Bill Summary for S 595 (2019-2020)

Summary date: 

Apr 10 2019

Bill Information:

View NCGA Bill Details2019-2020 Session
Senate Bill 595 (Public) Filed Wednesday, April 3, 2019
AN ACT TO MAKE CHANGES AND TECHNICAL CORRECTIONS TO THE GENERAL STATUTES CONCERNING REAL PROPERTY LAW, AS RECOMMENDED BY THE NORTH CAROLINA BAR ASSOCIATION.
Intro. by Daniel.

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Bill summary

Part I

Enacts Article 5, Tenancy by the Entirety, to GS Chapter 41. Recodifies the following statutes into the Article, as provided: GS 31A-5; GS 39-13.3(b) and (c); GS 39-13.5; GS 39-13.6(a), (b) and (c); GS 39-13.7; and GS 41-2.5. Defines conveyance, income, and spouses

Amends GS 41-56, GS 41-58, GS 41-59, GS 41-63, and GS 41-65 (was GS 39-13.3, GS 39-13.6, GS 39-13.7, and GS 41-2.5) to change language from "husband and wife" and "husband or wife" in existing tenancy by the entirety provisions to "spouses" and "individual." 

Amends GS 41-56(a) (was 39-13.6(b)) to provide that unless a contrary intention is expressed in the conveyance (currently, no provision providing for contrary intention expressed in the conveyance to control), a conveyance of real property, or any interest therein, to spouses vests title in them as tenants by the entirety when the conveyance is to a named individual and wife, or a named individual and husband, or a named individual and spouse (currently, a named individual and spouse is not included in language creating a tenancy by the entirety) or two named individuals, married to each other at the time of conveyance, whether or not identified in the conveyance as being husband and wife, spouses, or married to each other, if at the time of the conveyance they are legally married to each other. Amends GS 41-56(b) (was, GS 39-13.3(b)) to provide that the joinder of a spouse in a conveyance made by the grantor is not necessary but the conveyance is subject to the provisions of GS 52-10 (contracts between husband and wife) and GS 52-11 (antenuptual contracts and torts) except that acknowledgement of the spouse of the grantor is not necessary. Makes further clarifying, technical, and conforming changes to GS 41-46(c) and (d) (was GS 39-13.5 and GS 41-2.5). Eliminates the provision in GS 41-56(d) that provides that law relating to estate or inheritance taxes is not repealed or modified by the language.

Enacts GS 41-57 to establish that when an individual furnishing consideration for real property causes title to be placed in the name of the individual and the individual's spouse, a presumption is created of a gift to the individual's spouse of an entirety interest. Provides for rebutting the presumption by clear, cogent, and convincing evidence. Excepts from the presumption instances of equitable distribution under GS 50-20 and GS 50-21.

Amends GS 41-58 (was, GS 39-13.6(a)) to prohibit either spouse from signing or paying out property held by them as tenants by the entirety without joinder of the other spouse. Adds that the mortgage or sale of an interest in real property held by spouses as tenants by the entirety where one or both spouses is incompetent is governed by the provisions of Article 15 of GS Chapter 35A. Makes conforming and clarifying changes. 

Amends GS 41-59 (was, GS 39-13.6(c)) to make technical and clarifying changes. Adds that income derived from property held by spouses as tenants by the entirety becomes personal property held by the spouses as tenants in common in equal shares. 

Enacts GS 41-60 to prohibit property held by spouses as tenants by the entirety from being held liable for individual debts or subject to individual judgment liens. Provides that the property is liable for obligations of both spouses and subject to a judgment lien against both spouses. Clarifies liabilities upon termination of tenancy by the entirety upon (1) divorce of the spouses, which converts the estate to a tenancy in common, allowing a judgment lien against the spouse which is still active and unsatisfied to attach at that time to the spouse's undivided interest or (2) upon death of a spouse, which gives the surviving spouse the entire legal title, allowing a judgment lien against that spouse which is still alive and unsatisfied to attach at that time to the property. 

Enacts GS 41-61 providing that neither spouse is entitled to reimbursement of expenditures made on the property while the tenancy by the entirety exists. 

Enacts GS 41-62 providing that an insurance policy and proceeds on property held as tenants by the entirety inure to the benefit of the entire estate regardless of policy issuance or payment, unless the parties by contract have provided for another disposition, and the proceeds become divisible personal property held by the spouses as tenants in common.

Amends GS 41-63 (was, GS 13.3(4)) to make conforming and clarifying changes regarding termination of the tenancy by the entirety by conveyance from one spouse to another. Additionally provides for five events, other than death of a spouse, which terminates a tenancy by the entirety, including the voluntary sale and conveyance, voluntary partition by joint instrument, involuntary transfers, absolute divorce, and a judgment of forfeiture ordering divestment.

Enacts GS 41-64 to provide a general rule that upon death of a spouse, property held as tenants by the entirety belongs to the surviving spouse by right of purchase under the original grant or device and by virtue of survivorship. Specifies that the deceased spouse has no estate which is descendable or divisible. Modifies the slayer exception (was, GS 31A-5) to define slayer as the term is defined in GS 31A-3(3). Makes clarifying changes. 

Amends GS 41-65 (was, GS 39-13.7), concerning real property conveyed to trusts, to make conforming, clarifying, and technical changes. Adds that notice can be given in a statement of conveyance of the tenancy by the entireties real property to the trust that the real property is held under the statute and that, as of the date of the conveyance, the requirements are met providing for the application of GS 41-60(a)(1), as enacted, protecting the real property from liability for the individual debts of either spouse. Allows a person entering into a transaction involving real property held in trust under the statute to request confirmation from the trustee whether the provisions of GS 41-60(a)(1) are met at the time of the transaction. 

Part II

Enacts Article 6, Joint Tenancy, to GS Chapter 41. Recodifies provisions of GS 41-2 into the Article, as provided. Defines conveyance and termination.

Enacts GS 41-71, providing that a conveyance to two or more persons creates a tenancy in common unless a joint tenancy with right of survivorship is created as provided by the statute, or a tenancy by the entirety is created as provided by law. Establishes that a conveyance to two or more persons creates a joint tenancy with right of survivorship if the instrument expresses an intent to create a joint tenancy with right of survivorship. Provides that express intent exists, unless the instrument otherwise provides, if the instrument uses the language "joint tenants with right of survivorship," "joint tenants," "joint tenancy," "tenants in common with right of survivorship," "joint with right of survivorship," "with right of survivorship," "to them or the survivor of them," or wording of similar import.

Eancts GS 41-72, incorporating GS 41-2(b), to establish that the interests of joint tenants in a joint tenancy with right of survivorship are equal unless the instrument of conveyance provides otherwise. This provision applies to any conveyance of an interest in property created at any time that explicitly seeks to create unequal ownership interest in a joint tenancy with right of survivorship. Provides that distributions made prior to October 1, 2009, that were made in unequal amounts from a joint tenancy with right of survivorship that sought to create unequal ownership remain valid and are not subject to modification on the basis of this provision. Declares that for a joint tenancy interest conveyed to individuals married to each other (rather than husband and wife) and to one or more other joint tenants in the same conveyance instrument, the interest held by the married individuals is a tenancy by the entirety, and the married individuals are to be treated as a single joint tenant unless the instrument provides otherwise.  

Enacts GS 41-73. Details six events that result in severance of a joint tenancy with right of survivorship. Events terminating a joint tenancy due to the collective action of all tenants include: (1) conveyance to a third party by all tenants of all of their interests held in the property, (2) execution of an instrument with a third party that does not convey all of their interests held in the property to the third party, and (3) execution of an instrument by all joint tenants with the express intent to terminate the joint tenancy. Events terminating a joint tenancy due to the unilateral action of a joint tenant include: (1) conveyance to a third party of all of that joint tenant's interest in the property, (2) execution of an instrument with a third party by a joint tenant that does not convey all of that joint tenant's interest to the third party, and (3) execution of an instrument by the joint tenant where the joint tenant is both the grantor and the grantee with the express intent to terminate. Details the creation of a tenancy in common upon severance, with variations depending on the event that triggered severance, incorporating GS 41-2(a). Specifies three events that do not result in severance of a joint tenancy with right of survivorship: (1) the filing of a judgment against one joint tenant; (2) the filing of a petition by one joint tenant in bankruptcy; or (3) the divorce of married individuals holding an interest as tenants by the entirety in a joint tenancy with one or more other joint tenants, unless the divorced individuals agree otherwise, with the divorced individuals then holding their existing interest equally as joint tenants. Clarifies that the statute does not limit the manner or effect of a severance ordered by a court of competent jurisdiction. 

Enacts GS 41-74, incorporating GS 41-2(b) to provide that joint tenant interests among two or more joint tenants holding property in joint tenancy with right of survivorship are subject to GS 28A-24-3 (requirement of survival by 120 hours) upon the death of one or more of the joint tenants.

Enacts GS 41-75 to exempt from the Article's provisions executors or trustees in their representative capacity, partnerships governed by GS Chapter 59, business entities, accounts established under GS 41-2.1 (right of survivorship in bank deposits created by written agreement) or GS 41-2.2 (joint ownership of securities) to the extent inconsistent with the provisions of the statute, and life estates.

Enacts GS 41-76 to establish that common law and principles of equity supplement the Article, but in the event of conflict, the Article or state law controls. 

Repeals the remainder of GS 41-2, which is not incorporated in the new Article.

Part III

Enacts GS Chapter 47I, Notice of Settlement Act, to create an additional, nonexclusive procedure for registering a property interest in real property through the use of a notice of settlement, and establishing priority in a grantee of a conveyance or lease from the time of filing of the notice settlement. Sets forth 14 defined terms applicable to the Chapter. Allows notice agent to register an instrument, upon contract between the current owner of record and a grantee, designated a Notice of Settlement (Notice) in the county register of deeds in which real property is situated with reference to the settlement that the notice agent in good faith reasonably believes will occur within 60 days of the registration. Provides for the registration and indexing of the Notice and a registration fee. Details the required form and contents of the Notice.

Provides that the registration of the Notice is constructive notice of the anticipated settlement and interest of the grantee or mortgagee affecting the real property identified in the Notice. Provides that registration of the Notice establishes priority of title of the grantee or mortgage, as described, except over four specified types of interests or claims. Allows a closing attorney or settlement agent to pay any potential liens upon the real property that is the subject of the Notice or any known liabilities of the current owner of record that can affect the title. Clarifies that the owner of record is not relieved from any personal liability under the statute. Provides for name changes between the registered Notice to the registered settlement instrument. Allows for an attorney to sign a statement to register which provides that the attorney has updated the title on applicable online registries and identified any conveyances, liens, or encumbrances found online after registration of the Notice. Details duration, priority and nonrenewability of the Notice. Allows for an Additional Notice of Settlement. Provides a form for early termination of a Notice.

Provides a severability clause for the Chapter.

Makes conforming changes to GS 47-18, GS 47-20, and GS 161-14.1, concerning priority and subsequent recordings. 

Applies to notices of settlement registered on or after January 1, 2020.

Part IV

Makes clarifying changes to Section 4.1 of SL 2018-80 regarding the effective dates of the act.

Amends GS 46-17.1 to require the first page of all deeds or deeds of trust to be registered to show the name of the drafter (rather than the person or law firm who drafted the instrument). Clarifies that the register of deeds is not required to verify or make inquiry concerning the capacity or authority of the person or entity shown as the drafter. Makes conforming and technical deletions. 

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