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TAX CREDIT PROJECTS AND TITLE INSURANCE. Todd C. Brockmann Ed Urban The Brockmann Law Firm, PC Urban Title Company ( 704) 541-5779(704) 544-2202 [email protected] [email protected]. WHAT IS TITLE INSURANCE?. - PowerPoint PPT Presentation
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TAX CREDIT PROJECTS AND TITLE INSURANCETodd C. Brockmann Ed Urban
The Brockmann Law Firm, PC Urban Title Company(704) 541-5779 (704) 544-2202
WHAT IS TITLE INSURANCE?
A product in the form of a policy that insures title to real property against defects, liens, encumbrances and other matters affecting the title, subject to certain general exclusions, conditions and specific exceptions.
It is not designed to insure against known risks – only unknown risks.
WHY DO YOU NEED IT?
• Protects the insured interest in the real property
• Facilitates its marketability
• Fulfills investor, lender and governmental requirements
FALL 2012: PURCHASE CONTRACT
Upon signing a purchase contract for a property, the conditions in the contract will dictate the timing of the title insurance process. Typically, there is a due diligence deadline for the purchaser to object to any problems with the property including title issues.
It is very important to get the title searched and a commitment issued early in the process to flush out any potential problems.
Same as standard real estate transactions.
HOW DOES TITLE GET SEARCHED?
• Prior policy/tacking
• Abstracting process
• Title opinion
• Title commitment
TITLE COMMITMENT COMPONENTS
• Schedule A• Schedule B-I• Schedule B-II• Endorsements• Cover
WHAT ARE THE ISSUES?10 Year Rule for Rehab Projects under Section 42(d)(2)(B)(ii):
• At least 10 years between the date of its acquisition and the date the building was last placed in service
• Prepare a separate chain of title
• Identify any potential ownership changes
• If owner was a tax partnership, verify no partnership changes
• Affidavit from seller
• Examples of problems
WHAT ARE THE ISSUES?Reverters or Restrictions in Deeds:
• Carefully review each deed in the title for any extraordinary restrictions
• If tacking, pull prior deeds to confirm
• Evaluate if restrictions will impact project development
• Examples
WHAT ARE THE ISSUES?Easements that restrict where or what you can build:
• Located in deeds and separate easement documents
• Access – specifically defined or general in nature
• Utilities – specifically defined or general in nature
• Survey may be necessary for answers
• Affirmative title insurance coverage
WHAT ARE THE ISSUES?Seller on the Contract:
• Does the name of the seller match?
• Valid reasons of lack of a match
• Invalid reasons for lack of a match
SPRING 2013TAX CREDIT APPLICATION
Real Estate Requirements of QAP/Application
• Site Control: Evidenced by option, deed or contract • Utilities: Direct or by easement• Access: Direct or by easement• Zoning: Endorsement will be required• Neighborhood Characteristics: Must know exact
location to determine point scores• Rehab: Need to satisfy 10 year rule
SUMMER 2013TAKE A VACATION
FALL 2013:YOU HAVE A RESERVATION OF CREDITS. NOW WHAT?
• Acquisition is no different than any real estate acquisition
• Title commitment revised/finalized for acquisition
• North Carolina closing process
• Title policy for acquisition price
TITLE POLICY COMPONENTS• Schedule A• Schedule B-Part I• Schedule B-Part II• Endorsements• Jacket
SPRING 2014:CLOSING OF CONSTRUCTION LOAN AND EQUITY
Title commitments
• Equity: Amount of development budget• Construction Loan: Amount of loan• State Tax Credit Loan: Amount of loan• Other secondary financing
Proforma Policies
SPRING 2014:CLOSING OF CONSTRUCTION LOAN AND EQUITY
Owners vs. loan policy endorsements:
•Owners only
• Loan only
• Both
• Coverage given more liberally to loan policies
SPRING 2014:CLOSING OF CONSTRUCTION LOAN AND EQUITY
Special endorsements and requirements:
• If available, they want it• Common examples:
Zoning Survey Access Environmental Lien Comprehensive
SPRING 2014:CLOSING OF CONSTRUCTION LOAN AND EQUITY
Non-imputation Endorsement and Affidavit:
• Provides investor with coverage for issues know to developer
• Developer must provide affidavit and indemnity to title insurance company
• A financial statement of one or several indemnitors might be required
SPRING 2014:CLOSING OF CONSTRUCTION LOAN AND EQUITY
Issuance of Title Policies:
• Closing: Update and record• Final title opinion • Payment of insurance premium• Provide signed affidavits• Investor/Lender Instruction Letters
SPRING 2014:CLOSING OF CONSTRUCTION LOAN AND EQUITY
What are these NCLTA lien affidavits?
• Substantial number of recent lien claims• Seller Form 1• Seller Form 2• Buyer Form 3
SPRING 2014:CLOSING OF CONSTRUCTION LOAN AND EQUITY
Simultaneous issuance of policies
• Streamline process
• Save premium costs
SUMMER 2014TAKE ANOTHER VACATION
CONSTRUCTION PERIOD
Update/Date Down Process:
• What is really necessary? • Equity requirements• Lender requirements
Construction draws Future Advance Deed of Trust In-state vs. out-of-state lenders
CONSTRUCTION PERIOD
• Abstracting and title opinion update
• Endorsement to policies
• Mechanic’s liens issues
• Non-imputation issues
2015:COMPLETION AND PERM LOAN CLOSING
• Lien Free completion
• As-built survey
• Interplay between multiple loans
• Subordination agreements
• New commitment and policy for perm loan
• Date downs of existing/continuing policies
TAKE ANOTHER VACATION
TAX CREDIT PROJECTS AND TITLE INSURANCETodd C. Brockmann Ed Urban
The Brockmann Law Firm, PC Urban Title Company(704) 541-5779 (704) 544-2202
