VOLUME 21.3 • FALL 2015 THE MAGAZINE OF THE VIRGINIA LAND TITLE ASSOCIATION
VLTA
EXAMINER
Supreme Court Case Decided on a Title Search
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VLTA
EXAMINER upcoming events March 10, 2016 Regional Education, Virginia Beach
April 14, 2016
Regional Education, Staunton
June 3-4, 2016
Annual Convention, Richmond
contents 8
Oct. 20, 2016
Certificates of Satisfaction
A Modest Proposal For An Industry Wide Best Practice
10 Walking Through A Dark Alley at Midnight — Crime and Your Escrow Account
The curtain opens on an average day in the life of a settlement agent. The phone rings. The seller in a recent transaction is on the line inquiring about the proceeds of his sale.
12 A Supreme Court Case Decided on a Title Search
We often think that the U. S. Supreme Court only hears and decides cases that involve sublime issues of constitutional law. There are occasions, however, when the Court relies on mundane items to decide seemingly narrow issues.
Sept. 22, 2016
Regional Education, Fairfax
VOLUME 21.3 • FALL 2015
19 Tales from the Table
Anyone who has conducted a settlement collects stories. Some of them are instructive and we can learn from them. Some of them are cautionary tales that help provide guidelines to keep us out of trouble in the future. Some of them are just plain entertaining. Here are three of my favorite entertaining ones.
Regional Education, Lynchburg
23 The Courthouse Is On Fire
The courthouses in Virginia are on fire, yet incredibly no one seems to have noticed!
26 All Our Education is Now FREE at Your Doorstep!
The VLTA is proud to announce that all our education is now FREE at your doorstep— well, almost. Here is what I mean.
columns 5
from the President
6
from the Executive Director
7
from the Editor/Director
FOLLOW US
20 Word Search
TWITTER www.twitter.com/vltanews LINKED IN www.linkedin.com
21 ARTU
GOOGLE GROUPS www.google.com
27 Recorded Treasure
The TITLE WEB www.thetitleweb.com/
28 Tute 31
FACEBOOK www.facebook.com/virginialandtitleassociation
Professional Development
Phone: 571.494.1782 Toll Free: 800.929.8730 Fax: 703.995.0649 VLTA EXAMINER volume 21.3, fall 2015 www.VLTA.org 3
VLTA
EXAMINER
VOLUME 21.1 • WINTER 2015 THE MAGAZINE OF THE VIRGINIA LAND TITLE ASSOCIATION
PUBLISHER
EDITORIAL BOARD MEMBERS
Virginia Land Title Association
Cheryl Klein, vcte, vctsa
DIRECTOR/EDITOR Julie Ann Rutledge, vcte President, Land Title Research, Inc. P.O. Box 3271 Stafford, VA 22555 Ph. 540.659.0107 Fax 540.659.4952 jrutledge@ltrinc.com
MANAGING EDITOR Kathleen E. Zaynullin Herndon, PhD Executive Director Virginia Land Title Association 14001-C Saint Germain Drive, Suite 822 Centreville, VA 20121 tel 571.494.1782 toll free 800.929.8730 fax 703.995.0649 KHerndon@vlta.org
FEATURES EDITOR R. Michael Smith Underwriting Counsel Conestoga Title Insurance Co. 137 E. King Street Lancaster, PA 17602 tel 800-861-9352 fax 800-889-0169 msmith@contitle.com
THEME EDITOR Cheryl Klein, vcte, vctsa Alliance National Title Company 3930 Custis Road, 2nd Floor Richmond, VA 23225 Ph. 804.562.4151 Fax 804.482.2936 CKlein@aNationalTitle.com
CONTENT EDITOR Colleen Taylor Agency Sales Consultant WFG National Title Insurance Company 8301 Kines Road, Warrenton, VA 20187 Ph. 703.973.9224 ctaylor@wfgnationaltitle.com
COLUMN EDITOR Anne Tourangeau Fidelity National Title Insurance Company 5875 Trinity Parkway, Suite 210 Centreville, VA 20120 Ph. 571.215.1374 Fax 703.815.4374 anne.tourangeau@fnf.com
PUZZLE EDITOR Glenda S. Brooks, vcte, vctsa Middlesex Title Company P.O. Box 559 Deltaville, VA 23043 Ph. 804.776.9202 Fax 804.776.9696 gbrooks@va.metrocast.net
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VLTA EXAMINER volume 21.3, fall 2015 www.VLTA.org
Alliance National Title Company 3930 Custis Road, 2nd Floor Richmond, VA 23225 Ph. 804.562.4151 Fax 804.482.2936 CKlein@aNationalTitle.com
Maria Deligiorgis President Mid-Atlantic World Wide Land Transfer 1875 Connecticut Avenue, NW 12th Floor Washington, D.C., 20009 tel 202.650.0349 ext 140 fax 888.WWLT.FAX maria@wwlandtransfer.com
Palma J. Collins, Esq. First American Title Insurance Company 14150 Newbrook Drive, Suite 250 Chantilly, VA 20151 tel 703.480.9500 fax 703.480.9481 pcollins@firstam.com
Submissions to the VLTA Examiner should be made to the Director, jrutledge@ltrinc.com. Th e m i s s i o n o f t h e Vi rgi n i a L a n d Title Association ( VLTA) is to promote communication and to provide education throughout the real estate and title insurance industries. The mission includes promoting standards and regulations that increase the effectiveness of the industries. Legislative initiatives and educational programs are primary aspects of the VLTA’s work. Leadership in ethical practices and standards is an integral part of its members’ business, within and outside of the VLTA. The VLTA EXAMINER is the official publication of the Virginia Land Title Association. It is published for VLTA members. Requests for address changes must be received 30 days prior to the date of the issue with which it is to take effect. Although advertising is screened, acceptance of an advertisement does not imply VLTA endorsement of the product, the services, or the views expressed. The views and opinions expressed in this publication are not necessarily those of the association. Articles may not be reprinted without the consent of the VLTA. Subscriptions are available to interested individuals or groups at $75.00 per year. Address all VLTA and Examiner inquiries to: VLTA EXAMINER; 14001-C Saint Germain Drive, Suite 822, Centreville, VA 20121, 571.494.1782; toll free 800.929.8730; 703.995.0649 (fax); kherndon@vlta.org. Submit all articles for publication in the magazine to: Virginia Land Title Association, 14001-C Saint Germain Drive, Suite 822, Centreville, VA 20121; by email at Examiner@vlta.org; or by fax to 703.995.0649.
2014-2015 VLTA Board of Directors Kevin T. Pogoda, Esq., vcte, vctsa
Elizabeth H. Jamerson, vcte
President Old Republic National Title Insurance Co. 7960 Donegan Drive, Suite 247 Manassas, VA 20110 Ph. 703.365.2300 Fax 703.365.2400 kpogoda@oldrepublictitle.com
Director of Communications Jamerson Title, LLC 4200 Bromley Lane Richmond, VA 23221 Ph. 804.240.2694 Fax 804.897.8260 elizabethjamerson@verizon.net
Glenda S. Brooks, vcte, vctsa President Elect Middlesex Title Company P.O. Box 559 Deltaville, VA 23043 Ph. 804.776.9202 Fax 804.776.9696 gbrooks@va.metrocast.net
Director of Events Old Republic National Title Insurance Co. 7960 Donegan Drive, Suite 247 Manassas, VA 20110 Ph. 703.365.2300 Fax 703.365.2400 mmeloon@oldrepublictitle.com
Katherine Crawford, Esq.
Sonia Kuppert, vcte, vctsa, ntp
First Vice President First American Title Insurance Company 14368 Sommerville Court Midlothian, VA 23113 Ph. 804.419.2171 kcrawford@firstam.com
Director of Membership STA Title & Escrow, Inc. 101 Westwood Office Park Fredericksburg, VA 22401 Ph. 540.368.5501 sonia@statitle.com
Stewart “Skip” Sacks, Esq.
Norbert Prigge, Esq.
Secretary Stewart Title Guaranty Company 808 Eden Way North Chesapeake, VA 23320 Ph. 757.424.4400 ssacks@stewart.com
Director of Legislative Affairs Chicago Title Insurance Company 5875 Trinity Parkway, Suite 210 Centreville, VA 20120 Ph. 703.219.3702 Fax 703.385.2821 Norbert.prigge@ctt.com
Myrna Lou Keplinger, vctsa Past President The Settlement Group, Inc. 5641 Burke Centre Pkwy, # 229 Burke, VA 22015 Ph. 703.642.6002 Fax 703.642.6003 myrna@settlementgroup.com DIRECTORS
Frank Butler, Esq. Director of Education Fidelity National Title Group 4525 Main Street, Suite 810 Virginia Beach, VA 23462 (757) 216-0488 Frank.butler@fnf.com
Megan Meloon
Julie Ann Rutledge, vcte Director of the Examiner Magazine Land Title Research, Inc. P.O. Box 3271 Stafford, VA 22555 Ph. 540.659.0107 Fax 540.659.4952 jrutledge@ltrinc.com
Kathleen E. Zaynullin Herndon, PhD Executive Director Virginia Land Title Association 14001-C Saint Germain Drive, Suite 822 Centreville, VA 20121 tel 571.494.1782 toll free 800.929.8730 fax 703.995.0649 KHerndon@vlta.org
fromthePresident I recently attended ALTA’s Annual Convention in Boston. I have never attended one before. One of the highlights for me was when an ALTA correspondent went out “on the street” and recorded several interviews with average people, all of whom were asked the question, “Do you know what title insurance is?” Here are their answers: “Does it protect your house if you rent it or do something with it?” “I do not know. Does it cover parts of the home?” “I know I have it. I know it came with my mortgage. I don’t really know what it is to be totally honest with you.” “Not at all.” “I’m semi-familiar. And I know a little of how it works. I’m not sure exactly how it works, though. It’s a mystery.” Kevin T. Pogoda, Esq., vcte, vctsa “Is that supposed to proVLTA President 2015-2016 tect the title of your home? Old Republic National Well, then I guess I do have Title Insurance Co. it.” Manassas, VA These answers were really funny—and scary. In most of my day-to-day, I am surrounded by people like you who understand the nature and value of title insurance. But these interviews reminded me that the rest of the world is not like that. You and I live in a bubble. If you want to see these interviews for yourself, go to https://youtu.be/ uBrLHknUJho. Perhaps now more than ever it is time
to educate the consumer and bring them into the bubble. ALTA spent a great deal of money trying to understand the best way to communicate our message to those outside the bubble. The result? When asked what we do for a living, we need to communicate the emotional response of what title insurance provides. Think about commercials—many commercials do not spend much time describing the product at all; instead, they try to elicit an emotional response. And so when someone asks you what you do for a living, try saying, “I provide peace of mind.” Intriguing, right? Don’t you want peace of mind? Who wouldn’t? And when that intrigued individual asks you how you provide peace of mind, try saying, “I protect property rights.” Well, that just begs another question, doesn’t it? So how do you protect property rights? Well . . . now the conversation is ripe for you to describe how you administer a product that is called “title insurance.” “Title insurance provides peace of mind and protects your property rights; this is how it works and the part I play . . . .” Can you see the difference? Try it out on the next person who asks you what you do for a living and see for yourself!
VLTA EXAMINER volume 21.3, fall 2015 www.VLTA.org 5
fromtheExecutiveDirector It was a bright and sunny Saturday morning, and the children were hungry. I remember the day because I’ve never seen such an empty refrigerator. In such a busy job, I often lose track of grocery day, and find myself shopping at the last minute for important items. As I stood there like Old Mother Hubbard, I listened to my brood make requests for every outlandish dish you can imagine. We settled on vegetable soup, which is one of the few dishes all of my picky monsters will eat. I grabbed my purse, and headed to the Farmer’s Market to pick out the most beautiful, local veggies the summer could offer. KATHLEEN E. HERNDON, PHD Executive Director After all, everyone knows that if Virginia Land Title Association you want to buy the perfectly ripe tomato, you schlep to the farmer’s market on Saturday morning to talk to the farmer about his crop & smell each and every beautiful heirloom specimen. We all know this. Local is better. Personal is best.
Consumers know that if you want to sell a home in a small town, you should contact a licensed Realtor who knows the local market. They understand that their local bank or credit union might be able to give them the best rates. They want to select providers they have dealt with, recognize from PTA meetings, and can call when they have a question. They know that local is better, and personal is best. Virginia Land Title Association supports local providers because we know that in Virginia, it takes a local provider to do the job right. With a provincial court system, nothing is the same from town to town. Can you access the chancery index? Is indexing current? On what side of the counter do you place a recording to get it in the right order? Do they
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accept e-recordings after 3pm on Fridays? Local providers know their Clerks, their record rooms, and their territory. When it comes to title insurance, local is better. Personal is best. In this time of transition, many businesses worry that they will not have the resources to remain open. Many agencies are considering consolidation or closure. Federal regulation often hurts the little guy – new, expensive rules are not often beneficial to small businesses. VLTA remains committed to Virginia’s small businesses, despite the challenges we all face. We will continue to feature our members, recommend you to the public, and advocate for your needs on a state and national level. We know that in Virginia, it takes a local to get the job done right. Local is better. Personal is best. And it always will be.
Support our cause! Are you interested in joining VLTA in supporting local business? Here are some tips: n Contact a local Virginia Certified Title Examiner (VCTE) to manage your abstracting. n
Join VLTA’s small business advisory panel to advocate for your business.
n
Keep your online membership profile up-todate – let’s feature the right info!
n
Network with your colleagues at VLTA’s events — we help connect you to other local providers.
fromtheDirector Life After CFPB – The New Direction In the wake of our recent industry overhaul, there have been times during the process that we have had to stop and look around, re-evaluate and ask questions. Who are we? Where are we going? What are we doing to get there? We have been faced with the challenge of re-evaluating our company practices, procedures and services. The result is that we have taken stock of all aspects of our business and know exactly what it is that we do. For many of us, we have decided to stay and continue on. How do we do that? How do we find this new direction? I am reminded of a favorite poem… The Road Not Taken
…Two roads diverged in a wood, and I — I took the one less traveled by, And that has made all the difference.
Robert Frost
Julie Ann Rutledge, vcte Editor/Director, VLTA Examiner
I hope that you enjoy the variety of articles and columns in this issue. Be sure to check out our newest column addition …”Tales from the Table”. We are always on the look-out for . Recorded Treasures, so send us your interesting and unusual findings from the record room. I want to say thank you to our hard working Examiner Committee, to all those who have made contributions and to all of our advertisers who help to support the Examiner magazine.
The Examiner Committee wants to announce the Examiner Contest, the Winner to receive a $100 Visa Gift Card for the person who submits the best article, which will be featured in the Spring Examiner issue. Deadline for submissions is December 31, 2015. I encourage those of you who enjoy writing about title topics to send in your articles, we want to hear from you!
About the Author
Success isn’t just finding opportunity. It’s knowing when to pounce.
A community bank with a competitive edge. Business leaders who choose FVCbank don’t bank bigger — they bank smarter.
JULIE ANN RUTLEDGE, vcte, is President of Land Title Research, Inc. located in Stafford Virginia. LTR specializes in title research of all types of properties with an emphasis on commercial title research. She is a graduate of James Madison University, BSSW. Julie developed and is the Instructor for the VLTA Virginia Certified Title Examiner (VCTE) Classroom Course, which began in August of 2012 and the VCTE Online Course, which began in January of 2014.
For all title company banking needs, contact Katie Tzitzouris at 703.436.3874 or KTzitzouris@FVCbank.com
Arlington • Fairfax • Manassas • Reston • Springfield 703.436.3800
VLTA EXAMINER volume 21.3, fall 2015 www.VLTA.org 7
A Modest Proposal For An Industry Wide Best Practice:
Certificates of Satisfaction I was recently copied with the following response after raising the issue of an inadequate certificate of satisfaction for a Deed of Trust, as modified, and its associated Assignment of Leases and Rents. Normally it is fine to cancel the original D/T not listing modifications depending on the Title company. Some Title companies accept cancelling only the original D/T without modifications listed and some want the original D/T plus the modifications listed. In this circumstance since there was a monetary increase with the modification that is larger than the original amount it is understandable that they would want the modification listed on the Cert. of Sat.
Since members of the lending community feel this is an issue subject to the discretion of the title insurance industry, it seems DOUGLASS W. DEWING appropriate to suggest the industry Commercial Underwriting establish a uniform approach. The Counsel, Fidelity National Title following discussion is most apInsurance Company plicable to the release of commercial financing, but many residential security instruments, especially those securitized in the secondary market, would equally benefit from the flexible approach to the certificate of satisfaction form I am suggesting. Modifications generally appear to be of four types: a) to make a minor change, such as to the interest rate or the maturity date, but leaving the amount secured unchanged; b) to secure new or additional obligations, sometimes greater and sometimes smaller than the original; c) to add or remove collateral; or d) to completely amend and restate the deed of trust. Over the years, I have seen certificates that referenced only the original deed of trust, only the last modification, or some mix of original and modification. I have seen certificates that listed the highest amount secured, the original amount secured, or a number that bore no discernable resemblance to what the land records showed as the amount secured.
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There is a similar lack of uniformity in lender documents regarding Assignments of Leases and Rents. Some automatically release when the associated deed of trust is released; some state the lender will provide a release. The Assignment of Leases and Rents is a security instrument in its own right, and absent automatic release, will need to be expressly released. If not amended when the associated deed of trust is amended, the automatic release provisions become murky. Is a release of the original deed of trust or of the modification contemplated by that provision? I will concede that the risk of a lender foreclosing on an ambiguously released deed of trust, as amended or modified, is slight. It is not, however, outside the realm of the possible. One real risk of foreclosure arises when the deed of trust secures more than one note or obligation, and the release identifies only one of those obligations. A marketability objection raised by a future purchaser, given the large number of unreleased deeds of trust, failed lenders, and ambiguity in the land records, is far more likely. I would recommend to the industry an approach that bears some resemblance to my ill-fated efforts at fishing. Fish hooks generally have barbs at the end. The more barbs that are in the fish, the more likely the fish will not get away. Since my hooks generally ended up in my flesh, rather than in the fish’s mouth, my experience has been more directed as to how to get the hook out of me and back into the tackle box. The best method is the one that removes all the barbs. In the context of deeds of trust, and other encumbrances on title, that would mean identifying each and every instrument the lender used to secure its debt in the instrument of release.1 The statutory form of certificate of satisfaction, or 1 The author expresses no opinion on the treatment by the Clerk as to recording fees assessed for a Certificate of Satisfaction that releases each and every barb in the hook. It should not be more than the cost of separate releases. A 2001 Attorney General opinion interpreted the “single fee” rule in Virginia Code § 17.1-275(A)(2) as requiring only a single fee for an original deed of trust and all of its corrections or modifications. 2001 Va. AG 89. The lack of uniformity among the 120+ jurisdictions in the Commonwealth regarding statutory recording fees is distressing.
partial satisfaction, is not a barrier to this approach. The statute (Virginia Code § 55-66.4:1) requires only that the form used “conform substantially with” the statutory model. The statutory model can easily be adjusted to fit the permutations of modern real estate transactions. I have inserted several variations on the attached page, leaving the statutory language in one type font, and the modifications or amendments that are easily added in another. I would recommend that the industry adopt an “insurability” standard that starts with an expectation that a lender would release all the recorded security instruments, and leave releases that don’t meet that standard for more stringent review and analysis by underwriting counsel.
Certificate of Satisfaction Place of Record Date of Note/Deed of Trust Face Amount Secured/Face Amount of Note: Note 1 Amount Note 2 Amount Deed Book Page Name(s) of Grantor(s)/Maker(s); Name(s) of Trustee(s) Face Amount of Note(s) $ Date of Assignment of Rents and Leases Recording Data of Assignment of Rents and Leases Date of Modification Recording Data of Modification Modification Amount Secured Date of Substitution of Trustee Recording Data of Substitution Names of Substituted Trustees Date of Amended and Restated Recording Data of Amended and Restated Amended and Restated Amount Secured Names of Amended and Restated Trustees Date of Assignment Recording Data of Assignment Name of Assignee
.
I/we, holder(s) of the above-mentioned note(s) secured by the above-mentioned deed of trust, do hereby certify that the same has/have been paid in full, and the lien therein created and retained is hereby released. GIVEN UNDER MY/OUR HAND(S) THIS DAY OF , 20
About the Author
What more can be written about the inimitable DOUGLASS DEWING, author of the Title Examiners’ Bible, and Pillar of the Land Title Industry? Doug is a graduate of Washington and Lee University, and the St. Louis School of Law. Doug has served as counsel to the industry since 1987, and has championed the profession of title examination for decades.
(NOTE HOLDERS) Commonwealth of Virginia, County/City of
to wit:
Subscribed, sworn to and acknowledged before me by day of , 20 My Commission Expires: . My Commission Number
this
NOTARY PUBLIC
VLTA EXAMINER volume 21.3, fall 2015 www.VLTA.org 9
Walking Through A Dark Alley at Midnight — Crime and Your Escrow Account The curtain opens on an average day in the life of a settlement agent. The phone rings. The seller in a recent transaction is on the line inquiring about the proceeds of his sale. The agent confirms that the wire was sent out per the seller’s instructions—exactly in accordance with the new account information that the seller emailed just the day before. The agent’s face goes white and his hands begin to shake as the seller informs him that he never sent an email, he didn’t change the escrow instructions at all. The horrible realization that the agent has been the victim of a hack takes hold….and SCENE. This scenario and variations thereof have become daily occurrences all across the country. The cloning of email addresses so that hackers can impersonate someone has been in use for years. Anyone with an email account by has likely had emails show up that Palma J. Collins look like they are from someone First American Title you know but are actually spam Insurance Company of some kind. More recently, this method has been turned on real estate professionals in order to steal millions of dollars. The hackers have figured out that they can hack into email accounts, monitor a real estate transaction and then, when the time is right, they can create a fraudulent email impersonating someone in that transaction. By creating an email appearing to come from real estate agent, seller, or the settlement agent, the hacker can induce the misdirection of settlement funds and successfully score some of the thousands of dollars that are routinely generated from just one transaction. To add to the enticement of committing this crime, the risk of being caught is almost non-existent, particularly as many of the perpetrators are from outside the country. The increased use of emailed communication in the place of direct personal contact or telephones to conduct business has helped to open us up to this particular scam. An older, but equally devastating scheme is the downloading of malware or botnets onto the computers of settlement agents. These malicious programs can collect banking wire
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passwords and other data and cause your computer to do the bidding of a hacker, such as the transfer of your escrow funds to bank accounts that are immediately swept of funds by the hackers--again often to accounts outside the country. This scheme requires a bit more technological knowhow to perpetrate. Malware or botnets are delivered to computers when email links are clicked, infected social network sites are visited, or other poorly secured internet sites are surfed. While some scams we’ve seen take a lot of expertise, some don’t take much at all. Smartphones have enabled fairly easy “double collection” of settlement disbursements. A payee in a transaction can instantly take a picture of an escrow disbursement check, deposit it remotely, and then return the check, requesting that the settlement agent “just wire the funds instead”. Funds may be wired before it is discovered that the check was already cashed providing the recipient with a double payday. Even lower tech is the counterfeit cashier’s check scheme that just never seems to go away. This is the one where a cashier’s check is given to the settlement agent to deposit for earnest money or down payment. The scammer then cancels the transaction and demands the return of the funds. If the settlement agent complies, they send the scammer good funds from their escrow account only to discover later that the cashier’s check was counterfeit and their escrow account is overdrawn. Finally, there are the scams that the most unsophisticated criminal can pull off. The settlement community has
lenders so that they do not fall victim. Last minute changes in instructions from anyone for handling or transmission of funds should be escalated to management and should always be thoroughly investigated! Determine your office policy regarding the use by employees of computers on your network for personal business, social networking, shopping and the like. Consider prohibiting use of office technology for personal use. Train your staff: Train to the procedures that you have laid out. The plan that you wrote down will not help at all if your staff doesn’t really understand it and you don’t enforce it. Educate your employees about frauds by “social engineering”--the risk of being talked into or otherwise being tricked into giving out personal data, sending out transaction documentation or changing file information. Non-public, private client information as well as checks and banking information for the agency should be locked up and should be shared only on a “need to know” basis with parties to the transaction and personnel working directly on the file. Documents that are no longer needed should be shredded and then disposed of by a reputable document disposal company. Rethink your hiring and employment practices: Do you do background checks? Drug checks? Some employers don’t even call applicants’ references. Going with your gut and hiring based upon personality is just not reasonable when the new hire will gain access to your office systems and banking information. Remember, you are safeguarding client funds. By tightening up hiring practices, you may keep yourself from letting the wolf in the door. Similarly, when someone leaves your company, make sure that you terminate all virtual and physical access to agency systems and immediately terminate banking credentials. Consider buying insurance: Additional insurance against cybersecurity breaches and other risks is available. Check with your professional liability insurer about policies that address these risks. If the worst happens, it could save your business. You might notice that the suggestions made here remind you of several of the Pillars of ALTA Best Practices. It is no accident that compliance with ALTA Best Practices involves several of the same steps as protecting your business against criminal activity. Best Practices was designed to address the concerns that lenders and other customers have when they do business with title and settlement agents. It is not enough to competently conduct your settlements and issue your title policies. Lenders and others want to do business with companies that understand the risks faced by the industry and have taken prudent and reasonable steps to reduce them to the extent possible. Preventing cyberattacks as well as other crimes lowers the cost of doing business and goes a long way toward providing the consumer with a transaction that goes through smoothly with no anxiety or awful dramas. By educating ourselves to security vulnerabilities and then taking appropriate measures to fortify them, we can best serve our clients and protect our own livelihoods.
been plagued by stolen check stock, stolen mail and payoff checks stolen right out of overnight delivery deposit boxes. The bad guys know we are charged with handling a great deal of money and have specifically targeted the real estate settlement community as an easy and rich mark. Although we try to keep abreast of the latest scams and schemes, the criminals continue to invent new ones. In case you are wondering who is responsible for the misdirection or loss of funds, the answer largely depends upon whose system was hacked or what party was induced to misdirect funds. However, if the money is stolen from your escrow account, or your office sends it to the wrong place, it is safe to say that your agency will likely pay the price. With all that you are exposed to, it’s a little like walking through a dark alley at midnight with a wad of cash in each hand. How can you, as a responsible real estate settlement professional, hope to keep up and protect the funds of your clients? There are some steps that you can and should take: Secure your systems: Consider having a reputable company audit your computer systems, identify weaknesses and suggest a fix. Make sure that you have an enabled firewall, and up to date antivirus software. Properly encrypt your Wi-Fi and wired networks. Use pop up blockers. Use secured email. Make sure no one in your office clicks on links sent by email. One of the simplest and almost never used methods to prevent a virus from affecting your escrow account is to have one computer that is solely used for communicating with the bank. It is wired, not networked with the other office computers and is never used to surf the internet or for other business. Talk to your bank: Ask them what security systems they can provide to you in order to protect your account from security breaches. Wires and large checks should have some system of verification before being honored. There are key fob systems, complex password systems, security questions and biometric verification systems that can enable the bank to determine whether or not a transfer is authorized. In addition, find out what your bank’s policy is in regard to unauthorized transfers and/or forged checks. Find out what losses will be your responsibility versus what will be taken care of by the bank. It is important to note that most accounts have time frames in which the bank must be notified of a breach or a forged check after which the bank will bear no responsibility. Find out about those time frames so you are prepared if something should happen. Firm up your procedures: Develop and write down a cybersecurity and escrow security plan. Include procedures for double checking of wires and separation of employees’ escrow duties. Authorize disbursement only after verification of receipt and collection of incoming funds. Determine how wire instructions will be sent and how they will be accepted. If wire instructions are ever emailed, institute a procedure to double check the information, like verification after receipt by calling a previously obtained, trusted telephone number. Plan to communicate your wire transfer procedures to your clients, real estate agents and
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A Supreme Court Case Decided on a Title Search We often think that the U. S. Supreme Court only hears and decides cases that involve sublime issues of constitutional law. There are occasions, however, when the Court relies on mundane items to decide seemingly narrow issues. In a case of consequential precedence, the Supreme Court did both. The case is Johnson and Graham’s Lessee v. M’Intosh, 21 U.S. (8 Wheat.) 543, 5 L.Ed. 681 (1823). [Hereinbelow referred to as Johnson.] Johnson has historical significance because it is part of Chief Justice John Marshall’s jurisprudence that forms the law governing the relationship between the United by States of America and R. Michael Smith the many Indian nations Underwriting Counsel living within its boundarConestoga Title Insurance Co. ies. Yet this case did not have an Indian plaintiff or defendant. Instead, several white men were wrangling over title to two tracts of land in present day Illinois, with the basic conflict being who had the better title: Those who derived their grants by purchase from the Native Americans by duly executed and recorded deeds or the title of Mr. M’Intosh whose title came from the United States. Spoiler alert – M’Intosh won below and on appeal in the Supreme Court. What is of particular relevance to us in the title business is that Johnson made it settled law in the United States that, as between the European descendants who were the citizens of the nascent nation and the Indians who had resided on and occupied the land long before those arriving Europeans, title to the soil was in the United States. Consequently, only the United States (or the monarchs of 12
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the various settling countries of Europe before the United States) could convey the property still undistributed, including the lands in the Illinois Territory/ state even though these lands had been occupied by the Native Americans for centuries. Evidence in the case suggested that the two vast parcels being litigated had not been occupied by plaintiffs, in fact, although possession was considered to have been established for purposes of an adverse possession if that would have been dispositive. What Johnson did was make the theory of title by discovery the law of the land.
We are familiar with acquisition of title to realty by purchase, by inheritance, by court order, by adverse possession, and by grant from the sovereign. Acquisition by discovery is not often part of a modern title search. In this modern day, discovery theory is plagued with negative racial, religious and cultural subtexts, and aboriginal titles are under scrutiny not only in the United States, but also Australia, Canada, and New Zealand. See, Blake A. Watson, “The Impact of the American Doctrine of Discovery on Native Land Rights in Australia, Canada, and New Zealand,” Seattle University Law Review (2011), Vol. 34, pp. 507, et seq. 1
Chief Justice Marshall, however, was not plagued with doubts about the propriety or political correctness of title by discovery as applied to Johnson v. M’Intosh:
As the right of society to prescribe those rules by which property may be acquired and preserved is not, and cannot be drawn into question; as the title to lands, especially, is and must be admitted to depend entirely on the law of the nation in which they lie; it will be necessary, in pursuing this inquiry, to examine, not singly those principles of abstract justice, which the Creator of all things has impressed on the minds of his creature man, and which are admitted to regulate, in a great degree, the rights of civilized nations, whose perfect independence is acknowledged. On the discovery of this immense continent, the great nations of Europe were eager to appropriate to themselves so much of it as they could respectively acquire. Its vast extent offered an ample field to the ambition and enterprise of all; and the character and religion of its inhabitants afforded an apology for considering them as a people over whom the superior genius of Europe might claim an ascendancy. The potentates of the old world found no difficulty in convincing themselves that they made ample compensation to the inhabitants of the new, by bestowing on them civilization and Christianity, in exchange for unlimited independence. But, as they were all in pursuit of nearly the same object, it was necessary… to establish a principle… as the law by which the right of acquisition… should be regulated as between themselves. This principle was that discovery gave title to the government by whose subjects… it was made. In the establishment of these relations, the rights of the original inhabitants were, in no instance, entirely disregarded, but were necessarily, to a considerable extent, impaired. The history of America, from its discovery to the present day, proves, we think, the universal recognition of these principles. (Emphasis added.)
M’Intosh land grant the facts of plaintiffs and defendant all of which were stipulated by both sides. Since the Court accepted the arguments of the defendant, here is a truncated version of the search leading to the grants to M’Intosh upon which the Supreme Court settled title in him:
Johnson v. M’Intosh, 21 U.S. 543, 572-574. This article, however, is not about discovery theory, but about the title search that supported the holding of the Supreme Court.2 In establishing that the grant to M’Intosh by the United States was greater than that of the plaintiffs who traced theirs to the deeds from the Illinois and Piankeshaw tribes, the Chief Justice relied upon a title search that could be said to be a short history of the United States. Exploration, two wars, colonial and royal grants, and early legislation by newly formed states and Congress were part and parcel of the evidence found in the more than 200 year search. The recitation of the facts of the search consumes more than fifteen pages of the opinion, those being
1. 1496-1498: Henry VII, King of England granted letters patent to John Cabot (an Italian) to hire a crew and ships, sail west for mercantile purposes, and discover new lands for the crown, which led him to landings in Nova Scotia and points south, which lands he did claim for the monarchy of Britain3, 4; 2. May 23, 1609: James I, King of England, patent to the Company of Adventurers and Planters of the City of London, granting all of the land 200 miles north and south of Old Point Comfort to the west and northwest and the Company thereafter took possession of part of the granted lands;
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3. At the same time: “Various independent tribes or nations of Indians” held occupied and possessed “in full sovereignty” the same lands; 4. 1624: The Company went bankrupt and title to the lands revested in the English Crown, effecting Virginia as a Royal Colony holding the same lands until it became an independent state; 5. Prior to 1756: The French government made a claim to the lands at the headwaters of the Mississippi north and west of the Ohio and, by consent of the occupying Indians, even established military outposts at Vincennes and Kaskaskias; these claims were within the lands of the Virginia colony; 6. 1756: The government of Great Britain, “after complaining of these establishments as encroachments, and remonstrating against them,” went to war against the French and its Indian allies (the Iroquois); 7. 1763: The Treaty ending the French and Indian War included a cession of all land claims to the area north and west of the Ohio to England, confirming the Virginia colony’s title;
15. September 3, 1783: Treaty of Paris ending the Revolutionary War in which independence was recognized and the lands to the west of the thirteen colonies were ceded by Great Britain to the respective colony holding the original Royal grant; 16. December 20, 1783: The Virginia General Assembly authorized its Congressional delegation (Thomas Jefferson, James Monroe, and others) to execute a Deed Poll giving to the benefit of the United States “all right, title, and claim, as well of soil as jurisdiction, which (Virginia) had to the territory northwest of the Ohio … which cession the United States accepted” (deed delivered and accepted in 1784); 17. July 20, 1818: The United States, through its designated officers, conveyed lands of the Illinois area to the defendant, which grant conflicted with the prior grants of the plaintiffs; 18. 1773 and 1775 till 1816: The plaintiffs and their successors never occupied the lands of their grants as a misfortune of the Revolutionary War, but they petitioned Congress persistently after the War for recognition of their Indian grants.
8. 1749: 600,000 acres granted by the Crown to the Ohio Company which included the tracts in the suit; 9. After 1763: The former allies of France, the Indians (Iroquois) remained on the lands in question as allies of England but as sovereign nations, with British protection; 10. To and after 1763: The Iroquois and Piankeshaw tribes held property in common and grants of their lands were by act of the Chief(s) with the compensation divided among the members of the tribe but individuals had no right in the soil individually; 11. July 5, 1773: Iroquois chiefs conveyed lands near Fort Kaskaskias by deed duly entered for $ 24,000 to predecessors of the plaintiffs (“or to George Third, then King of England”), which persons were all citizens of Great Britain (including one Levi Andrew Levi of Lancaster, PA) and which lands were all within the Virginia colony (The transaction was attended by many tribesmen and was open, public, and fair, and the Chiefs understood what was happening as interpreters translated everything); 12. October 18, 1775: Piankeshaw chiefs conveyed lands near Fort Vincennes by deed duly entered for $ 31,000 in a process similar to the preceding one; 13. May 6, 1776: The Virginia Colony declared itself independent of Great Britain claiming its boundaries as that of the 1609 Royal Patent except for the granted lands by the Crown for the colonies of Pennsylvania, Maryland and Carolina; 14. October 5, 1778: The Virginia General Assembly established the County of Illinois after having its militia capture Forts Vincennes and Kaskaskias, which County included the lands of the plaintiffs’ deeds from the Indians; 14
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John Marshall by Henry Inman, 1832
Piankeshaw_Indians
Johnson, 21 U.S. at 543-562.
(as representing the nation) passed to the colonists by charters, which were absolute grants of the soil; and it was a first principle in colonial law, that all titles must be derived from the crown.
Based on this title report, the Supreme Court had to decide who had the better title: The plaintiffs who had the earlier deeds from the Indians who resided on the land or the defendant whose title came from the United States through its derivation from the British monarch and the Virginia colony. In determining that the theory of discovery was the greater applicable principle and such favored the defendant, Chief Justice Marshall, writing for the Court, held as follows: …According to every theory of property, the Indians had no individual rights to land, nor had they any collectively, or in their national capacity; for the lands occupied by each tribe were not used by them in such a manner as to prevent their being appropriated by a people of cultivators. All of the proprietary rights of civilized nations on this continent are founded on this principle. The right derived from discovery and conquest, can rest on no other basis; and all existing titles depend on the fundamental title of the crown by discovery. The title of the crown
Johnson, 21 U.S. at 570. In the final analysis Johnson v. M’Intosh confirmed the theory of discovery as the beginning point for title to real property on the continental United States. Whichever litigant in a quiet title action could trace its title back to the earliest discovery by a European monarch would win the case. In order to resolve Johnson, after establishing the legal principle involved, the Chief Justice had to rely on evidence from a title search, albeit one that was unusual in every aspect – explorers, Kings, Indians, colonies, two wars, two peace treaties, acts of legislatures, etc. Most of this information was probably not found in the record rooms of Fort Vincennes or Fort Kaskaskias, but it was available somehow to at least one diligent examiner who abstracted the title to land in Illinois over the 200 year Colonial Era.
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(Endnotes)
1 There were some who argued, back in the Space Race of the 1960s, that the United States should claim the moon by discovery as a result of being the first to land there. Most nations of the world have signed the popularly known Outer Space Treaty by which, among proposals banning use of celestial bodies for military activities, “ownership” will not be claimed by any sovereign state. (Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space etc.; U. S. Department of State, hhtp://www.state.gov/t/isn/5181.htm. But, since no country “owns” the moon or Mars, et al., can private companies explore and extract minerals at their own expense and, if so, what is the nature of their claim to that soil? See, Glenn Harlan Reynolds, “Who Owns the Moon? The Case for Lunar Property Rights,” Popular Mechanics, retrieved from: http://www.popularmechanics.com/ space/moon-mars/a3358/4264325/.)
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2 If interested in further discussion on the soundness and universality of the acceptance of the principles of title by discovery, see, Blake A. Watson, “John Marshall and Indian Land Rights: A Historical Rejoinder to the Claim of ‘Universal Recognition’ of the Doctrine of Discovery,” Seton Hall Law Review (2006), Vol. 36, pp. 481, et seq. 3 England was not a party to an earlier devolution of sovereignty over undiscovered lands. The Inter Caetera (“among other [works]”), a Papal Bull of Pope Alexander VI in 1493, was issued favoring Ferdinand and Isabella of Spain in the explorations of Christopher Columbus. The Pope conferred title to any lands discovered by their sailors and inhabited only by non-Christians which lands were more than 100 leagues west of the Azores. The Pope did this in return for the promise by them of attempts to convert the natives. He used the following language: “(W)e, of our own accord, not at your instance nor the request of anyone else in your regard, but of our own sole largess and certain knowledge and out of the fullness of our apostolic power, by the authority of Almighty God conferred upon us in blessed Peter and of the vicarship of Jesus Christ, which we hold on earth, do by tenor of these presents, should any of said islands have been found by your envoys and captains, give, grant, and assign to you and your heirs and successors, Kings of Castile and Leon, forever, together with all their dominions, cities, camps, places, and villages, and all rights, jurisdictions, and appurtenances.” (Emphasis added.) The Pope later mediated differences between Portugal and Spain. Although the Pope never made a similar grant to Great Britain, Henry VII, first, and James I, later, apparently assumed their crowns had the same devolution of title to lands discovered by their subjects, as derived by the monarch personally from God, unless such lands had been previously discovered by another ‘Christian Prince.’ 4 Neither the Pope nor any European sovereign ever addressed the earlier visits to North America by the Vikings even though knowledge of their sailings may well have been known to educated Europeans of the late Fifteenth Century. If considered, the potential Viking claims would have been dismissed either because they left no settlements behind as evidence of possession or the discovery was not made by subjects of a Christian Prince.
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About the Author
R. MICHAEL SMITH, a graduate of the University of Virginia School of Law, is currently Underwriting Counsel for Conestoga Title Insurance Co., located in Lancaster, PA. He is a former Virginia State Counsel for national underwriters and a former Chairman of the VLTA’s Education Committee. He is a frequent speaker at VLTA and other title industry seminars, and continues to contribute to the VLTA Examiner. He coordinated the Jamestown 400th Anniversary Program in 2007. Please contact him at msmith@contitle.com.
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Tales from the Table Anyone who has conducted a settlement collects stories. Some of them are instructive and we can learn from them. Some of them are cautionary tales that help provide guidelines to keep us out of trouble in the future. Some of them are just plain entertaining. Here are three of my favorite entertaining ones. I will preface this story by saying that when I conduct a settlement, I am a talker. I talk about the documents, of course. I also talk about virtually everything else. The settlement is usually a happy occasion and I treat it accordingly, telling stories and getting to know the parties, at least a little. One day I go to a real estate agent’s office for a purchase transaction. The purchasers are a young husband ERIC A. NESHEIM and wife who are buying their Title One Settlement first home. This is back in the Group, LLC days of small down payments with first and second mortgages. The husband is not available for closing, so the wife will be signing all of the documents for two loans for herself and for her husband with a power of attorney. She has her work cut out for her. The settlement is going well and everyone is happy, but as we get most of the way through the documents, she starts looking like she is getting mad. As I said, I am a talker, so I am wondering if I said something that offended her. I apologize for whatever it is that I said and she replies: “I am not mad at you. I am mad at my husband. The reason that he is not here to sign all of these papers for himself is because he is at the Orioles game.” Another day, I am conducting a settlement for a newlywed couple who are buying a home from a new home builder. I am sitting at the head of the conference table. The husband is sitting next to me on the side of the table and his bride is sitting next to him. Settlement is going well until we get to the Bank of America Same Name Affidavit. This
was when the form had the list of aliases going down the page with a signature line for each variation. I pass the forms to the purchasers. The wife’s form passes in front of the husband’s field of vision and he notices that all of the lines are full. She has about 6 variations of her name on the form. He grabs the form, looks at her and asks what all of the names are. Her meekly delivered reply was: “I am sorry that I did not tell you, but I was married before.” I was sure that the settlement was over. They asked for a little bit of alone time so I excused myself and left the room. After about 15 minutes, they called me back into the room and we completed the closing. Finally, I was conducting a closing where the primary language of the purchaser and her agent was Vietnamese. I worked with this agent quite a bit, so this was nothing new. As we are going over the first page of the settlement statement, the purchaser points to one of the lines and asks her agent a question in Vietnamese. Based upon the line to which she was pointing, I was pretty sure that I knew the question, so I answered in English. The agent looks up from the paper, turns to me, and with eyes as wide as saucers says: “I did not know that you speak my language.”
About the Author
ERIC A. NESHEIM is Managing Attorney of Title One Settlement Group, LLC in Chantilly. He started his career searching titles in 1985 in Cook County, Illinois. He received his law degree from George Mason University School of Law in 1990 and is licensed to practice law in Virginia, Maryland, and The District of Columbia. VLTA EXAMINER volume 21.3, fall 2015 www.VLTA.org 19
Word Search
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ARTU
What would you do?
“Underwriting and claims solutions from ARTU, Esq.” ARTU (Anal Retentive Title Underwriter who is spending his time “down on the farm”), Esq. is the ideal title insurance counsel — a problem solver who understands not only the legal issues, but the reality of each particular risk determination and claim. Question: You are a settlement entity, are delighted with your growing business, and are looking for ways to become more productive. You have just discovered that Molly, one of your new closers, has an accounting background, and for a small raise, is willing and eager to not only disburse on files, but to reconcile your accounts. This will allow you to significantly trim payroll elsewhere in the office. Are there any problems with this? Answer: Don’t EVER let the same individual disburse files and reconcile accounts. It is an invitation for a disaster. In one case, the bookkeeper knew that her company had several large escrow accounts which had not had any activity for over a year. On a current file, there was a payoff required of $252,000. The bookkeeper padded the payoff to $257,000, made the actual payoff off $252,000, and cut a $5,000 check to a fictitious LLC which she endorsed and cashed. When reconciling, the actual payoff was cleared for $257,000, making it appear that the statement was balanced.
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THE COURTHOUSE IS ON FIRE
Citizen Indexing via “The Coversheet” The courthouses in Virginia are on fire, yet incredibly no one seems to have noticed! While flames are not rolling out of the windows, nonetheless… this fire is now burning and the land records are at this very moment in jeopardy of being lost. Where is this fire that threatens our land records, how did it start, and what can be done about it ?
Historical Perspective: The office of the Clerk of the Circuit Court dates from 1619 when constitutional offices in Virginia were created by the House of Burgesses. While from the earliest of our colonial days to the present time, the daily functions of the clerk have changed dramatically; this office today still remains one of the most important constitutional offices in JOHN L. BANE the Commonwealth. Owner / Managing Member From the very beginning, our Commercial Title Services, LLC founding fathers recognized that it was the land records that were without question the most important documents to be properly safeguarded in this new country. Although many records are kept in the courthouse, it is the land records that have always been stored in the “vault”, originally behind great iron doors much the same as in a bank vault. The preservation of these land records is and always has been, one of the Clerk’s greatest duties and responsibilities and the one which has always been regarded as uniquely essential for the orderly governance and continued prosperity of our Commonwealth. That much has not changed in the last 400 years and today there still remains no record more vital to this Commonwealth than her land records.
Today in Virginia: What has changed most recently is the electronic filing, indexing, recording and storage of these important land records. Approximately 20 years ago (1995) a report was developed by the Joint Legislative Audit and Review Commission (JLARC) entitled “The Feasibility of Modernizing Land Records in Virginia”. This report was commissioned by the General Assembly in response to the ever increasing volume of land transactions then occurring in the Commonwealth, along with the clerks’ growing inability to manage
that volume. The realization that perhaps computers might now handle a large portion of the work gave the report’s authors great hope for (what seemed then) a simple solution. In 1997 the General assembly passed House Bill 2579 which, among other things, directed the creation of a Land Records Management Task Force. The Task Force as recommended by JLARC was established in June of 1997. In September of that year the Task Force submitted its Interim Report to the Governor and Chairman of the House Appropriations & Senate Finance Committees. The Interim Report defined the concept of land records management & provided a strategic plan for the modernizing of our land records in Virginia. In its Final Report published in January 1998, the Task Force identified several objectives and made many recommendations that related to the content and format of the land records including: the consistent indexing of the documents to be recorded in Circuit Court clerks’ offices. In order for there to be a consistency to the (computerized) indexing process, a list of rules were developed which outlined exactly HOW names were to be entered into the (now computerized) index. (Reference “Commonwealth of Virginia, Standards for Indexing Land Record Instruments” last revised April 5, 1999.) These rules MUST be followed in order for the recorded documents to be later found. These rules for indexing are by necessity quite detailed, technically complex, and extensive, covering well over 25 pages of the Task Force Report. Realizing the complexity of these rules, the Task Force further recommended there be offered additional education and training for even the most seasoned of court personnel who would now be expected to adhere to these mandatory (computerized indexing) standards. In addition to these complex and extensive rules for the entering of names to the computer index, the use of a standardized “Cover Sheet” was recommended, again to provide for a uniform and consistent format in the indexing of the land records. The idea of the cover sheet being to encourage those who prepare the documents to conform to those indexing standards and by so doing, reduce the workload of personnel in the Clerk’s office. They (court personnel) would not have to read the entire document in order to capture the bookkeeping or recording information (speeding up the VLTA EXAMINER volume 21.3, fall 2015 www.VLTA.org 23
recording process considerably). Additionally, in those Clerks’ offices who chose to use the Optical Character Recognition (OCR) technology, little or no data entry would then be required by the clerks, thus speeding even more the recording process. This same Task Force Report then advised that “if a Cover Sheet was required, the liability for incorrect information should be placed on the preparer. The Clerk should be allowed to index from the cover sheet without being held liable for indexing errors where the information on the cover sheet is different from the information on the document” [the fire was lit]. Curiously, the Task Force never addressed the question of who the preparer of these cover sheets would be, how (or if) they might be trained, and how they might be held accountable for the errors which they create. That monumental oversight has been allowed to continue and today it is reflected in our law. Originally (as offered January 26, 1998) House Bill No. 793 amended and re-enacted § 17-79.3 of the Code of Virginia, among other things, “to allow the use of cover sheets etc…”. This bill was subsequently amended and approved [H 1452] during the 1999 session. The General Assembly then amended the Code by adding the new Code Section numbered § 17.1-227.1. This code section has been amended numerous times since its adoption 16 years ago. Significantly in 2008 the statute was amended to reflect “The attorney or party who prepares or submits the cover sheet on any deed or other instrument conveying or relating to an interest in real property for recordation has the responsibility for ensuring the accuracy of the information contained in the cover sheet.” In 2014 this amendment was changed to add the following language “and the clerk may rely on the information provided therein”. (Presently the filer is responsible for the cover sheet accuracy, and the Clerk is allowed to rely on the cover sheet to index) [the fire spreads]. As previously required by §§ 55-48 and 55-58, all parties listed in the first clause of the original instrument being recorded, were indexed by the Clerk. Now §17.1-249 will allow the instrument (presented with a cover sheet) to be indexed by the information contained in the cover sheet. We now have these two statutes (§17.1-227.1 and §17.1-249) that put our land records at risk of being lost. Lost because they were indexed not according to the original document, but indexed according to whatever information appeared on the cover sheet, and lost because that information was given in a format that did not comply with the Commonwealth of Virginia Standards for Indexing Land Record Instruments - 25 pages of mandatory standards for the computerized indexing of names. The gravity of this simply cannot be overstated. It is all too easy in a computerized index to misplace a document if you are not skilled at data entry, and if you do not adhere to the (25 pages of) mandatory indexing standards. 24
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If the document is not INDEXED correctly, there is a great chance that document will not be found later. Although the document is placed of record (somewhere), if that document cannot be found (where expected) has anyone been given Record Notice of its existence? This real problem is further compounded by the complete lack of accountability on the part of the Clerk, who is now “immune from suits arising from the recordation of any document, or the content of any document recorded, in the land records pursuant to this or any other applicable provision of this Code unless the Clerk was grossly negligent or engaged in willful misconduct” § 17.1-227 (as amended 2014). Today a cover sheet can be (and usually is) prepared by someone with little or no experience in document preparation; they have absolutely no training on how names must be entered (formatted) in the Computerized Land Records Index (see the above referenced 25 pages of Mandatory Standards for Indexing) in order for those documents to be later found. Additionally these individuals have no real accountability for any errors or omissions contained in that cover sheet. While an attorney will prepare a deed, the cover sheet is left to whomever is responsible for putting the document on record, usually just “someone” involved in the closing or recording process. Clearly a system that permits just anyone to enter the critical information required to properly index our land records puts those records in great peril. To allow the index to reflect whatever information is contained on the cover sheet and NOT necessarily what is contained in the original document, only invites disaster. In a similar context, imagine returning a book to the library and the librarian says “We have instituted a new policy where you are responsible for putting the book back in its proper place”. You are told that instructions are available on our web-site, and there is a kiosk you can go to in the building which explains the basics necessary to shelve the book properly (a mere 25 pages). Although proper book placement has always been the responsibility of the librarian..., now we are going to trust you to put it back in the proper place. Really? While most people are conscientious, and would probably want the book returned to its proper place, who has the time or inclination to learn this rather complicated task? One can imagine the utter chaos that would soon result from such a system. How many years would it take before the library could no longer find most of the books that had been re-shelved by the citizens? Picture a building filled with books, where the shelves are full, but locating the one you happen to be looking for has become a near impossibility. That is the frightening system of computerized indexing we have allowed today in the Clerks’ offices of Virginia (citizen indexing) via the cover sheet [our Land Records at risk of being fully engulfed by flames].
While not all of the Clerks’ offices today in Virginia require the use of a cover sheet to record documents in the land records, most of the ones which presently do readily tell you that they DO NOT Index [solely] off of the cover sheet, although it is clearly allowed by statute. Most of these Clerks recognize the serious problems which could result from that practice, and will freely admit their great reluctance to ever do so. So why do we allow this ? Although immune by statute from any liability, most Clerks now choose to compare the information contained on the cover sheet with that contained in the original document, obviously doubling their work and not saving time, but actually consuming more (contrary to what was initially envisioned by JLARC in 1998). Does this make any sense? Should a conflict exist between the information contained on the coversheet and what appears in the original document which gets indexed, and if so, why? We have created a system that puts our land records at risk of being lost. We have allowed the average citizen to index our most valuable records and to do so with no training and no practical liability. Perhaps most troubling, we have removed all accountability for the safe keeping of these records from the Clerk, whose primary duty it has always been for almost 400 years.
Before our land records are totally lost in the abyss of the computerized index, we should rethink the process that presently puts our Commonwealth’s most important documents in the path of fire. DEDICATION:
This article is dedicated to the memory of Rebecca Fay Mahone, (12/20/1950 to 04/18/2015) Deputy Clerk, for The Circuit Court of Roanoke County, Virginia (Indexer of Land Records), who devoted 30 years to the task of properly indexing the Land Records of Roanoke County. Without her help this article would not have been possible, and without her friendship this world would have (for so many people) been a little less loving and cheerful.
About the Authors
JOHN L. BANE is a Title Examiner and former Real Estate Paralegal, with extensive knowledge and experience primarily concentrated in the area of commercial property.
From building award winning services, to demonstrating eGovernment cost savings,
Virginia Interactive has partnered with commonwealth government entities to deliver the highest caliber of
online solutions.
All Our Education is Now FREE at Your Doorstep! The VLTA is proud to announce that all our education is now FREE at your doorstep — well, almost. Here is what I mean. Notices of membership renewals will soon be upon us. There are now two levels of membership: “standard” and “all-inclusive.” If you are a creature of habit and like the way things have always been, select standard membership when you renew. We have reduced our standard membership rate by $25. Buy yourself lunch to celebrate. But before you do, consider the all-inclusive membership, which is $75 more than our current rates. What do you get for the extra $75? Let me tell you! FREE online, on demand continuing education. Right now we have over 50 courses in our catalog, and the list continues to grow. There KEVIN T. POGODA, ESQ. is continuing education VLTA President here for attorneys, title
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VLTA EXAMINER volume 21.3, fall 2015 www.VLTA.org
agents, title examiners and title settlement agents—all FREE for the all-inclusive member. FREE admission to our new Regional Events. No more hotel stays and travelling long distances to attend Fall Seminar. We come to you, teach valuable education for several hours, then we all leave before traffic starts. We’ll be visiting Virginia Beach and Harrisonburg in the Spring; Northern Virginia and Lynchburg in the Fall. 50% OFF admission to our Annual Convention, which is now a 1.5 day event. No more several night stays at a hotel— just one night will be needed so that everyone can attend a full day of education, celebrate at the Gala Event and then have a little more education the following day. 50% OFF our Pre-Licensing Course, as well as our Virginia Certified Title Examiner and Virginia Certified Title Settlement Agent Courses. Does someone in your office need to get his or her title license? Choose an all-inclusive membership—the savings from the Pre-Licensing Course almost pays for the membership! Sound too good to be true? It’s not. Keep your eyes peeled for membership renewal notices, or visit the VLTA website at www.vlta.org for details.
Recorded Treasure
Quitclaim Deed
submitted by
DON C. WELLS, JR. from the public records of Rockingham County, VA
Download Complete PDF Those of you who have had the experience of working in various record rooms have undoubtedly come across some very interesting recorded documents. If you have come across an unusual instrument in the land records, we would like to print it as part of a regular feature in the VLTA EXAMINER. Please send us your unusual finds.
VLTA EXAMINER volume 21.3, fall 2015 www.VLTA.org 27
Questions & Answers for Title Examiners and Underwriters
The Little Examiner That Could1 by
TUTE
The Unknown Title Examiner
Title Tips by Tute is a regular feature in the VLTA Examiner. Tute offers interesting and informative questions and answers pertinent to title examiners and underwriters. Tute may be reached at www.tute.us. We encourage our readers to submit their questions or comments to Tute c/o the VLTA Examiner.
Brreeep, breeeep. Vroooom, vroooom. Ca chink, ca chink, ca chink. Swooosh. The Little Examiner turned the corner into the parking lot as her cell phone went off. She was a happy little examiner for she had the best job in the whole wide world. Her title reports made it possible for people to buy and sell homes, borrow money, and build and expand businesses. Some of her customers sold toy animals – giraffes with long necks, Teddy bears with almost no necks at all, baby elephants, dolls with curly hair, dolls with straight hair, cars, toys engines, puzzles, books and every kind of thing boys and girls could want. But that was not all. Some of her customers sold things that were good to eat – oranges and apples, creamy milk for breakfast, fresh vegetables for dinner, and lollipops for snacks. And for the grown-ups there were organic food stores and fair trade coffee. “Hellooo,” she sang into her phone. “Hold on a second,” she heard. And the phone got all muffled, like someone had put a hand over the speaker, but she still heard “Hey, Pierre, we’ve got an exam for a little strip center downtown. Are you available?” “Me, a little strip center? I am a First Class Commercial Resort Examiner. I examine titles to hotels (4-star and higher) and resort properties. The restaurants in my properties appear in the Michelin Guide. A strip center? Indeed, not.” And even through the phone, The Little Examiner could hear the subvocalized snort of derision. “I hate to keep you holding,” she heard clearly, as the hand was removed from the phone. “I know you are busy with a full schedule of exams for closings next week… uh, hold on again.” Muffling reappeared. “Hey, Freddy. I’m in a jam here. Retail center, multiple parcels, just like that factory job you did last month. You’d be perfect, can you squeeze it into your schedule?” “Retail? I am an Industrial Specialist. Factories, distribution centers… “ “Yeah, that was why I thought of you. It’s got a couple of indirect access questions, just like that distribution center you did the other day.” “… maybe even a mixed use office / warehouse. But Retail? Puleeeze, call me when you have something important for me to do.” And even through the phone, The Little Examiner could feel the waves of indignation. “Cheer up,” said the search supervisor. “I’ve got more than resort and industrial examiners around here; it is just that I really didn’t want to upset your schedule. You are such a versatile utility infielder for our team, and I know we have you overbooked as it is.” “It sounds interest… “ started to say The Little Examiner, as her phone returned to muffledom. “Maestro, can you fit something in for me? It’s down in the old Luminous Rivulet subdivision and I think you’ve done more work there than any three other examiners. It ought to be a piece of cake for an old pro like you.” “I don’t know,” echoed through the phone’s speaker. “Paper streets, some open, some not, some still being disputed. Funky restrictions. Is the developer’s estate still suing people down there? You know, my health isn’t what it used to be. I am so tired. I can’t stand up in the record room all day any more. I can not. I can not. I can not.” And even through the phone, The Little Examiner could feel her spirits droop with contagious depression. “I give up,” she heard clearly through the phone. “I’ll get two or three searchers to pick up your case load. This is really a lot more important that those other examiners realize. This center is going to be rehabbed and has to be ready to re-open in time for Christmas. I know you like a challenge, especially with a worthy cause. Rumor has it that the Chamber of Commerce is going to have their “Meet and Greet With Santa” in this center… if it can be ready in time.” “It sounds interesting,” The Little Examiner repeated, this time being heard. “Multiple parcels… I think 1
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Yes, I borrowed vast quantities of this from The Little Engine That Could, retold by Watty Piper, Platt & Munk Co., New York (1930).
VLTA EXAMINER volume 21.3, fall 2015 www.VLTA.org
I can handle that. Access easements… I think I can handle that. What else?” “It’s an amalgamation of fee and leased parcels; not like a single strip center building, but a little bit like an urban campus. Access is restricted along the Boulevard, but there are supposed to be at least one, maybe two REAs.” “So I’ll need to examine some of the adjoining parcels as well to find everything. I think I can handle that. Do you have any prior work?” “Some, but even though I haven’t been out in the field for years, it looks incomplete. I don’t know if the customer didn’t make us a full copy, or if they just don’t realize what they’re asking. To paraphrase the late President Reagan, “Trust, but verify.” The Little Examiner reached into her briefcase and checked her supplies. Paper, pens, markers, protractor, compass. Customer card for the copy machine. Access account code for the online copies. “Can you refill my copy account today?” she asked. “I like to take notes, but it doesn’t sound like I will have enough time to do this the way I like to.” “Consider it done.” Loading all her supplies into the carry-all bag, The Little Examiner headed for the Courthouse door. “I think I can,” she said as she left the parking lot. “I think I can,” she said as she climbed the stairs to the entrance. “I think I can,” she said as she entered the record room. “I think I can,” she said as she scoped out the perimeter of the parcels on the Treasurer’s computer. “I think I can, “she said as she adversed the developer for the fee in the streets. “I think I can, I think I can, I think I can.”
Up, up, up, the indices to conveyances. Down, down, down, the indices to judgments. Over and over, combing the indices for both fee and leasehold interests. Overlaying easements on top of parcels; matching the dominant and the servient parties together. Getting around no access strips. “I think I can, I think I can, I think I can.” Tickety, tap, tickety, tap, tickety, tickety, tickety tap. Writing each interest up in the computer. One last review of all the pieces, all the connections, all the plats and deeds. Plonk. The Little Examiner hit “send” and off went her report. “I thought I could, I thought I could, I thought I could.” And she smiled to think of the excited boys and girls receiving new toys, and the concerned moms and dads buying healthy foods, and coffee drinkers doing good while sipping lattes. Time passed. The Little Examiner went on to other projects, some big, some small, some easy, some complicated. But in December, her boss called her into the office and handed her an envelope. “Two Tickets to the ‘Meet and Greet With Santa’” he said. “You’re going to be sitting at the same table with Santa and a group of kids who are receiving community service awards. And there is a little something else in there from the developer2 who was verrrry appreciative of the job you did. I hear there are stuffed giraffes and bears and elephants in the toy store. And great fair trade coffee in the food court. Have a blast.” 2 You did know this was a fairy tale, right? Sort of like the joke about Santa, the honest lawyer, and the drunk walking down the street and seeing a $10 bill? Developers rewarding title examiners… sounds like a figment of the imagination.
Celebrating 25 Years of Service to VLTA Members and the Title Industry! Times were tough for title professionals in the 1980s. Like today, E&O insurers were either ceasing to offer coverage or raising rates dramatically. To respond to this crisis, ALTA members created Title Industry Assurance Company (TIAC) to provide a long-term stable E&O market for its members. 25 years later, TIAC is one of the longest running and successful E&O insurance providers available! Combining broad coverage, expert claims and underwriting services, and competitive rates, TIAC is the choice for title professionals! If you have not received a quotation from TIAC lately or compared our broad coverage, contact us at 800-628-5136 or complete our online premium estimate form at www.cpim.com/tiac.
Title Industry Assurance Company, A Risk Retention Group 7501 Wisconsin Avenue, Suite 1500E Bethesda, MD 20814-6522 p. (800) 628-5136 f. (800) TIAC FAX (842-2329) e. tiac@cpim.com w. www.cpim.com/tiac
EndorsEd by thE Major titlE UndErwritErs
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First American Title Proudly Supports the
Virginia Land Title Association First American Title has been at the forefront of providing peace of mind, valuable protection and accurate information to our agents and their customers.
First American Title Offices 2226 Richelieu Avenue Roanoke, VA 24014 800.552.5024
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Virginia Land Title Association is Virginia's premier provider of land title industry education! We offer courses to satisfy Virginia's Bureau of Insurance Continuing Education (CE) requirements for licensed title insurance agents, MCLE credits for settlement attorneys, certification programs for Title Examiners (VCTE) and Title Settlement Agents (VCTSA), and continuing education for certification programs (CCE). VLTA also provides Title Insurance Pre-Licensing Education. Earn credits online or at VLTA's live events.
Title Insurance Pre-Licensing VLTA offers title insurance Pre-Licensing education for those wishing to obtain a Virginia Title Insurance Agent's License (producer's license). The Title Insurance License is required for non-attorneys wishing to conduct real estate settlements in Virginia. VLTA's revised course strictly adheres to the examination content outline offered by the Virginia Bureau of Insurance. Both live and online classes are led by VLTA President, Kevin Pogoda, Esq., whose amusing and informative content has been lauded by students statewide. Our class is fun and engaging - and has the highest passrate of any class offered in Virginia. Beginning in 2016, our class will be available online. To register for a live class in 2015, click here.
Certification Programs Virginia Land Title Association is the ONLY provider of the Virginia Certified Title Examiner (VCTE) course and the Virginia Certified Title Settlement Agents (VCTSA) course. These classes offer basic and advanced training for land title professionals in Virginia. Are you looking to demonstrate that your staff is well trained to keep up with the burden of compliance? Consider the VCTE & VCTSA courses as your ally. Click here for more information.
VLTA EXAMINER volume 21.3, fall 2015 www.VLTA.org 31
Member Discount Programs VLTA is shopping and everyone likes a discount! We know that title industry professionals do business with vendors they trust. If you know of a vendor who excels when it comes to service and quality – let us know. We would like the opportunity to negotiate a discount for all our members statewide. A sampling of Member Discount participants are below. For more information, please email us directly. If you are a Member, simply click on the logo below to be redirected to the Member Discount offer. (Member login required.) Learn more about this month’s featured partner at www.vlta.org/member-discounts
The fast track to compliance using ALTA Best Practices
HA&W’s ComplianceSuccesssm Program can assess your current level of compliance and provide you a remediation plan in as little as 10 days.
Get Started Today. Contact Kim McConkey, Partner, HA&W ComplianceSuccess sm program kim.mcconkey@hawcpa.com 404-898-8237 32
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