Doctrine of Merger

A homeowner came to the registry today looking for a subdivision plan that shows his property. I helped him find it, and his deed. He pointed out how he has owned two lots, each 5000 square feet, for several decades, then went on to say that even though the current zoning ordinance calls for minimum lot size of 10,000 square feet, he still had two building lots because when he purchased them long ago, they complied with the zoning ordinance in effect at the time and so they were "grandfathered in."

I urged him to check with a lawyer about it and suggested among the things he discuss with the lawyer was something called "merger."

As I recall, the doctrine of merger, it holds that when two contiguous lots come under common ownership, they merge together to form a single lot. If this concept applied to zoning, his two "grandfathered lots" may have become a single complying lot when he gained ownership of the second of the lots.

I wasn't doing a good enough job of explaining what merger meant, so finally I asked "have you ever cooked pancakes?" He asked me to repeat the question at least twice before he decided that yes, I had asked him if he had cooked pancakes. "Yes, I've cooked pancakes." So I said, "If you have a smallish frying pan and drop in two scoops of batter intending to make two pancakes, but they spread out and connect together, you end up with one big pancake, not two little pancakes. That's the doctrine of merger." The guy smiled and said "I like that. Now I understand."

And now that my mind is fixated on pancakes, I might be stopping at the Owl Diner tomorrow for breakfast.

Missing out on the Community Preservation Act

The Community Preservation Act was signed into law in Massachusetts about 15 years ago. The purpose of the law was to encourage and to assist communities in preserving open space, creating affordable housing, and conducting historic preservation. To utilize the CPA, residents of a community would have to impose a surcharge of up to 3% on their property taxes. As an incentive to do this, the state would match the funds raised by the surcharge. To fund the matching amounts, the state imposed a surcharge on recording fees at the registry of deeds. Almost all documents carry a $20 surcharge (municipal lien certificates have a $10 surcharge and homesteads and state and federal tax liens are surcharge-free).

In today’s Boston Globe, op-ed columnist Renee Loth urges the city of Boston to adopt a CPA proposal filed by two city councilors (“Boston is losing out bynot adopting the Community Preservation Act”). Here’s how the column begins:

Those lucky folks in Acton. Over the past several years, they have purchased more than 30 acres of farmland and open space, created a wildflower garden and accessible boardwalk at the Acton Arboretum, and started work on their section of a 22-mile rail trail from Lowell to Framingham. In Gloucester, residents have leveraged funding for 80 units of affordable elderly housing in an old grammar school, replaced historic lead glass windows at the Cape Ann museum, and restored Depression-era WPA murals at City Hall. In Cambridge, they have preserved hundreds of affordable rental units that were about to expire, stabilized an eroding slope at Fresh Pond to protect drinking water, and transferred millions of dollars into a housing trust fund. All these communities – and 157 others – recognize the value of protecting their economic, environmental, and cultural assets through the state’s Community Preservation Act.

She spends the rest of the column arguing that it is short-sighted for Boston to continue to ignore the CPA.

You could say the same thing about Lowell. Because even the slightest property tax increase creates much angst in Lowell, it seems unlikely that the voters—especially the small percentage who actually vote in city elections—would volunteer to increase their property taxes, even if the amount of the increase was matched by the state.

What makes it even more short-sighted for Lowell to forego the CPA is that it’s not really the state that’s providing the matching funds; it’s the property owners of Lowell. From 2008 through 2015 here at the Middlesex North Registry of Deeds, we have collected $9,328,900 in Community Preservation Act surcharges for an average of $1,166,112 per year. Although the district consists of ten communities (Billerica, Carlisle, Chelmsford, Dracut, Dunstable, Lowell, Tewksbury, Tyngsborough, Westford, and Wilmington), Lowell accounts for 22% of all documents recorded.

Given those numbers, property owners in Lowell have contributed $2,052,358 to the Community Preservation Fund, all of which has benefitted communities like Acton, Gloucester, and Cambridge. Maybe it’s time for the property owners of Lowell to get some return on their CPA investment.

More on Registry Standardization

In my preceding post, I discussed the process of selecting the ACS computer system and how that was intended to become the standard system in Massachusetts. Unfortunately, that did not happen. Here is a list of registries in Massachusetts (in alphabetical order) along with the computer system they are currently operating. Whether the registry is "state" or "county" is also indicated:

1. Barnstable - Browntech - county
2. Berkshire Middle - ACS - state
3. Berkshire North - ACS - state
4. Berkshire South - ACS - state
5. Bristol Fall River - ACS - county
6. Bristol North - ACS - county
7. Bristol South - ACS - county
8. Dukes - ACS - county
9. Essex North - Browntech - state
10. Essex South - in-house system - state
11. Franklin - ACS - state
12. Hampden - Browntech - state
13. Hampshire - ACS - state
14. Middlesex North - ACS - state
15. Middlesex South - ACS - state
16. Nantucket - ACS - county
17. Norfolk - Browntech - county
18. Plymouth - ACS - county
19. Suffolk - ACS - state
20. Worcester - ACS - state
21. Worcester North - Browntech - state

State v county, 13 registries are state; 7 are county

ACS v Browntech, 15 use ACS, 5 use Browntech, and 1 uses an in-house system

Of the 13 state registries, 9 use ACS; 3 use Browntech, and 1 uses an in-house system.

Of the 7 county registries, 5 use ACS and 2 use Browntech.

Registry of Deeds standardization

This is a follow-up to Thursday's post about my involvement in a Real Estate Bar Association (REBA) program earlier this week (I wrote this on Friday but inadvertently did not publish it until today, Monday, March 21, 2016). During our panel discussion, several audience members asked about the elusive topic of standardizing registry computer systems. I was able to give a brief reply then, but since it is a topic of broad interest, I thought I would explore the topic in a series of blog posts. Today, I offer a history lesson on how the ACS system came to be selected for use in so many registries of deeds:

1. Back in the late 1990s, after several counties had been abolished, the Secretary of State's office began working closely with registers of deeds in Cambridge, Lowell, Worcester, and Greenfield, the only registries using the Wang computer system, and with the register from Northampton, were a system by Perceptics was in use. Neither Wang nor Perceptics was capable of handling dates beyond the year 1999.
2. Because December 31, 1999 was a hard deadline and because the process of selecting a new computer system was a lengthy one, the Secretary's office and the registers decided to "remediate" the computer code in use on Wang and Perceptics so they could operate beyond 1999 and to defer the search for the new system until after January 1, 2000.
3. However, since all involved knew that any replacement system would use Windows-compatible PCs on a wide area network, we used funding available for Y2K preparation to acquire and install the hardware and infrastructure that would be needed for the new system, whatever that system might turn out to be, prior to January 1, 2000.
4. Y2K passed without incident.
5. In 2000 and early 2001, the bursting of the dot-com bubble caused state revenue collections to plunge. As a result, the funding for a new computer system was frozen.
6. In the spring of 2001, after an indication that state Information Technology (IT) Bond that was to be used for new registry computer systems might soon become available, the five registers of deeds and the Secretary of State's office began a system selection process. A RFP was issued, vendor demonstration days were held, and site visits were made to registries of deeds in Chicago, Illinois; Philadelphia, Pennsylvania; Wilmington, Delaware; and Charlotte, North Carolina; to see the systems of the top respondent computer companies in action.
7. Although the new system would initially be installed in just these five registries, the RFP (and the philosophy of all involved) was that this new computer system would eventually be used at every registry of deeds in the state. The timetable for replacements in other registries was not firm; the understanding was that as existing computer systems needed replacement, the ACS system would be installed. But, if an existing computer system was working satisfactorily and the register of deeds in that office wished to continue using the system, no new system would be forced on that registry.
8. In April 2002, ACS was selected as the "target migration system." The first installation, in Lowell, became active on July 1, 2002. The other four registries followed in succession. Afterwards, many but not all of the registries in Massachusetts shifted to ACS which is now in place in a majority of registries in the Commonwealth.

REBA Update on Registries of Deeds

Yesterday I traveled to the new headquarters of the Real Estate Bar Association of Massachusetts (REBA) at 295 Devonshire St in Boston to participate in a panel discussion. The name of the event was "Escape from the 19th Century: An Update on the Evolving Registries of Deeds."

At the conclusion of the 90-minute program, an audience member asked me if I was "the one who wrote the blog" and said how useful and enjoyable he found it. He very tactfully used the present tense since I have fallen out of the habit of posting here. Being reminded that there is an audience for online registry news and information has prompted me to return to the blog today (and hopefully for many days to come).

My portion of the talk was mostly about the use of technology at the registry of deeds. Computers have definitely transformed the way title examinations are conducted. Opinions differ substantially on whether that's a good thing or a bad thing. It should not come as a surprise that I believe our use of technology at the registry has been a great advancement, however, I also am the first to say that it - particularly our website - could be much better than it is. All I can say is that we're working on it.

In the bigger picture, it was clear to me that all three segments of the conveyancing community involved in yesterday's discussion - title examiners, closing attorneys, and registers of deeds - are existentially threatened by technology. While real estate law and the interpretation of real estate documents has been and will continue to be incredibly complex, the act of recording and retrieving documents is not, and so technology threatens not only to change how those things get done, but to greatly reduce the market for people who perform those tasks. That's a given. What is not a given is the response of those whose jobs will change as a result of technology. As I said in my closing remarks yesterday, never in history has a group whose livelihood has been threatened by advances in technology succeeded in holding off that technology. Trying to do that just accelerates one's demise. The better response is to embrace the technology and get ahead of it. Doing that increases efficiency, provides better service, and yes, allows one to remain relevant.

Registry of Deeds closed Feb 8, 2016

The Massachusetts Trial Court has closed all courts in Middlesex County due to today's snowstorm. This means the Middlesex North Registry of Deeds will also be closed for the day.

http://www.mass.gov/courts/sitealertlanding.html#2196109

2015 Recording Statistics

The number of documents recorded in all major categories was up in 2015 compared to 2014:

Deeds increased 5% from 6561 in 2014 to 6913 in 2015;
Mortgages increased 21% from 9190 in 2014 to 11148 in 2015
Foreclosure deeds increased 35% from 155 in 2014 to 209 in 2015
Orders of Notice increased 38% from 347 in 2014 to 479 in 2015.

Total documents increased 13% from 53,584 in 2014 to 60,516 in 2015.

New Appeals Court foreclosure case

The Massachusetts Appeals Court just issued its decision in Moronta v Nationstar Mortgage. The case arose when a borrower whose home had been foreclosed and who was then being evicted, counter-claimed on several grounds, including a consumer protection violation claim under MGL c.93A that the lender knew or should have known that the borrower would be unable to repay the loan that was granted. The trial court granted Nationstar's motion for summary judgment on the grounds that there was no issue of material fact and that Nationstar was entitled to judgment as a matter of law.  The Appeals Court disagreed and returned the case to the trial court for further action.

The Appeals Court held that there was a "genuine issue of material fact whether [lender] should have recognized at the outset that borrower was unlikely to be able to repay the refinanced loans at issue" which is the standard set by the Supreme Judicial Court for finding a violation of 93A.

The decision is worth reading if only for background on how the mortgage industry worked during the boom years. The Appeals Court latched onto the terms of the new loan intended to "rescue" the borrower from the terms of the initial loan of which he was in default. The new loan was for 30 years, but the payments were amortized over 50 to reduce the monthly payment amount. This left a balloon payment due at the end of 30 years equal to 90% of the amount of the initial indebtedness, despite the borrower having payed 30 years of monthly payments. While the Appeals Court did not rule that this was a 93A violation as a matter of law, it did say it created a question of fact that was appropriate for further judicial inquiry.

October recording statistics

The total number of documents recorded in October 2015 was up 9% from October 2014 (5085 in Oct 2015 v 4915 in Oct 2014);

Deeds were up 1% (603 in Oct 2015 v 595 in Oct 2014);

Mortgages were up 7% (946 in Oct 2015 v 881 in Oct 2014);

Foreclosure deeds were down 10% (18 in Oct 2015 v 20 in Oct 2014);

Orders of Notice were up 48% (68 in Oct 2015 v 46 in Oct 2014).

Recording a Purchase and Sales Agreement

Yesterday a person tried to record a Purchase and Sale Agreement for property in this registry district. We had to turn them away for two reasons. First, Massachusetts General Laws chapter 184, section 17Astates that "No purchase and sale agreement shall be recorded in any registry of deeds unless such agreement is acknowledged by the parties agreeing to sell such real estate or one of them" and neither of the seller signatures on this P&S were acknowledged. Second, the P&S just identified the land by street address.  I don't think that "360 Gorham Street, Lowell" describes the property with the level of specificity required in a contract for the sale of land. At a minimum, I think a book and page reference to the deed that established ownership in the seller would be required, although the full legal description, or at least a copy of the deed as an exhibit, would probably be better.

Electronic connectivity problems at the registry

We've encountered some connectivity problems during the past 48 hours. Yesterday at about noon, the MassLandRecords website became inaccessible to users. The same outage knocked out our electronic recording capability. Everything within the registry continued to work fine so we were able to record walk-in documents and mail and search the database on our public access computers, but offsite business was shut down for nearly three hours. The IT people at the Secretary of State's office and associated contractors resolved the problem. I'm still not sure what caused it. We resumed full operations at about 2:30 pm so we were out of business for about 2.5 hours.

Today we had a different problem. At about 9:15 am we got error message on all of our computers. They had "lost" the connection with the server that runs our land management software (recording, search, etc). The error resolved itself in only about 4 minutes but it's the second time it has happened. The other was on October 20 which again lasted for only a few minutes. We're not sure what caused these two outages but are concerned that the are indicators that some switch or cable on our internal network may be starting to fail. We've asked the IT people to dig into it to try to preempt a bigger outage.

Because so much of our operations have shifted to electronics, an electrical outage or computer problem have a major impact on us. We could always shift back to a paper-based system but that would only be done with a multi-day outage. 

Legal Implications of Rooftop Solar Panels

Here is an article I wrote for the October 2015 edition of the Merrimack Valley Housing Report, a joint venture of UMass Lowell and the Middlesex North Registry of Deeds. For more information about the Housing Report and to subscribe to it for future delivery to your email inbox, check out MVHR webpage.  Here's my article:

Drive through any neighborhood in Lowell these days and you will notice that the matte gray shingles on many homes have been covered with shiny black solar panels. These systems capture sunlight, convert it to electricity, and use that electricity to power the house’s appliances. Excess electricity is fed back into the power grid with the homeowner getting a credit to be applied against traditional electricity usage which occurs at night when no solar power is being created.

A typical agreement between a solar company and a homeowner lasts for twenty years. During those two decades, the solar company continues to own the solar equipment installed on the homeowner’s rooftop. To protect its property, the solar company records a UCC-1 financing statement at the registry of deeds. This form identifies the property owner, the property address, and the book and page of the property owner’s deed. The purpose of this filing is to notify everyone, especially potential purchasers of the property or lenders about to refinance the homeowner’s mortgage, of the security interest held by the solar company in the rooftop equipment.  

The solar companies vigorously assert that these financing statements are not liens.  Vivint Solar Developer LLC, one of the more active companies in this region, even includes the following language in its UCCs:

COMPANY DOES NOT HAVE A SECURITY INTEREST OR LIEN ON THE PROPERTY. THIS NOTICE SHOULD NOT BE CONSTRUED AS AN ENCUMBRANCE AFFECTING TITLE TO THE PROPERTY. (Capital letters in original).

Another of the primary solar companies in this area, SolarCity, in its Frequently Asked Questions webpage responds to the question, “Is there a lien on the solar home?” with this:

No. What you’ll find on the title of a home with a SolarCity power system is a UCC-1 fixture filing. A UCC-1 fixture filing is not a lien against the home. SolarCity files a Uniform Commercial Code Financing Statement, or UCC-1, on all of our solar energy systems in the real property records where each system is located prior to or when the system is installed. We file the UCC-1 to notify anyone who might perform a title search on the address where the system is located that our property, the solar energy system, is installed on the home. This filing protects our rights as the system’s owner against any mortgage on the real property. If the lender that holds the mortgage on the real property forecloses on our customer’s home, the UCC-1 filing protects our interest in the solar energy system and prohibits the lender from taking ownership of it.

SolarCity goes on to acknowledge that “lenders prefer not to see anything on the title” so SolarCity routinely releases its UCC filing in the case of refinancing and then re-files it after a new mortgage has been recorded.  That SolarCity acknowledges the need to release its position before a lender will extend financing to the homeowner is strong evidence that the UCC filing is in fact an encumbrance on the property.

Besides complicating the refinancing process, a rooftop solar unit might also complicate the sale of one’s home. SolarCity’s website addresses this, offering three options. A property owner may transfer the existing agreement to the new homeowner; pre-pay the 20 year commitment to the solar company; or move the device to one’s new home. The website assures readers that the company will not be an impediment to the sale of a home.

The number of solar-related UCC filings is steadily increasing.  Approximately 1100 of these financing statements have been recorded at the Middlesex North Registry of Deeds with 65% of them coming in 2015 alone. Because these rooftop solar units are so new, their practical effect on owning, refinancing, and selling one’s home has not yet been fully determined. With the standard solar company-homeowner contracts being twenty years in duration, there are many rights and obligations involved. There are also many implications for lawyers, loan officers, brokers and appraisers. Should the standard purchase and sale agreement be revised to reflect the existence of a rooftop solar unit? What if the new buyer is willing to assume the agreement with the solar company but the solar company rejects that? What if the buyer wants nothing to do with solar energy and wants the unit removed? If the unit is removed, what impact will that have on the integrity of the roof? There are many unanswered questions and probably just as many questions that have not yet been identified.

Here in the northeast where energy costs are so high, the idea of powering one’s home with a rooftop solar panel is very attractive. Nothing in this article is intended to detract from that. Nevertheless, there should be a greater discussion of the real estate law consequences of these devices so that homeowners are fully aware of the consequences of adopting this type of energy solution and so real estate professionals are able to successfully navigate the legal and practical challenges posed by this new technology.

2015 recording statistics thru September

With more than three-quarters of the calendar year done, here's a comparison of the number of documents recorded in 2014 and 2015.

The number of deeds recorded from January thru September of 2015 was up 5% from the same period in 2014 (44,980 in 2015 vs 39,498 in 2014);

Mortgages were up 29% (8491 in 2015 vs 6575 in 2014);

Foreclosure Deeds up 24% (138 in 2015 vs 111 in 2014);

Orders of Notice up 35% (334 in 2015 vs 247 in 2014);

Total documents up 14% (44,980 in 2015 vs 39,498 in 2014).

Electronic Recording Statistics

In June, 43% of the documents we recorded were sent to us electronically.  In real numbers, 2886 documents were recorded electronically out of a total of 6707.  That translates into a daily average of 131 out of 305 documents coming to us via electronic recording.

The percentage recorded by electronic recording for the first half of 2015 was 44% or 12252 documents out of 27906.  The six month daily average would therefore be 103 electronic recordings out of a daily total of 235. 

A consistent 20% of our recordings come through the mail which would be an average of 47 documents per day.  That would leave 85 documents, or 36% recorded by walk-in customers.

Closer look at 2015 foreclosures

Earlier this week I wrote posts comparing recording statistics from the first half of 2015 to the first half of 2014 and another comparing recordings in June 2015 to June 2014.  The number of foreclosures was up significantly in both periods which warranted a closer look.  Here's what I found when I scrutinized foreclosure deeds recorded in June 2015 which I reported had risen from 5 to 16, a jump of 220%.

The first thing I found was that there were really only 14 foreclosure deeds during this period.  One property straddled the boundary between Tewksbury and Lowell so it showed up in the index query three different times: as Lowell, Tewksbury and "multiple" towns.  Still, the 14 foreclosure deeds still constitute a 180% increase which is also a worrisome number.

On to a closer look at the individual mortgages involved in these foreclosures:

Four of the mortgages that were foreclosed were obtained at the same time the property was purchased.  One was from 2003, two from 2005, and one from 2006, with down payments of 5%, 11%, 25% and 25%).  Two other mortgages were on properties that had been received by the borrowers as gifts.  One was a $283,000 mortgage from 2004 on a property that was obtained in 1989 for $1; the other was a $287,000 mortgage from 2014 on a property that was obtained in 2009 for $1.

The eight remaining mortgages all involved refinancings in which the borrower had purchased the property earlier with another mortgage, but then obtained a new, post-purchase mortgage which is the one that was foreclosed.  The following list shows the dates and amounts of the mortgages, followed by the dates and amounts of the purchase deeds:

• ·         2003 mortgage of $215,000; 1998 deed of $158,000
• ·        2004 mortgage of $252,000; 2003 deed of $265,000
• ·        2005 mortgage of $185,000; 1999 deed of $97,000
• ·        2005 mortgage of $280,000; 2001 deed of $305,000
• ·        2005 mortgage of $222,000; 2004 deed of $278,000
• ·        2007 mortgage of $389,000; 2005 deed of $360,000
• ·        2007 mortgage of $339,000; 1996 deed of $153,500
• ·        2009 mortgage of $348,000; 2004 deed of $175,000

Mid Year Recording Statistics

Here are some recording statistics for certain types of documents for the first half of 2015 when compared to the same period in 2014:

Deeds were down 1%, dropping from 3045 in 2014 to 3018 in 2015;

Mortgages were up 38%, rising from 3948 in 2014 to 5434 in 2015;

Foreclosure deeds were up 26%, rising from 68 to 86;

Orders of notice were up 21%, rising from 153 to 185;

Total documents were up 13%, rising from 24973 in the first half of 2014 to 28249 in the first half of 2015.

June recording statistics

There were some positive signs for the housing market in our June recording statistics.  When compared to the recording numbers from June 2014:

Deed were up 20% (640 in June 2014 to 769 in June 2015);

Mortgages were up 35% (910 in June 2014 to 1212 in June 2015);

Foreclosure deeds were up 220% (5 to 16);

Orders of notice were up 54% (29 to 31);

Total documents were up 32% (5095 in June 2014 to 6708 in June 2015).

While the increases in foreclosure deeds and orders of notice would be troubling if just the percentage increases were considered, the overall number is still low so it is less troublesome.  At some point I'll take a closer look in a future blog post at these June 2015 foreclosures and determine when the mortgages being foreclosed originated.

Independence Day schedule at the Registry of Deeds

The Middlesex North Registry of Deeds will be open for business on Friday July 3, 2015 and on Monday July 6, 2015 for normal hours.

State law mandates that when a holiday falls on a Sunday, state offices will be closed on that Monday to recognition of the holiday.  The same is not the case when a holiday falls on Saturdays.  When a holiday falls on a Saturday as is the case with the 4th of July this year, government offices do not close on the preceding Friday (or the following Monday).  They remain open on both and employees are granted a floating holiday.

Recording statistics for May

Here are the number of various document types recorded in May 2015 compared to the numbers from the same month last year:

Deeds: There was a 12% decline in the number of deeds recorded, dropping from 572 in May 2014 to 502 in May 2015.

Mortgages: There was a 24% increase in the number of mortgages, rising from 722 in May 2014 to 895 in May 2015.

Foreclosure Deeds: There as a 100% increase in the number of foreclosure deeds, rising from 12 in May 2014 to 24 in May 2015.

Orders of Notice: There was a 7% increase in the number of orders of notice, rising from 29 in May 2014 to 31 in May 2015.

Total Documents: There was a 4% increase in the total number of documents recorded, rising from 4464 in May 2014 to 4643 in May 2015.

SJC addresses bankruptcy and real estate liens

The Massachusetts Supreme Judicial Court in a decision released today clarified the effect of bankruptcy on an existing judicial lien on the debtor's real estate.  The Court held in Christakis v Jeanne D'Arc Credit Union, that unless the bankruptcy court expressly excludes such a lien, the lien survives the discharge in bankruptcy of the debtor.  The court reasoned that Federal bankruptcy law erases the personal liability of the debtor for the debt but it does not automatically erase the liability against the real property that was created when, as in this case, an Execution was recorded against the debtor's property.  So, while creditors cannot pursue any collection activities against a debtor who has been discharged in bankruptcy, the creditor can pursue the sale of the debtor's present or former real property that was encumbered pre-bankruptcy filing with a judicial lien such as an attachment or execution.

Congratulations to Lowell attorney Sandra Boulay who represented Jeanne D'Arc before the SJC.