATE SUBCOMMITTEE

MINUTES OF FEBRUARY 3, 2010 CONFERENCE CALL MEETING

OF THE COMMERCIAL REAL ESTATE SUBCOMMITTEE OF THE REAL PROPERTY SECTION BOARD OF GOVERNORS

by William L. Nusbaum

Chair Bill Nusbaum convened a conference call of the Commercial Real Estate Committee of the

Real Property Section Board of Governors on February 3, 2010, at 11 a.m. Also present in person or by phone were Section Chair Joe Cochran, Jean Mumm, Michael Barney, Howard Gordon and Cooper Youell. FEE SIMPLE Article Ideas

The discussion first veered out of the Committee’s turf, when it considered whether the revised bylaws of the Section needed to be published in the FEE SIMPLE, until it was determined that they needed to be circulated in advance of the Annual Meeting in June, and there was no assurance that the next issue of the FEE SIMPLE would be published prior to that meeting. Additional topics from within the Committee’s purview were then considered, as follows (along with the name of the person who suggested the topic):

a. The Commonwealth charging rent for filled land – Howard Gordon b. Victor Pickett’s credit markets presentation to the upcoming Advanced Real Estate Seminar –

Howard Gordon (who agreed to pursue that idea) c. Rescission of Title Policies – Michael Barney (who agreed to try to recruit someone from the

Title Insurance Committee) d. Buyer Beware at Foreclosure Sales of Multi-family Properties / Liability for Security

Deposits – Howard Gordon e. Roanoke condemnation case dealing with the land adjacent to Carillion’s new medical

school, which Carillion subsequently acknowledged it didn’t need, and the court said it didn’t matter – Joe Cochran (who agreed to ask Chuck Lollar to write the article)

f. Permitting and Building a Wind Farm – Joe Cochran (who agreed to ask the speaker on that topic at the Advanced Real Estate Seminar to write the article)

In addition, Subcommittee Chair Nusbaum was charged with e-mailing the Subcommittee’s other

members for additional article topics and to promote attendance at the Advanced Real Estate Seminar (which he promptly did). Advanced Real Estate Seminar

As of February 3, spaces were still available for the seminar, although registration is limited this year to 80 people, due to our being consigned to a smaller meeting room. What’s Going On in Our Practices; Adjournment

There was no discussion of this topic at this time, whereupon it was moved by Howard Gordon, seconded by Joe Cochran and unanimously agreed to adjourn the meeting at 11:53 a.m.

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REPORT OF THE EMINENT DOMAIN SUBCOMMITTEE

by Charles M. Lollar

The Eminent Domain Subcommittee, formed roughly eighteen months ago, now boasts 35 members. Members of the Subcommittee practice all over Virginia, with offices in Hampton Roads, the Richmond metropolitan area, northern Virginia and a number of other areas throughout Virginia.

Since the Subcommittee’s inception, its members have published three articles in the FEE SIMPLE related to issues of particular interest to practitioners of eminent domain and condemnation law: Secondary Easements, by Douglas K. Baumgardner, Esquire, in November 2009; The Effect of Probability of Rezoning on Valuation in Just Compensation Proceedings, by Stephen J. Clarke, Esquire, in May 2009; and Limitations on Discovery in Eminent Domain Proceedings: Application of Rule 4:1(b)(5), by Christi A. Cassel, Esquire, in November 2008. In the coming years, we plan to continue to identify topics of particular interest to those practicing in the field of eminent domain and submit such articles to the FEE SIMPLE for publication.

Members of the Subcommittee are also in the process of drafting a public education pamphlet. The purpose of the pamphlet will be to provide basic information to the general public regarding eminent domain, the steps of condemnation proceedings, terminology, and a landowner’s options.

The Subcommittee will continue to work toward improving communication among attorneys representing condemning authorities and attorneys representing private property owners. Topics of conversation at meetings in the past eighteen months have included: creating more cooperative and effective pretrial discovery through early joint site meetings and the use of pretrial orders tailored for eminent domain statutory proceedings; streamlining deposits of funds, draw downs, and disbursements; and encouraging successful mediations and settlement conferences.

The general goal of the Subcommittee is to encourage members to work together to insure that every owner whose private property is taken or damaged for public use receives the just compensation contemplated and guaranteed by Article I, Section 11 of the Virginia Constitution. The Subcommittee meets quarterly and attempts to coordinate its meetings with other conferences and events at which a number of its members are present. Our last meeting was held April 29 at the 4th Annual CLE International Conference on Eminent Domain at the Tides Inn in Irvington. Our next meeting will be held Friday, June 18, 2010, at 1:00 p.m., immediately following the Real Property Section Annual Business Meeting, in the Skytop Room on the top floor of the Holiday Inn Sunspree on 39th Street and Oceanfront, in Virginia Beach, in conjunction with the 72nd Annual Meeting of the Virginia State Bar. We encourage practitioners of eminent domain and condemnation law across the Commonwealth to join the Subcommittee. Prospective members should contact Chuck Lollar of Waldo & Lyle, P.C., chair of the Subcommittee.

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BOARD OF GOVERNORS REAL PROPERTY SECTION

VIRGINIA STATE BAR (2009-2010)

Officers

Chair Joseph M. Cochran, Esquire Richmond & Fishburne 214 East High Street Charlottesville, VA 22902 (434) 977-8590 (434) 817-5212 (fax) email: [email protected] Term Expires: 2011 (2)

Vice-Chair Paul A. Bellegarde, Esquire 8284 Spring Leaf Court Vienna, VA 22182 (301) 537-0627 (cell) (703) 893-4971 (fax) email: [email protected] Term Expires: 2011 (2)

Secretary/Treasurer Paul H. Melnick, Esquire Melnick & Melnick, P.L.C. 711 Park Avenue Falls Church, VA 22046 (703) 276-1000 (703) 790-0544 (fax) email: [email protected] Term Expires: 2010 (1)

Board Members

Kenneth L. Dickinson, Esquire Stewart Title 1802 Bayberry Court Suite 305 Richmond, VA 23226 (804) 897-0000 (804) 897-0001 (fax) email: [email protected] Term Expires: 2011 (1)

Barbara Wright Goshorn, Esquire 203 Main Street P.O. Box 177 Palmyra, VA 22963 (434) 589-2694 (434) 589-6262 (fax) email: [email protected] Term Expires: 2010 (1)

J. Philip Hart, Esquire Genworth Financial, Inc. Senior Real Estate Counsel 6620 West Broad Street Building #1 Richmond, VA 23230 (804) 922-5161 (804) 662-2414 (fax) email: [email protected] Term Expires: 2011 (1)

James M. McCauley, Esquire Virginia State Bar 707 E. Main Street, Suite 1500 Richmond, VA 23219 (804) 775-0565 (804) 775-0501 (fax) email: [email protected] Term Expires: 2010 (2)

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William L. Nusbaum, Esquire Williams Mullen 999 Waterside Drive Suite 1700 Norfolk, VA 23510 (757) 629-0612 (757) 629-0660 (fax) email: [email protected] Term Expires: 2012 (2)

Susan S. Walker, Esquire Jones & Walker, P.C. 128 S. Lynnhaven Road Virginia Beach, VA 23452 (757) 486-0333 (757) 340-8583 (fax) email: [email protected] Term Expires: 2011 (1)

C. Cooper Youell, IV, Esquire Whitlow & Youell, P.L.C. 26 W. Kirk Avenue Roanoke, VA 24011 or P.O. Box 779 Roanoke, VA 24004 (540) 904-7836 (866) 684-7836 (fax) email: [email protected] Term Expires: 2012 (2)

Ex Officio

Academic Liaison Lynda L. Butler, Esquire Chancellor Professor of Law Marshall-Wythe School of Law College of William and Mary 613 South Henry Street Williamsburg, VA 23185 or P.O. Box 8795 Williamsburg, VA 23187-8795 (757) 221-3843 (757) 221-3261 (fax) email: [email protected]

Immediate Past Chair *Randy C. Howard, Esquire Vice President, Manager & Commercial Counsel Virginia National Business Unit Chicago Title < > Ticor Title Lawyers Title < > Commonwealth Land Title 830 E. Main Street, Suite 1600 Richmond, VA 23219 (800) 552-2442 (toll free) (804) 521-5737 (direct) (804) 337-1878 (cell) (804) 521-5756 (fax) email: [email protected]

Judicial Liaison The Honorable Rodham T. Delk, Jr. Fifth Judicial Circuit P.O. Box 1814 Mills E. Godwin Jr. Courts Building Suffolk, VA 23439-1814 (757) 923-2276 (757) 923-2429 (fax) email: [email protected]

VSB Liaison Dolly C. Shaffner Special Projects Administrative Assistant Virginia State Bar 707 East Main Street, Suite 1500 Richmond, VA 23219-2803 (804) 775-0518 (804) 775-0501 (fax) email: [email protected]

* Indicates former Chair of the Section.

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VBA Real Estate Council Chair *C. Grice McMullan, Jr., Esquire Thompson & McMullan, P.C. 100 Shockhoe Slip 3rd Floor Richmond, VA 23219-4140 (804) 698-6203 (804) 780-1813 (fax) email: [email protected]

Virginia CLE Liaison Nancy Kern, Esquire Virginia C.L.E. 105 Whitewood Road Charlottesville, VA 22901 (800) 223-2167 ext. 145 (434) 984-0311 (fax) email: [email protected]

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AREA REPRESENTATIVES

Central Region

Steven W. Blaine, Esquire LeClairRyan, P.C. P.O. Box 2017 123 Main Street 8th Floor Charlottesville, VA 22902-2017 (434) 971-7771 (434) 296-0905 (fax) email: [email protected]

Richard B. "Rick" Chess, Esquire Chess Law Firm 9211 Forest Hill Ave. Suite 201 Richmond, VA 23235 (804) 241-9999 (cell) (866)596-9908 (fax) email: [email protected]

*Douglass W. Dewing, Esquire Lawyers Title, Commonwealth Land Title, Chicago Title, and Ticor Title Virginia National Business Unit 830 E. Main St., Suite 1600 Richmond, VA 23219 (800) 552-2442 (toll free) (804) 521-5743 (direct) (804) 521-5756 (fax) email: [email protected]

Lisa M. Graziano, Esquire Republic Title Services 409 Park Street Charlottesville, VA 22902 (434) 979-1136 (434) 979-0580 (fax) email: [email protected]

Manus E. Holmes, Esquire First American Title Insurance Corporation Three James Center 1051 E. Cary Street Suite 1111 Richmond, VA 23218 (804) 698-5400 (804) 698-5403 (fax) email: [email protected]

*Neil S. Kessler, Esquire Troutman & Sanders, L.L.P. P.O. Box 1122 Richmond, VA 23218-1122 (804) 697-1450 (804) 698-6002 (fax) email: [email protected]

*Larry J. McElwain, Esquire Parker, McElwain & Jacobs, P.C. 2340 Commonwealth Drive Charlottesville, VA 22906 (434) 973-3331 (434) 973-9393 (fax) email: [email protected]

*C. Grice McMullan, Jr., Esquire Thompson & McMullan, P.C. 100 Shockhoe Slip 3rd Floor Richmond, VA 23219-4140 (804) 698-6203 (804) 780-1813 (fax) email: [email protected]

*Joseph W. (“Rick”) Richmond, Jr., Esquire Richmond & Fishburne 214 East High Street Charlottesville, VA 22902 (434) 977-8590 (434) 296-9861 (fax) email: [email protected]

Louis J. Rogers, Esquire CEO Rogers Realty Advisors, L.L.C. 4121 Cox Road Suite 107 Glen Allen, VA 23060 (804) 290-7900 (804) 290-0086 (fax) email: [email protected]

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*Susan H. Siegfried, Esquire 5701 Sandstone Ridge Terrace Midlothian, VA 23112 (804) 739-8853 email: [email protected]

John W. Steele, Esquire Hirschler & Fleischer Federal Reserve Bank Building 701 East Byrd Street Richmond, VA 23219 or P. O. Box 500 Richmond, VA 23218-0500 (804) 771-9565 (804) 644-0957 (fax) email: [email protected]

Albert W. Thweatt, II, Esquire The Law Offices of Albert W. Thweat, II, P.C. 106 North Eighth Street Suite 1 Richmond, VA 23219 (804) 644-1964 (804) 644-1770 (fax) email: [email protected]

J. Page Williams, Esquire Feil, Pettit & Williams, P.L.C. P.O. Box 2057 530 East Main Street Charlottesville, VA 22902-2057 (434) 979-1400 (434) 977-5109 (fax) email: [email protected]

Stephen B. Wood, Esquire Bierman, Geesing & Ward, L.L.C. 81200 Three Chopt Road Room 240 Richmond, VA 23229-4833 (804) 282-0463 (804) 282-0541 (fax) email: [email protected]

Northern Region

Dianne Boyle, Esquire Chicago Title Insurance Company 1129 20th Street, N.W. Suite 300 Washington, DC 20036 (202) 263-4745 (202) 955-5769 (fax) email: [email protected]

Todd E. Condron Leggett, Simon, Freemyers & Lyon, P.L.C. 100 East Street, SE Vienna, VA 22180 (703) 537-0800 (888) 448-3556 fax email: [email protected]

Lawrence A. Daughtrey, Esquire Kelly, Mayne & Daughtrey 10605 Judicial Drive Suite A-3 Fairfax, VA 22030 (703) 273-1950 (703) 359-5198 (fax) email: [email protected]

Dorothea W. Dickerman, Esquire McGuire Woods, L.L.P. 1750 Tysons Boulevard Suite 1800 McLean, VA 22102-3892 (703) 712-5000 (703) 712-5242 (fax) email: [email protected]

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James P. Downey, Esquire Downey and Mayhugh, P.C. 82 Main Street Warrenton, VA 20186 (540) 347-2424 (540) 349-1705 (fax) email: [email protected]

Russell S. Drazin Jackson & Campbell, P.C. 1120 Twentieth Street, N.W. South Tower Washington, DC 20036-3437 (202) 457-1690 (direct) (202) 457-1600 (main) (202) 457-1678 (fax) Email: [email protected]

*John David Epperly, Esquire Fidelity National Title Insurance Company 10300 Eaton Place Suite 270 Fairfax, VA 22030 (703) 279-1701 or (888) 465-0406 (ext. 701) (703) 691-2258 (fax) email: [email protected]

Craig C. Erdmann, Esquire Office of General Counsel U.S. Department of Housing and Urban Development 451 Seventh St., S.W. Room 9262 Washington, DC 20410 (202) 402-5136 (202) 708-5689 (fax) email: [email protected]

Mark W. Graybeal, Esquire Pesner Kawamoto Conway, P.L.C. 7926 Jones Branch Drive Suite 930 McLean, VA 22102-3303 (703) 506-9440 (703) 506-0929 (fax) email: [email protected]

*Susan M. Pesner, Esquire Pesner Kawamoto Conway, P.L.C. 7926 Jones Branch Drive Suite 930 McLean, VA 22102-3303 (703) 506-9440 (703) 506-0929 (fax) email: [email protected]

Jordan M. Samuel, Esquire Asmar, Schor & McKenna, P.L.L.C. 5335 Wisconsin Avenue, N.W. Suite 400 Washington, DC 20015 (202) 244-4264 (202) 686-3567 (fax) email: [email protected]

*Lawrence M. Schonberger, Esquire Sevila, Saunders, Huddleston & White, P.C. 30 North King Street Leesburg, VA 20176 (703) 777-5700 (703) 771-4161 (fax) email: [email protected]

Pamela Heflin Sellers, Esquire Assistant County Attorney Spotsylvania County Attorney’s Office P.O. Box 308 Spotsylvania, VA 22553-0308 (540) 507-7020 (540) 507-7028 (fax) email: [email protected]

David W. Stroh, Esquire Assistant County Attorney for Fairfax County Office of the County Attorney 12000 Government Center Parkway Suite 549 Fairfax, VA 22035 (703) 324-2421(main) (703) 324-2663 (direct) (703) 324-2665 (fax) email: [email protected]

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Neil I. Title, Esquire Karpoff & Title 1804 Wilson Boulevard Suite 205 P.O. Box 990 Arlington, VA 22216 (703) 841-9600 (703) 358-9458 (fax) email: [email protected]

John H. Toole, Esquire Cooley Godward, L.L.P. One Freedom Square Reston Town Center 11951 Freedom Drive Reston, VA 20190-5601 (703) 456-8651 (703) 456-8100 (fax) email: [email protected]

Lucia Anna Trigiani, Esquire MercerTrigiani 112 South Alfred Street Alexandria, VA 22314 (703) 837-5000 (703) 703-837-5001 (fax) (703) 837-5008 (direct) (703) 835-5040 (direct fax) email: [email protected]

Eric V. Zimmerman, Esquire Miller Zimmerman, P.L.C. 50 Catoctin Circle, NE Suite 201 Leesburg, VA 20176 (703) 777-8850 (703) 777-8854 (fax) email: [email protected]

Southside Region

Walter R. Beales, III, Esquire 157 Madison Street P.O. Box 239 Boydton, VA 23917 (434) 738-6180 (434) 738-0105 (fax) email: [email protected]

*Robert E. Hawthorne, Esquire Hawthorne & Hawthorne P.O. Box 603 Kenbridge, VA 23944 (434) 676-3275 (434) 676-2286 (fax) (Kenbridge Office) (434) 696-2139 (434) 696-2537 (fax) (Victoria Office) email: [email protected]

Robert E. Hawthorne, Jr., Esquire Hawthorne & Hawthorne P.O. Box 603 Kenbridge, VA 23944 (434) 676-3275 (434) 676-2286 (fax) (Kenbridge Office) (434) 696-2139 (434) 696-2537 (fax) (Victoria Office) email: [email protected]

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Tidewater Region

Robert C. Barclay, IV, Esquire Cooper, Spong & Davis, P.C. P.O. Box 1475 Portsmouth, VA 23705 (757) 397-3481 (757) 391-3159 (fax) email: [email protected]

*Michael E. Barney, Esquire Kaufman & Canoles, P.C P.O. Box 626 Virginia Beach, VA 23451-0626 (757) 491-4040 (757) 491-4020 (fax) email: [email protected]

Kathryn Byler, Esquire Pender & Coward, P.C. 222 Central Park Avenue Suite 400 Virginia Beach, VA 23462-3062 (757) 490-6292 (757) 497-1914 (fax) email: [email protected]

*Paula S. Caplinger, Esquire Vice President, Manager & Counsel Chicago Title Insurance Company The Atrium Bulding 11832 Rock Landing Drive Suite 204 Newport News, VA 23606 (757) 873-0499 (ext. 305) (757) 873-3740 (fax) email: [email protected]

Christian H. Chiles, Esquire Williams Mullen 222 Central Park Avenue Suite 1700 Virginia Beach, VA 23462-3035 (757) 473-5349 (757) 473-0395 (fax) email: [email protected]

Brian O. Dolan, Esquire Kaufman & Canoles, P.C. 11817 Canon Boulevard Suite 408 Newport News, VA 23606 (757) 873-6311 (757) 873-6359 (fax) email: [email protected]

John F. Faber, Jr., Esquire Wolcott Rivers Gates Convergence Center IV 301 Bendix Road, Suite 500 Virginia Beach, VA 23452 (757) 497-6633 (757) 497-7267 (fax) email: [email protected]

*Howard E. Gordon, Esquire Williams Mullen 999 Waterside Drive Suite 1700 Norfolk, VA 23510 (757) 629-0607 (757) 629-0660 (fax) email: [email protected]

Ray W. King, Esquire LeClairRyan, P.C. 999 Waterside Drive Suite 2525 Norfolk, VA 23510 (757) 624-1454 (main) (757) 441-8929 (direct) (757) 624-3773 (fax) email: [email protected]

*Charles (Chip) E. Land, Esquire Kaufman & Canoles, P.C. P.O. Box 3037 Norfolk, VA 23514-3037 (757) 624-3131 (757) 624-3169 (fax) email: [email protected]

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*Charles M. Lollar, Esquire Waldo & Lyle, P.C. 301 West Freemason Street Norfolk, VA 23510 (757) 622-5812 (757) 622-5815 (fax) email: [email protected]

*James B. (J.B.) Lonergan, Esquire Pender & Coward, P.C. 222 Central Park Avenue Virginia Beach, VA 23462 (757) 490-6281 (757) 497-1914 (fax) email: [email protected]

James Magner, Esquire 160 Brambleton Avenue Norfolk, VA 23510 (757) 622-5000 (757) 623-9198 (fax) email: [email protected]

Jeffrey A. Maynard, Esquire Troutman & Sanders, L.L.P. 222 Central Park Avenue Suite 2000 Virginia Beach, VA 23462 (757) 687-7500 (757) 687-7510 (fax) email: [email protected]

Christina E. Meier, Esquire Christina E. Meier, P.C. 4768 Euclid Road Suite 102 Virginia Beach, VA 23462 (757) 313-1161 (757) 313-1162 (fax) email: [email protected]

Lisa M. Murphy, Esquire LeClairRyan, P.C. One Columbus Center 283 Constitution Drive Suite 525 Virginia Beach, VA 23462 (757) 217-4530 (main) (757) 217-4537 (direct) (757) 217-4599 (fax) email: [email protected]

Cynthia A. Nahorney, Esquire Lawyers Title Insurance Corporation Commonwealth Land Title Insurance Company 150 West Main Street Suite 1615 Norfolk, VA 23510 (757) 628-5902 ext. 11 (757) 625-0293 (fax) email: [email protected]

Harry R. Purkey, Jr., Esquire 303 34th Street Suite 5 Virginia Beach, VA 23451 (757) 428-6443 (757) 428-3338 (fax) email: [email protected]

*Stephen R. Romine, Esquire LeClairRyan, P.C. 999 Waterside Drive Suite 2525 Norfolk, VA 23510 (757) 624-1454 (main) (757) 441-8921 (direct) (757) 624-3773 (fax) email: [email protected]

Elliot M. Schlosser, Esquire Office of Elliot M. Schlosser Attorney at Law, P.C. 47 W. Queens Way Hampton, VA 23669-3968 (757) 723-0545 (757) 723-2578 (fax) email: N/A

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William W. Sleeth, III, Esquire LeClairRyan, P.C. 5388 Discovery Park Boulevard Third Floor Williamsburg, VA 23188 (757) 941-2821 (757) 941-2879 (fax) email: [email protected]

Amanda A. Smith, Esquire 703 Thimble Shoals Boulevard Suite C-2 Newport News, VA 23606 (757) 595-5500 (757) 595-4999 (fax) email: [email protected]

Allen C. Tanner, Jr., Esquire 690 J. Clyde Morris Boulevard Newport News, VA 23601 (757) 595-9000 (757) 595-2961 (fax) email: [email protected]

Philip R. Trapani, Jr. Esquire Philip R. Trapani, Jr., P.L.C. 740 Duke Street Suite 500A Norfolk, VA 23510-1515 (757) 961-5525 (757) 625-4133 (fax) email: [email protected]

*Courtland L. Traver, Esquire 1620 Founders Hill North Williamsburg, VA 23185 (757) 564-6177 (tel and fax) email: [email protected]

Susan S. Walker, Esquire Jones & Walker, P.C. 128 S. Lynnhaven Road Virginia Beach, VA 23452 (757) 486-0333 (757) 340-8583 (fax) email: [email protected]

Edward R. Waugaman, Esquire Southern Title Insurance Corporation 200 Golden Oak Court Reflections II Building Suite 155 Virginia Beach, VA 23452 (757) 486-3111 (757) 631-1792 (fax) email: [email protected]

Mark D. Williamson, Esquire McGuire Woods, L.L.P. World Trade Center Suite 9000 101 W. Main Street Norfolk, VA 23510 (757) 640-3713 (757) 640-3973 or (757) 640-3701 (fax) email: [email protected]

Valley Region

K. Wayne Glass, Esquire Vellines, Cobbs, Goodwin & Glass P.O. Box 235 Staunton, VA 24402-0235 (540) 885-1205 (540) 885-7599 (fax) email: [email protected]

Whitney Jackson Levin Wharton Aldhizer & Weaver, P.L.C. 125 South Augusta Street, Suite 2000 Staunton, VA 24401 (540) 213-7456 (direct) (540) 885-0199 (main) email: [email protected]

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Paul J. Neal, Esquire 122 West High Street Woodstock, VA 22664 (540) 459-4041 (540) 459-3398 (fax) email: [email protected]

Mark N. Reed, Esquire Reed & Reed, P.C. 16 S. Court St. P.O. Box 766 Luray, VA 22835 (540) 743-5119 (540) 743-4806 (fax) email: [email protected]

Western Region

Stephen C. Gregory, Esquire Stewart Title Guaranty Company Virginia/West Virginia Counsel West Virginia District Manager 101 E. Washington Street Suite 124 Charleston, WV 25301 (304) 342-0004 (304) 344-0984 (fax) email: [email protected]

*David C. Helscher, Esquire Osterhoudt, Prillaman, Natt, Helscher, Yost, Maxwell & Ferguson, P.L.C. 3140 Chaparral Drive Suite 200 C Roanoke, VA 24018 (540) 725-8182 (540) 772-0126 (fax) email: [email protected]

*Michael K. Smeltzer, Esquire Woods, Rogers & Hazlegrove, L.C. P.O. Box 14125 Roanoke, VA 24038 (540) 983-7652 (540) 983-7711 (fax) email: [email protected]

C. Cooper Youell, IV, Esquire Whitlow & Youell, P.L.C. 26 W. Kirk Avenue Roanoke, VA 24011

or P.O. Box 779 Roanoke, VA 24004 (540) 904-7836 (866) 684-7836 (fax) email: [email protected]

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SUBCOMMITTEE CHAIRPERSONS AND OTHER SECTION CONTACTS

SUBCOMMITTEE CHAIRPERSONS

Standing Subcommittees

Fee Simple Co-Chairs Lynda L. Butler, Esquire Chancellor Professor of Law Marshall-Wythe School of Law College of William and Mary 613 South Henry Street Williamsburg, VA 23185 or P.O. Box 8795 Williamsburg, VA 23187-8795 (757) 221-3843 (757) 221-3261 (fax) email: [email protected] Courtland L. Traver, Esquire 1620 Founders Hill North Williamsburg, VA 23185 (757) 564-6177 (tel and fax) email: [email protected] Publication Subcommittee members Douglass W. Dewing, Esquire

Trevor B. Reid, Esquire Lawrence M. Schonberger, Esquire Lucia Anna Trigiani, Esquire

Membership Co-Chairs Joseph M. Cochran, Esquire Richmond & Fishburne 214 East High Street Charlottesville, VA 22902 (434) 977-8590 (434) 817-5212 (fax) email: [email protected] Larry J. McElwain, Esquire Parker, McElwain & Jacobs, P.C. 2340 Commonwealth Drive Charlottesville, VA 22906 (434) 973-3331 (434) 973-9393 (fax) email: [email protected] Subcommittee members: Craig C. Erdmann, Esquire Randy C. Howard, Esquire C. Grice McMullan, Jr., Esquire Harry R. Purkey, Jr., Esquire David W. Stroh, Esquire Edward R. Waugaman, Esquire Mark D. Williamson, Esquire Stephen B. Wood, Esquire Eric V. Zimmerman, Esquire

Programs Joseph M. Cochran, Esquire Richmond & Fishburne 214 East High Street Charlottesville, VA 22902 (434) 977-8590 (434) 817-5212 (fax) email: [email protected] Subcommittee members: Paul A. Bellegarde, Esquire (Annual CLE)

Richard B. Chess, Esquire Joseph M. Cochran, Esquire (Advanced CLE) Howard E. Gordon, Esquire Mark W. Graybeal, Esquire Randy C. Howard, Esquire Neil S. Kessler, Esquire Larry J. McElwain, Esquire C. Grice McMullan, Esquire Christina E. Meier, Esquire Paul H. Melnick, Esquire (Summer CLE) Jean D. Mumm, Esquire Cynthia A. Nahorney, Esquire Stephen R. Romine, Esquire C. Cooper Youell, IV, Esquire

Technology *Douglass W. Dewing, Esquire Lawyers Title Insurance Corporation 830 E. Main St. Suite 1600 Richmond, VA 23219 (800) 552-2442 (toll free) (804) 521-5743 (direct) (804) 521-5756 (fax) email: [email protected] Subcommittee members: Christian H. Chiles, Esquire John David Epperly, Esquire Ray W. King, Esquire Jeffrey A. Maynard, Esquire James M. McCauley, Esquire Courtland L. Traver, Esquire

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Substantive Subcommittees

Commercial Real Estate William L. Nusbaum, Esquire Williams Mullen 999 Waterside Drive Suite 1700 Norfolk, VA 23510 (757) 629-0612 (757) 629-0660 (fax) email: [email protected] Subcommittee members: Michael E. Barney, Esquire Paul A. Bellegarde, Esquire Dianne Boyle, Esquire Richard B. Chess, Esquire Joseph M. Cochran, Esquire Lucy G. Davis, Esquire James Downey, Esquire Howard E. Gordon, Esquire Ray W. King, Esquire Whitney Levin, Esquire Jean D. Mumm, Esquire

Cynthia A. Nahorney, Esquire Stephen R. Romine, Esquire David W. Stroh, Esquire C. Cooper Youell, IV, Esquire Mark D. Williamson, Esquire

Creditors' Rights and Bankruptcy J. Philip Hart, Esquire Genworth Financial, Inc. Senior Real Estate Counsel 6620 West Broad Street Building #1 Richmond, VA 23230 (804) 922-5161 (804) 662-2414 (fax) email: [email protected] Subcommittee members: F. Lewis Biggs, Esquire Christopher A. Jones, Esquire John H. Maddock, III, Esquire Richard C. Maxwell, Esquire Stephen B. Wood, Esquire

Eminent Domain Charles M. Lollar, Esquire Waldo & Lyle, P.C. 301 West Freemason Street Norfolk, VA 23510 (757) 622-5812 (757) 622-5815 (fax) email: [email protected] Subcommittee members: Nancy C. Auth, Esquire Josh E. Baker, Esquire James E. Barnett, Esquire Douglas Baumgardner, Esquire James C. Breeden, Esquire Lynda L. Butler, Esquire Christi A. Cassel, Esquire Michael Chernau, Esquire Stephen J. Clarke, Esquire Charles Richard Cranwell, Esquire Kelly L. Daniels-Sheeran, Esquire

Christianna Dougherty-Cunningham, Esquire L. Steven Emmert, Esquire Jerry K. Emrich, Esquire Henry E. Howell, Esquire Barbara Anne Hubbard, Esquire Philip Infantino, Esquire Thomas M. Jackson, Jr., Esquire Brian G. Kunze, Esquire Steven L. Micas, Esquire Sharon E. Pandak, Esquire Rebecca Randolph, Esquire Mark Short, Esquire Rhysa G. South, Esquire Paul B. Terpak, Esquire Joseph T. Waldo, Esquire Scott Alan Weible, Esquire

Ethics

Pesner Kawamoto Conway, P.L.C. Susan M. Pesner, Esquire

7926 Jones Branch Drive Suite 930 McLean, VA 22102-3303 (703) 506-9440 (703) 506-0929 (fax) email: [email protected] Subcommittee members: David B. Bullington, Esquire Lawrence A. Daughtrey, Esquire James M. McCauley, Esquire Larry J. McElwain, Esquire Cynthia A. Nahorney, Esquire Lawrence M. Schonberger, Esquire Lucia Anna Trigiani, Esquire Eric V. Zimmerman, Esquire

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Land Use and Environmental Stephen R. Romine, Esquire LeClairRyan, P.C. 999 Waterside Drive Suite 2525 Norfolk, VA 23510 (757) 624-1454 (main) (757) 441-8921 (direct) (757) 624-3773 (fax) email: [email protected] Subcommittee members: Alan D. Albert, Esquire Michael E. Barney, Esquire Steven W. Blaine, Esquire Andrew W. Carrington, Esquire Richard B. Chess, Esquire John M. Mercer, Esquire R. J. Nutter, II, Esquire Jonathan Stone, Esquire David W. Stroh, Esquire

Residential Real Estate Co-Chairs Barbara Wright Goshorn, Esquire 203 Main Street P.O. Box 177 Palmyra, VA 22963 (434) 589-2694 (434) 589-6262 (fax) email: [email protected] Eric V. Zimmerman, Esquire Miller Zimmerman, P.L.C. 50 Catoctin Circle, NE Suite 201 Leesburg, VA 20176 (703) 777-8850 (703) 777-8854 (fax) email: [email protected] Subcommittee members: David B. Bullington, Esquire Joseph M. Cochran, Esquire Craig C. Erdmann, Esquire Christina E. Meier, Esquire Paul H. Melnick, Esquire David W. Stroh, Esquire

Title Insurance Brian O. Dolan, Esquire Kaufman & Canoles, P.C. 11817 Canon Boulevard Suite 408 Newport News, VA 23606 (757) 873-6311 (757) 873-6359 (fax) email: [email protected] Subcommittee members: Paula S. Caplinger, Esquire Lisa M. Graziano, Esquire Stephen C. Gregory, Esquire Larry J. McElwain, Esquire Albert W. Thweat, II, Esquire Edward R. Waugaman, Esquire

Section Contacts

Liaison to Bar Counsel Ray W. King, Esquire LeClairRyan, P.C. 999 Waterside Drive Suite 2525 Norfolk, VA 23510 (757) 624-1454 (757) 441-8929 (direct) (757) 624-3773 (fax) email: [email protected]

mailto:[email protected]

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Paul J. Neal, Esquire 122 West High Street Woodstock, VA 22664 (540) 459-4041 (540) 459-3398 (fax) email: [email protected]

Mark N. Reed, Esquire Reed & Reed, P.C. 16 S. Court St. P.O. Box 766 Luray, VA 22835 (540) 743-5119 (540) 743-4806 (fax) email: [email protected]

Western Region

Stephen C. Gregory, Esquire Stewart Title Guaranty Company Virginia/West Virginia Counsel West Virginia District Manager 101 E. Washington Street Suite 124 Charleston, WV 25301 (304) 342-0004 (304) 344-0984 (fax) email: [email protected]

*David C. Helscher, Esquire Osterhoudt, Prillaman, Natt, Helscher, Yost, Maxwell & Ferguson, P.L.C. 3140 Chaparral Drive Suite 200 C Roanoke, VA 24018 (540) 725-8182 (540) 772-0126 (fax) email: [email protected]

*Michael K. Smeltzer, Esquire Woods, Rogers & Hazlegrove, L.C. P.O. Box 14125 Roanoke, VA 24038 (540) 983-7652 (540) 983-7711 (fax) email: [email protected]

C. Cooper Youell, IV, Esquire Whitlow & Youell, P.L.C. 26 W. Kirk Avenue Roanoke, VA 24011

or P.O. Box 779 Roanoke, VA 24004 (540) 904-7836 (866) 684-7836 (fax) email: [email protected]

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SUBCOMMITTEE CHAIRPERSONS AND OTHER SECTION CONTACTS

SUBCOMMITTEE CHAIRPERSONS

Standing Subcommittees

Fee Simple Co-Chairs Lynda L. Butler, Esquire Chancellor Professor of Law Marshall-Wythe School of Law College of William and Mary 613 South Henry Street Williamsburg, VA 23185 or P.O. Box 8795 Williamsburg, VA 23187-8795 (757) 221-3843 (757) 221-3261 (fax) email: [email protected] Courtland L. Traver, Esquire 1620 Founders Hill North Williamsburg, VA 23185 (757) 564-6177 (tel and fax) email: [email protected] Publication Subcommittee members Douglass W. Dewing, Esquire

Trevor B. Reid, Esquire Lawrence M. Schonberger, Esquire Lucia Anna Trigiani, Esquire

Membership Co-Chairs Joseph M. Cochran, Esquire Richmond & Fishburne 214 East High Street Charlottesville, VA 22902 (434) 977-8590 (434) 817-5212 (fax) email: [email protected] Larry J. McElwain, Esquire Parker, McElwain & Jacobs, P.C. 2340 Commonwealth Drive Charlottesville, VA 22906 (434) 973-3331 (434) 973-9393 (fax) email: [email protected] Subcommittee members: Craig C. Erdmann, Esquire Randy C. Howard, Esquire C. Grice McMullan, Jr., Esquire Harry R. Purkey, Jr., Esquire David W. Stroh, Esquire Edward R. Waugaman, Esquire Mark D. Williamson, Esquire Stephen B. Wood, Esquire Eric V. Zimmerman, Esquire

Programs Joseph M. Cochran, Esquire Richmond & Fishburne 214 East High Street Charlottesville, VA 22902 (434) 977-8590 (434) 817-5212 (fax) email: [email protected] Subcommittee members: Paul A. Bellegarde, Esquire (Annual CLE)

Richard B. Chess, Esquire Joseph M. Cochran, Esquire (Advanced CLE) Howard E. Gordon, Esquire Mark W. Graybeal, Esquire Randy C. Howard, Esquire Neil S. Kessler, Esquire Larry J. McElwain, Esquire C. Grice McMullan, Esquire Christina E. Meier, Esquire Paul H. Melnick, Esquire (Summer CLE) Jean D. Mumm, Esquire Cynthia A. Nahorney, Esquire Stephen R. Romine, Esquire C. Cooper Youell, IV, Esquire

Technology *Douglass W. Dewing, Esquire Lawyers Title Insurance Corporation 830 E. Main St. Suite 1600 Richmond, VA 23219 (800) 552-2442 (toll free) (804) 521-5743 (direct) (804) 521-5756 (fax) email: [email protected] Subcommittee members: Christian H. Chiles, Esquire John David Epperly, Esquire Ray W. King, Esquire Jeffrey A. Maynard, Esquire James M. McCauley, Esquire Courtland L. Traver, Esquire

the FEE SIMPLE


Substantive Subcommittees

Commercial Real Estate William L. Nusbaum, Esquire Williams Mullen 999 Waterside Drive Suite 1700 Norfolk, VA 23510 (757) 629-0612 (757) 629-0660 (fax) email: [email protected] Subcommittee members: Michael E. Barney, Esquire Paul A. Bellegarde, Esquire Dianne Boyle, Esquire Richard B. Chess, Esquire Joseph M. Cochran, Esquire Lucy G. Davis, Esquire James Downey, Esquire Howard E. Gordon, Esquire Ray W. King, Esquire Whitney Levin, Esquire Jean D. Mumm, Esquire

Cynthia A. Nahorney, Esquire Stephen R. Romine, Esquire David W. Stroh, Esquire C. Cooper Youell, IV, Esquire Mark D. Williamson, Esquire

Creditors' Rights and Bankruptcy J. Philip Hart, Esquire Genworth Financial, Inc. Senior Real Estate Counsel 6620 West Broad Street Building #1 Richmond, VA 23230 (804) 922-5161 (804) 662-2414 (fax) email: [email protected] Subcommittee members: F. Lewis Biggs, Esquire Christopher A. Jones, Esquire John H. Maddock, III, Esquire Richard C. Maxwell, Esquire Stephen B. Wood, Esquire

Eminent Domain Charles M. Lollar, Esquire Waldo & Lyle, P.C. 301 West Freemason Street Norfolk, VA 23510 (757) 622-5812 (757) 622-5815 (fax) email: [email protected] Subcommittee members: Nancy C. Auth, Esquire Josh E. Baker, Esquire James E. Barnett, Esquire Douglas Baumgardner, Esquire James C. Breeden, Esquire Lynda L. Butler, Esquire Christi A. Cassel, Esquire Michael Chernau, Esquire Stephen J. Clarke, Esquire Charles Richard Cranwell, Esquire Kelly L. Daniels-Sheeran, Esquire

Christianna Dougherty-Cunningham, Esquire L. Steven Emmert, Esquire Jerry K. Emrich, Esquire Henry E. Howell, Esquire Barbara Anne Hubbard, Esquire Philip Infantino, Esquire Thomas M. Jackson, Jr., Esquire Brian G. Kunze, Esquire Steven L. Micas, Esquire Sharon E. Pandak, Esquire Rebecca Randolph, Esquire Mark Short, Esquire Rhysa G. South, Esquire Paul B. Terpak, Esquire Joseph T. Waldo, Esquire Scott Alan Weible, Esquire

Ethics

Pesner Kawamoto Conway, P.L.C. Susan M. Pesner, Esquire

7926 Jones Branch Drive Suite 930 McLean, VA 22102-3303 (703) 506-9440 (703) 506-0929 (fax) email: [email protected] Subcommittee members: David B. Bullington, Esquire Lawrence A. Daughtrey, Esquire James M. McCauley, Esquire Larry J. McElwain, Esquire Cynthia A. Nahorney, Esquire Lawrence M. Schonberger, Esquire Lucia Anna Trigiani, Esquire Eric V. Zimmerman, Esquire

the FEE SIMPLE


Land Use and Environmental Stephen R. Romine, Esquire LeClairRyan, P.C. 999 Waterside Drive Suite 2525 Norfolk, VA 23510 (757) 624-1454 (main) (757) 441-8921 (direct) (757) 624-3773 (fax) email: [email protected] Subcommittee members: Alan D. Albert, Esquire Michael E. Barney, Esquire Steven W. Blaine, Esquire Andrew W. Carrington, Esquire Richard B. Chess, Esquire John M. Mercer, Esquire R. J. Nutter, II, Esquire Jonathan Stone, Esquire David W. Stroh, Esquire

Residential Real Estate Co-Chairs Barbara Wright Goshorn, Esquire 203 Main Street P.O. Box 177 Palmyra, VA 22963 (434) 589-2694 (434) 589-6262 (fax) email: [email protected] Eric V. Zimmerman, Esquire Miller Zimmerman, P.L.C. 50 Catoctin Circle, NE Suite 201 Leesburg, VA 20176 (703) 777-8850 (703) 777-8854 (fax) email: [email protected] Subcommittee members: David B. Bullington, Esquire Joseph M. Cochran, Esquire Craig C. Erdmann, Esquire Christina E. Meier, Esquire Paul H. Melnick, Esquire David W. Stroh, Esquire

Title Insurance Brian O. Dolan, Esquire Kaufman & Canoles, P.C. 11817 Canon Boulevard Suite 408 Newport News, VA 23606 (757) 873-6311 (757) 873-6359 (fax) email: [email protected] Subcommittee members: Paula S. Caplinger, Esquire Lisa M. Graziano, Esquire Stephen C. Gregory, Esquire Larry J. McElwain, Esquire Albert W. Thweat, II, Esquire Edward R. Waugaman, Esquire

Section Contacts

Liaison to Bar Counsel Ray W. King, Esquire LeClairRyan, P.C. 999 Waterside Drive Suite 2525 Norfolk, VA 23510 (757) 624-1454 (757) 441-8929 (direct) (757) 624-3773 (fax) email: [email protected]

Documents

G:FSCCurrent WorkBurton acultyBUTLER 0NewsletterMayFinal0 … · 2011. 8. 30. · Burdette v. Brush Mountain Estates LLC, 278 Va. 286, 682 S.E.2d 549 (Sept. 18, 2009) Facts: Kelly