Bulletin: DC000003

Dear Associates:

The following are summaries of those bills enacted or enrolled by the District of Columbia General Assembly during its 1994 legislative session which affect title to real property and escrow practices in this state. This listing is by no means comprehensive as to bills dealing with real property and includes only those bills which, in the opinion of the undersigned, will have a significant impact on Stewart Agents. Bills are listed by topic and are not necessarily in numerical order. The effective date of each bill follows the summary. The undersigned acknowledges the contribution of the Code Revision Committee, Section of Real Property, Planning and Zoning, District of Columbia State Bar Association, The Legislative Committee, District of Columbia Land Title Association and The Office of the Attorney General to the preparation of this Bulletin.

Commercial Real Estate Broker's Lien:

SB 749 - Adds sections 14-301 through 14-313 to the Real Property Article to establish a procedure allowing real estate brokers to establish and enforce liens on real property for unpaid commission arising out of commercial leases. This procedure is comparable to that used to establish and enforce Mechanics Liens. Priority of the new lien relative to that of Deeds of Trust, judgments, etc. is established when the interlocutory order is signed. As with Mechanics Liens, a bona fide purchaser for value without notice is protected and the filing of the Petition constitutes notice. The right to enforce this lien expires one (1) year from the filing of the Petition.

EFFECTIVE: October 1, 1994

Easements/Licenses:

SB 763 - Adds sections 14-121 and 14-122 to the Real Property Article to define "burial site" and to clarify the rights of "persons in interest" to request that the owner of a burial site (private cemetery, etc.) grant them reasonable access to the site for purposes of viewing, restoring and maintaining the site. This law means that an appropriate exception must be taken when insuring titles to farms and acreage where there is any indication that a private burial site may be located on the property. It appears to support the easement by implication for such purposes long recognized by District of Columbia Courts.

EFFECTIVE: October 1, 1994

Judgments:

HB 584 - Amends Article 48A section 243H(g) to provide that all future judgments obtained by MAIF and all existing judgments assigned to MAIF will be automatically indexed by the Clerk in the name of the State of District of Columbia. Apparently, this bill was intended to avoid the twelve (12) year statute of limitations now applicable to MAIF judgments but which would not apply to general judgments in favor of the State.

EFFECTIVE: October 1, 1994

Recordation - Place and cost of filing Financing Statements.

SB 497 - Amends CL 9-401 and 9-402, TP 12-103(e) and 12-110(e) to provide that in order to perfect a security interest in chattels (except crops, growing timber, minerals or fixtures) a Financing Statement need only be recorded at the Office of the District of Columbia State Department of Assessments and Taxation (SDAT). To perfect a security interest in fixtures you must still record the Financing Statement in the County/Baltimore City Land Records. After October 1, 1994, any Continuation or Termination Statement or Assignment relating to Financing Statements previously recorded at both SDAT and in the County/Baltimore City Land and/or Financing Records must be filed at SDAT to be effective. However, if the filing was in the County/Baltimore City Land and/or Financing Records only, a Continuation or Termination Statement or Assignment need only be recorded in such records to be effective. Financing Statements filed with SDAT must now designate the County/Baltimore City in which primary debtor resides or where its principal place of business is located. The recordation tax collected on filings with SDAT will be based upon the rate set by the County/Baltimore City where the debtor resides or has its principal place of business. Foreign debtors will pay at the current rate of $1.65 per $500.00 of consideration.

EFFECTIVE: July 1, 1995

Recordation Charges:

HB 1179 - Amends RP 3-104(d) and 3-601 to provide for a flat rate recording fee for all instruments presented for recording among the Land and Financing Records. Charges will no longer be made by page and name. The new rates are as follows:

1. $10.00 per instrument for releases of Mortgages/Deeds of Trust and Termination Statements of nine (9) pages or less;

2. $20.00 per instrument for any other instrument of nine (9) pages or less or any instrument, regardless of length (including releases over nine pages) involving solely a principal residence; and

3. $75.00 per instrument for any instrument over nine (9) pages and not solely involving a principal residence.

NOTE: This bill does not eliminate the surcharge for Land Record improvement provided for in CJ 13-601. It does replace all mailing surcharges, special block/parcel identifier indexing charges in Baltimore City and Montgomery County, and the extra charge allowed under RP3-104(d) when the name of the party is not typed or printed below the signature line.

EFFECTIVE: July 1, 1994 - Regardless of Date of Instrument.

Recordation and Indexing:

HB 918 - Amends various sections in Title 3, Real Property Article to provide for implementation of a uniform intake/transfer sheet to be provided by the Administrative Office of the Court (AOC) when recording most instruments in the Land Records. Use of this sheet does not apply to assignments and releases of Mortgages/Deeds of Trust, Deeds Appointing Substituted Trustees, Powers of Attorney and Financing, Continuation and Termination Statements. The completed intake sheet will be recorded without additional charge immediately after the instrument to which it relates but will not be deemed to constitute constructive notice as to the contents of such instrument. While Stewart encourages its agents to use this form (see Note below) the bill provides that the clerk may not refuse to record any instrument simply because it is not accompanied by a completed intake sheet. Likewise, the lack of an intake sheet does not affect the validity of the conveyance or lien. This draft is subject to change. Look for a future District Bulletin on this.

NOTE: SDAT has been involved in the drafting of the proposed intake form. In the event the overall program is successful and use of this form is widespread, SDAT has expressed a willingness to retrieve its transfer information from the forms presented to the Clerk thereby eliminating one stop along the recording trail except in instances where agricultural transfer taxes, etc. must be collected.

EFFECTIVE: October 1, 1994

Recordation Taxes:

HB 1202 - Amends TP 12-105 (f) by adding a new requirement under (2) that where recordation taxes (documentary stamps) are not fully paid at the time of recording a line of credit or construction Mortgage/Deed of Trust, that additional advances be reported promptly and that the additional tax due be paid thereon. Although this bill also requires the lender under a construction loan over $100,000.00 to issue a check to the Clerk whenever an advance is made, it clearly states that the borrower and not the lender is liable for such payments.

EFFECTIVE: July 1, 1994

Releases:

HB 704 - Adds subsection (h) to RP 3-105 to provide that unless otherwise expressly provided in the instrument, a full or partial release of a Mortgage/Deed of Trust which refers to either its original recording reference or that of a supplement thereto shall also be effective with regard to the original and all modifications and supplements even though not specifically referred to in such release. To the extent that it describes fixtures and other collateral such release shall also be effective as a full or partial termination of any related Financing Statement(s).

NOTE: This bill does not amend RP 3-302(b). In cases where a full or partial release refers only to a modification or supplement to the original debt instrument the clerk is not required to search the Land Records in order to include in the index a reference to such original Mortgage/Deed of Trust. In order for releases to be effective as a termination of Financing Statements recorded simultaneously with the original Mortgage/Deed of Trust and/or supplements, your release forms must be amended to include a clear statement to the effect that they cover fixtures and other collateral as well as real property. We all owe a debt of thanks to the MLTA for sponsoring this important bill.

EFFECTIVE: October 1, 1994

Restrictions:

SB 48 - Adds RP 2-121 to define family day care home and provide that any recorded covenant or restriction which prohibits or restricts commercial use or activity upon land shall not be construed to prohibit the establishment and operation of a family day care home. In essence, this law says that the operation of such facilities shall be considered a non-commercial use regardless of the intent of the parties who imposed the restriction. This section does not apply to leases or to recorded restrictions governing planned unit developments (PUDs), condominium regimes, cooperative housing corporations, buildings containing more than four (4) dwelling units or properties on which the District of Columbia Community Development Administration (CDA) has a Mortgage lien.

EFFECTIVE: March 25, 1994

Tax Sales:

SB 36 - Amends TP 14-816 to eliminate the power of the tax collectors to sell leasehold properties in fee simple when, in fact, they are subject to ground rents created under leases for 99 years renewable forever or leases for a term of years. The bill does provide, however, that in the event the leasehold owner's right of redemption is foreclosed, the tax sale purchaser receives a title free from the claims of the lessor or ground rent holder for rent unpaid, due or accrued prior to the date of the judgment of foreclosure (ratification).

EFFECTIVE October 1, 1994

Transfer Taxes:

SB 346 - Adds section 10-8.2 to Article 10, Public Local Laws of District of Columbia to authorize Dorchester County to impose a county transfer tax of up to 1% on the consideration paid for a conveyance of real property.

EFFECTIVE: July 1, 1994

Please disseminate a copy of this Bulletin to every member of your staff with a need to know and take action to implement such changes to your title examination and escrow practices as may be required to comply with these new laws.

All questions and requests for clarification should be directed to the undersigned at (410) 547-9100 ext. 106.