EP 010 – Residential and Commercial Property for Property Conveyance
MARISA: So welcome, everyone, to Environmentally Speaking. I am Marisa Desautel an environmental attorney with a few decades of experience.
CLARICE: Hey, everybody. I’m Clarice. I am bringing you the questions and topics that you all requested or we randomly thought of. And today we’re kind of moving away from environmental but still in that land use field. And what are we talking about?
MARISA: Well, actually, I’m glad you just said that because the topic that we thought was relevant and timely actually does have to do with environmental and that is a common misperception about this topic. What topic am I talking about, it’s commercial due diligence and with a slight offshoot, also, for residential title searches because those are the two – residential and commercial property transactions are the two main areas for property conveyance. So there is a land use element because you’re talking about property, but it’s actually an area that includes environmental law because a lot of the materials and documents that you uncover are environmental in nature. Which should be start with, residential or commercial?
CLARICE: I don’t know. What makes you happy? .
CLARICE: Selfishly I want to start with residential because my neighbor and I just discovered we have a shared tree right on the property line.
MARISA: No kidding.
CLARICE: So we can’t decide what to do with it. So I’d like to start residential, but that’s because I’m being selfish.
MARISA: No. No. No. But what’s the deal with the tree? Are you thinking of cutting it down or sharing a swing set on it?
CLARICE: We would like to not cut it down.
CLARICE: They would like to chop it down because they think it might tip over at some point.
MARISA: Why are people always cutting trees down?
CLARICE: I know.
MARISA: Before we get started here, public service announcement. Stop with the cutting of the trees, everybody. We need the trees. They provide soil stabilization. They’re part of the ecosystem. Just stop, okay. It’s not going to fall on your house and if it does you deal with it. But continuing to cut trees down makes me mental. Okay.
[0:03:12] CLARICE: I just think it’s a pretty tree. I just love our tree.
MARISA: Yeah. It makes me nuts. Okay. So residential title searches, residential property transactions I think a good place to start because it’s where people have more experience and it’s a little easier to understand. So if you’ve ever bought or sold a home, you know that as part of that transaction you have to pay some hefty costs to both the attorney and to your lender. Why is that. Well, because if you’re borrowing money from a traditional lending institution the lending institution wants to make sure that their liability as it relates to the asset to the house is nonexistent. They’re not going to give you money if there’s a problem with the asset, basically.
So in order to track that information and ensure that liability is dealt with appropriately, there is a whole industry called land evidence records title examination. Attorneys sometimes do the title examination or they hire a subcontractor to do the title examinations. And if you ever go to your municipal – if you’re in Rhode Island your municipal town hall and tax assessors, town clerk’s office, there’s a dedicated room that you walk into and it’s just the walls are lined with stacks of land evidence records, land evidence books, plat maps. I mean, it’s a ton of information that a lot of people just don’t even know exists. Like did you know that it exists?
CLARICE: I had no idea, but now that I do know it exists I’m wondering how long before Oxygen makes this their next crime special, like the land evidence TV show. It’s going to be a thing. They’re returning out of ideas.
MARISA: That’s funny. I just had a whole bunch of images in my head of what that would look like. Anyway, so, yeah.
CLARICE: Okay. So you go into this room and it’s just full of information and maps.
MARISA: Yeah. Yeah.
CLARICE: What do you do?
[0:05:33] MARISA: And books. I mean, the books are kind of like the size of a legal pad. I’m holding up a legal pad. I don’t know why. No one can hear me holding up a legal pad. But they’re the size of either a high school book or a legal pad sometimes. And they’re just bound books that contain copies of all of the materials and documents related to royal property transactions. The materials and documents themselves are deeds, mortgage releases. Mortgage deeds are what the bank has you record when you take a mortgage out with them. And more problematic documents like tax liens, mechanics leans, documents that create liability because there’s some kind of claim to the value of the asset.
And so a lending institution wants someone, an industry professional, to go through all of the documents to a certain time in history — let’s say 30 years in Rhode Island — and put together a land evidence title examination report that tells the lending institute, hey, there’s an issue here. You’ve got a tax lien on the property that needs to get discharged before you can convey the property. There’s a mechanics lien because a contractor did some work on this house and never got paid and so they’re making a claim on the asset that needs to be discharged before the property can be conveyed, or at the closing table a check needs to be cut. Or the liability needs to be addressed in some manner that the lending institution finds satisfactory.
CLARICE: So does evidence get added to this room any time any sort of action happens on a property, or does it only happen when there’s a change? So if I bought one square acre and then the person after me bought that exact same square acre, both times that gets recorded?
CLARICE: It doesn’t have to be just a change? Okay.
MARISA: That type of transaction would require a deed that the buyer and the seller both execute. It’s notarized and then it gets recorded. Someone physically brings it to the clerk’s office. They scan it. They stamp it with a date and then a book and a page which correlates to the book that it’s going to be bound in so you can go and look it up by book and page. And that’s it. I mean, that’s your conveyance evidence. And it gets put in the book and, you know, it gets – the longer time goes on, obviously, the more book and pages we have, so you want to make sure that your deed is recorded as quickly as possible before someone else can come in and record something before you.
So it’s a pretty interesting area of law because some of it is electronic in the sense that the clerk’s office is now scanning documents. But it’s also pretty old school because in a lot of instances you have to physically go to town hall to look up some of the documents. A lot of municipalities are online now, so you can do a land evidence records search from your computer. But depending on the municipality and the age, how far back you’re looking, you have to physically go and look through these dusty old books.
[0:09:26] CLARICE: So other than making sure that the property you’re about to buy doesn’t have any financial secrets in the sense that it owes somebody some sort of money in any way, you talked a little bit about how it connects to the environment. Tell me more about that connection.
MARISA: In the residential setting I’ll take, for example, the Rhode Island Department of Environmental Management. If you’ve got wetlands on your property or a septic system on your property and the department finds – finds with a D – that you have violated state law or regulation related to your septic system or wetlands, they can issue something called a notice of violation. And that notice of violation gets recorded in the land evidence records. So anyone doing a title examination for a particular property should and will uncover the recorded notice of violation for the property.
CLARICE: [inaudible] responsible for past owners violations?
MARISA: Well, that’s a complicated question. It depends.
CLARICE: That’s my favorite legal answer..
MARISA: Yeah. Generally speaking the department will chase a chain of ownership for certain violations, but it’s completely dependent on the facts and the circumstances of the situation and the statute that you’re dealing with. But, you know, generally speaking if a bank is lending money on a residential transaction and the bank sees through its title examination report that there’s a notice of violation recorded for the property with a penalty assessed, they’re going to make the current owner deal with that, rectify the situation, put money into an escrow account to deal with it. They’re going to require something to protect themselves, so that’s where the environmental piece comes in.
And a lot of times in my experience you get a lending institution that just doesn’t have a ton of background or experience with environmental programs and so they see a notice of violation and just have no idea what the heck it is or how to deal with it. So that’s when we would get involved either through tahe lending institution getting in touch and saying, what do we do about this, or a seller or a buyer have a title examination done and saying, what do we do about this.
[0:11:55] CLARICE: So let’s shift over to commercial now.
MARISA: Well, I don’t think we should and let me tell you why. We’ve talked for 15 minutes just about on residential and the commercial side is a lot more detailed, so I think we should save it for the next podcast.
MARISA: Oh, yeah. Would this be our second part two?
CLARICE: It would.
CLARICE: We have double digits in recordings. We’ve got two part twos. Oh, guys. Merch is coming.
MARISA: Okay. So come back next time and we’ll be talking about commercial due diligence.
CLARICE: What a cliffhanger. All right, everybody. Send in your questions, comments, additional topics, your excitement for part two to Help@DesautelESQ and have a good one.
MARISA: Thank you.