This year was the second and last year of the 150th General Assembly. Any extant bill not passed this year “died”. This year’s legislative focus was the State’s budgetary issues, so there was less time for other issues; hence, fewer bills pertaining directly to real property. Most of the pertinent issues that the legislators at least tried to address were themselves tied to the impact of the general economic climate on real property, especially residential.
Bills Enacted into Law. The following bills passed, were signed by the Governor and became effective July 1, 2010:
House Bill 1191 (Act 485) amends O.C.G.A. § 48-6-69 to provide that intangible recording tax in a multicounty transaction is to be prorated among the applicable counties, with the amount due the collecting officer in each county being that proportion of the total tax due calculated by applying the ratio of the value of the real property in such county as it bears to the total value of the real properties in all counties described in the instrument to the total tax due. The proportions are to be calculated based upon the most recently determined fair market valuations of the properties as determined by the county boards of tax assessors or comparable assessing entities in any applicable state. The values must be disclosed on the face of the instrument or in an affidavit by the holder presenting the instrument for recording. The original or a duplicate original executed copy or counterpart of the instrument must be presented for recording in all counties in which the real property is located. The collecting officer of each county may rely upon the sworn original or a duplicate original certification of values in determining the amount due that county.
House Bill 1192 (Act 484) amends O.C.G.A. § 48-6-4 to provide that real estate transfer tax in a multicounty transaction is to be prorated among and paid to the applicable counties in a manner similar to that specified in Act 485 for the allocation of intangible recording tax.
Senate Bill 362 (Act 618) adds to O.C.G.A. § 44-14-361.1 a new subsection that authorizes, and provides a template form for, amendment of a claim of lien to reduce the amount claimed, with the amendment relating back to the date of filing of the original claim of lien. The amendment must be sent to the owner of the property in the same manner as required for a claim of lien.
Bills on which the Executive Committee of the Real Property Law Section Formally Advocated Positions. The Executive Committee formally voted to oppose or support, with suggested revisions, four bills. As is not unusual during a legislative session, time did not allow completion of the process for the Bar to take a formal legislative position. In any event, none of the bills passed.
These are bills in regard to which the Executive Committee took formal positions:
House Bill 970 proposed to add a new statutory requirement that any surveyor engaged to resurvey or remark the boundary lines of a property without processioners must give prior written notice to adjoining landowners if the property being surveyed contained at least 5 acres and was located in whole or in part in an agriculturally zoned area or in a political subdivision without zoning. In such event, the surveyor could not record any plat unless it bore the surveyor’s certificate that the notice requirement had been satisfied and indicated the names of all adjoiners. The surveyor would have been required to give adjoiners an opportunity to offer information regarding the location of the lines and to review and comment on the plat before certification. Failure of the surveyor to satisfy these requirements would have constituted unprofessional conduct by the surveyor.
Current processioning law specifies a statutory legal procedure to establish real property law boundaries in rural areas. The process requires involvement of the officially-appointed processioners of the applicable district to trace and mark the boundary lines. Based on that information, the county surveyor prepares a plat of survey that is admissible in evidence without further proof and is prima facie correct. “In spite of its limited scope of the remedy, it undoubtedly has a rough and ready usefulness as a substitute for the more violent forms of self-help, and has the advantage of being quick and inexpensive.” Pindar, Sec. 13-51
The Surveying and Mapping Society of Georgia (“SAMSONG”) voted to oppose the legislation. The Executive Committee also voted to oppose it. The Committee believed that the bill inappropriately placed upon the surveyor, a private party, the substantive requirements that the statute currently places upon processioners and the county surveyor, all of whom are public officials. The Committee believed that these additional requirements risked uncertainty in the confirmation of the establishment of boundary lines when the objective evidence otherwise given priority by statute and case-law raised no issues, thereby adding unnecessary time and expense to real property transactions, to the detriment of consumers.
A related resolution, House Resolution 1973, received its first reading on April 14, 2010. This resolution recited that “Georgia’s property law as it concerns the establishment of boundaries and surveying and its rules, regulations, and conduct has been determined to be in need of modernization and standardization;” that ”the use of processioning is outdated, and the law needs to be modernized to encompass current practices” and that “it would be beneficial to bring together surveyors, real estate lawyers, title companies, and other interested parties in Georgia to determine how Georgia property law may be updated to best serve the citizens of Georgia.” It proceeds to propose the creation of the “House Study Committee on Property Law Modernization and Standardization.” The committee would be composed of five members of the House of Representatives to be appointed by the Speaker of the House. The charge of the committee would be to “undertake a study of the establishment of the minimum standard of rules, regulations, and conduct in the area of surveying and establishing boundaries.” This Resolution also did not pass.
House Bill 1048, had it become law as originally drafted, would have required that all deeds conveying an interest in real property on which is situated a residential or commercial structure include a certification by a person employed by a licensee under Chapter 45 of Title 43 (i.e., a business entity engaged in the business of structural pest control which holds a valid license) that such structure had been inspected for termites and other wood-destroying organisms and stating the results of the inspection. The certification would be required to be delivered to each purchaser before the time of conveyance. The Executive Committee voted to oppose this bill, which was ultimately revised in committee to require the delivery of a termite inspection certificate not later than closing instead of a legend on the deed.
Senate Bill 494 proposed to prohibit so-called “transfer fee covenants”. These covenants provide that, upon each sale of a property subject to the covenants, a transfer fee (typically equal to 1% of the sale price) must be paid to a private third party (typically the property’s developer or its trustee), who otherwise has no connection to the property or the transaction. The developer or other seller establishes the covenant by either recording a covenant in the local public record or including the covenant in the deed for the property or any portion of it. Typically, these covenants are in effect for 99 years and are applied to residential properties, although they are also of concern in regard to commercial properties.
The status of these covenants under existing law is unclear. Proponents of the covenants argue that they constitute “covenants running with the land” and are therefore enforceable. Critics argue that they do not satisfy the requirements for “running with the land” and therefore do not bind successors in ownership. A few states have enacted legislation to address private transfer fees. California’s transfer fee statute allows them but requires disclosure of the transfer fee covenant in a separate document printed in 14 point bold face type. Texas’s statute is restricted to residential property only and is written so that arguably it prohibits parties from allocating the responsibility for payment to the purchaser (according to this interpretation, a transfer fee covenant should be allowable so long as the seller, but not the buyer, is allocated responsibility for paying the fee, but there is an effort underway to remove that “gap” in the statute). Florida, Missouri and Oregon have each passed statutes prohibiting such transfer fee covenants, subject to certain narrow categories of exclusions (e.g., transfer fees payable to §501(c)(3) entities and those payable to owner’s associations are allowed). Kansas has enacted a complete prohibition against all such instruments without any exclusions. Utah is currently considering a statute along the lines of California.
Proponents of these covenants, such as Freehold Capital Partners, argue that these transfer fees represent a future income stream that can be monetized, and perhaps eventually pooled together for securitization (just as mortgages have been), enabling land owners to sell their transfer fee interests in the securities markets and thus creating a source of capital that can be used to pay off mortgage loans, other debt, develop infrastructure and so on. Opponents, including American Land Title Association (“ALTA”), counter that these covenants:
“force consumers to pay more to own property in a less secure land transfer system. These covenants require consumers to pay thousands of dollars to third parties that hold no ownership interest in the property for the right to buy or sell real estate. These covenants provide no benefit to consumers or the public, but rather cost consumers money, complicate the safe, efficient and legal transfer of real estate and depress home prices.”
(quoted from ALTA Private Transfer Fee Covenant One Pager). As noted above, the responses of the states that have considered the matter range from prohibiting the fee covenants outright to prescribing specified limitations and requiring certain disclosures.
The Executive Committee voted to support SB 494 with modifications, because it believes that these covenants, if their use is not curbed, are likely to impose increased and unnecessary risk upon title examiners and title attorneys and to increase the cost and complexity of, and the time required to close, real estate transactions. In addition, these covenants are potential restraints on alienation which would impact the ability of subsequent sellers to sell the property unrestricted. The Committee targeted its suggested modifications to gaps utilized by proponents of the covenants to avoid statutory restrictions in other states.
House Bill 499 proposed to establish “tenancy by the entireties” in Georgia. One aspect of this estate is that, generally speaking, property so held is not subject to the debts of one of the spouses unless the other consents. The estate therefore may be a means, for example, to protect a home from being seized by a creditor of one of the spouses. This asset-protection attribute was presumably the motivation for this bill.
Georgia currently does not recognize tenancy by the entireties. A husband and wife owning Georgia property jointly do so either as joint tenants or tenants-in-common, depending on the terms of the vesting conveyance. These estates do not provide the same level of nondebtor asset protection as is afforded by entireties. There is an ample body of case law interpreting these existing forms of real estate holdings and the new law would have to be interpreted by the courts.
The Executive Committee, after communications and discussions with the sponsor of the Bill and with the leadership of the Family Law Section, voted to oppose the bill. Being a new concept for Georgia, it was unclear what impact the bill would have on other aspects of Georgia law. The Family Law Section had numerous concerns. From the perspective of the Real Property Law Section, the Executive Committee believed that the adoption of tenancies-by-the-entirety without a comprehensive vetting was ill-advised. The Committee was concerned that passage of the bill without that level of review could result in unintended consequences and liability to title examiners, real property law practitioners and their clients, including property owners and lenders.