Must a right of first refusal be recorded in order to defeat the claim of a buyer of real estate who recorded his own option to purchase?

According to a recent decision of the North Carolina Court of Appeals (Anderson v. Walker, No. COA 17-782, 3 July 2018), the answer is “No” in circumstances where the would-be buyer had actual knowledge of another person’s unrecorded rights.

The Court of Appeals ruled that a tenant who had negotiated “preemptive rights” in a lease renewal that also included a right of first refusal agreement (ROFR) was not required to record the ROFR in order to enforce it. The Court stated that “according to the plain language of the [recordation] statute, [N.C. Gen Statutes §47-18], a right of first refusal need not be recorded in order to be valid.” The would-be buyer argued that the tenant’s failure to record the lease or the ROFR which was part of the lease renewal was fatal to his claim, but the Court disagreed.

“A right of first refusal is enforceable against a subsequent purchaser for value who has ‘actual or constructive knowledge of the preemptive right'” the Court ruled. Constructive knowledge or notice may be disclosed in “muniments of record title” or otherwise “brought to the notice of the purchaser in such a manner as to put him upon inquiry.”

Ellinger Carr lawyers often work on commercial real estate transactions involving ROFRs, options to purchase, and purchase and sale agreements. Although the Court ruled in this case that the recordation of the ROFR was not required by the State statute, it may be a good idea to record the right of first refusal agreement in the land and title records. This is particularly true for rights that may not be exercised for many years, in order to put potential third party buyers on notice of the ROFR, in cases where the owner or seller forgets, or refuses, to give notice to the holder of the preemptive rights.

Ellinger Carr is a business law and commercial real estate law firm based in Raleigh, North Carolina. Ellinger Carr lawyers are experienced and knowledgeable counselors, transaction leaders, and business problem solvers, admitted to practice in North Carolina, South Carolina, Florida, Louisiana, Virginia and New York. For assistance in commercial real estate, corporate law and business development matters, please call 919-785-9998 or email Susan Ellinger at sellinger@ellingercarr.com, Steven Carr at scarr@ellingercarr.com, Heather McDowell at hmcdowell@ellingercarr.com, and Sarah Goodin at sgoodin@ellingercarr.com. 

Clients in need of a new power of attorney for estate planning purposes, or for real estate transactions, should be aware that their lawyers will need to comply with a new law that became effective on January 1, 2018.

As Janice Davies, an attorney at Davies Law PLLC in Charlotte wrote in a recent article published online by Lawyers Mutual,

“The North Carolina Uniform Power of Attorney Act is effective January 1, 2018. Governor Cooper signed Senate Bill 569, “An Act to Adopt the Uniform Power of Attorney Act in this State,” into law as Session Law 2017-153 on July 20, 2017. Session Law 2017-153 has no effect on health care powers of attorney and consents to health care for minors in Articles 3 and 4 of Chapter 32A of the North Carolina General Statutes. Chapter 32A is repealed by Session Law 2017-153 except for Articles 3 and 4 of Chapter 32A.

“A power of attorney is a common form of surrogate decision making that requires familiarity with agency law and the [new] Act . . . Chapter 32C of the North Carolina General Statutes is the new North Carolina Uniform Power of Attorney Act. There is a new “North Carolina Statutory Short Form Power of Attorney” in Chapter 32C effective on or after January 1, 2018. . . . North Carolina powers of attorney must be executed in accordance with Chapter 32C on or after January 1, 2018. . . .

“Powers of attorney executed before January 1, 2018 that are valid under Chapter 32A are still valid on or after January 1, 2018. However, the statutory short form general power of attorney in G.S. 32A-1 should not be executed on or after January 1, 2018. Chapter 32C does retain the powers conferred in G.S. 32A-2 for the former statutory short form set out in G.S. 32A-1 for application of the description of those powers to those statutory short forms executed before January 1, 2018.”

See the entire article at http://www.lawyersmutualnc.com/risk-management-resources/articles/are-you-aware-of-the-new-north-carolina-power-of-attorney-statute-effective-january-1-2018?

Ellinger Carr lawyers are keeping up with changes in the laws affecting our clients’ legal matters, and we can assist clients with a power of attorney (POA) suitable to their specific needs, including a new short-form POA, and a new limited POA for real estate transactions. Other changes in the new Act include automatic durability of POAs under the new form, and provide for the ability to appoint a guardian in the POA document if the principal becomes incompetent in the future.

Ellinger Carr is a business law and commercial real estate law firm based in Raleigh, North Carolina. Ellinger Carr lawyers are experienced and knowledgeable counselors, transaction leaders, and business problem solvers, admitted to practice in North Carolina, South Carolina, Florida, Louisiana, Virginia and New York. For assistance in commercial real estate, corporate law and business development matters, please call 919-785-9998 or email Susan Ellinger at sellinger@ellingercarr.com, Steven Carr at scarr@ellingercarr.com, Heather McDowell at hmcdowell@ellingercarr.com, and Sarah Goodin at sgoodin@ellingercarr.com.

Although Robert Frost’s neighbor insists in the poem, Mending Wall, that “Good fences make good neighbors,” fences don’t always prevent boundary disputes and protracted litigation between neighbors, as the parties learned in a recent North Carolina Court of Appeals decision handed down on January 2, 2018. And even good surveys don’t always prevent or resolve boundary disputes.

In Parker v. DeSherbinin, Case Number COA 17-377-2 the Court determined that one of the neighbors laying claim to a disputed area on both sides of a chain link fence separating the properties may be entitled to the disputed area on the basis of adverse possession and the doctrine of “lappage” if the claimant can show that a metes-and-bounds description and incorporated reference in the survey contained in his deed can be located on the ground sufficient to establish possession of color of title to the disputed area.

In this case, the claimant was a prior owner who acquired his property a number of years before the neighbors came along. Claimant, Mr. Parker, acquired his property and recorded a deed in 1984, and his property was described in a 1982 survey which was referenced in the deed. In 2013, the neighbors acquired the adjacent vacant lot and hired a surveyor to prepare a plat to submit with their plan to build a residence. The new survey made no reference to the 1982 survey and established a boundary between their property and Mr. Parker’s property approximately 5 feet south of the line established in Mr. Parker’s 1982 survey.

A chain link fence was shown on the 2013 survey. The fence was installed by Mr. Parker, to the north of the boundary line between the parties’ properties and within the disputed area. After attempts to resolve the dispute informally, a complaint by Mr. Parker objecting to his new neighbors’ building permit, and after at least two more surveys were performed and prepared, the litigation ensued and the case was ultimately tried in New Hanover County in 2016, and then appealed to the Court of Appeals, which reheard the case after a prior opinion issued in October of 2017, to seek to establish the true boundary line and to resolve the dispute.

And the case isn’t over yet. The Court of Appeals remanded the matter to the trial court and ordered one of the four surveyors already employed by the parties to do another survey and to physically locate, fit and describe the location of the chain link fence in the disputed area in order to quiet title once and for all.

Ellinger Carr lawyers handle commercial real estate transactions, sometimes involving boundary disputes, chain link fences and other types of fences, and many other legal issues arising in real estate transactions, including legal descriptions, leases and lease negotiations, conditions, covenants and restrictions, title, title insurance and survey matters.

Ellinger Carr is a business law and commercial real estate law firm based in Raleigh, North Carolina. Ellinger Carr lawyers are experienced and knowledgeable counselors, transaction leaders, and business problem solvers, admitted to practice in North Carolina, South Carolina, Florida, Louisiana, Virginia and New York. For assistance in commercial real estate, corporate law and business development matters, please call 919-785-9998 or email Susan Ellinger at sellinger@ellingercarr.com, Steven Carr at scarr@ellingercarr.com, Heather McDowell at hmcdowell@ellingercarr.com, and Sarah Goodin at sgoodin@ellingercarr.com.

The Ellinger Carr law firm is proud to announce that Heather D. McDowell has joined the firm as a partner.

Heather joined Ellinger Carr in 2009 and focuses on complex multi-million dollar commercial loan and real estate transactions and contract negotiations, affordable housing and historic rehabilitation tax credits, franchise negotiations and employment law.

Ellinger Carr is a business law and commercial real estate law firm based in Raleigh, North Carolina, with a special emphasis on affordable housing and community development. Our lawyers are experienced industry leaders and business problem solvers, advising and assisting nonprofit and for-profit developers, housing authorities, lenders, and investors for over 30 years.

www.ellingercarr.com  919.785.9998

Heather McDowell and Steven (Steve) Carr of the Ellinger Carr law firm will be featured speakers in an upcoming program on Title Law in North Carolina.

In the National Business Institute continuing legal education program scheduled March 14, 2017, in Raleigh, Heather McDowell will be leading on the subjects of preparing the title opinion and issues in title insurance.  Steve Carr will be presenting on transfer of title and ethical considerations in real estate transactions and reviewing the latest ethics opinions and court cases affecting practitioners and their clients in real estate matters.

Ellinger Carr lawyers are frequent speakers and presenters concerning legal issues arising in real estate transactions, including legal descriptions, leases and lease negotiations, conditions, covenants and restrictions, title, title insurance and survey matters.

Ellinger Carr is a business law and commercial real estate law firm based in Raleigh, North Carolina. Ellinger Carr lawyers are experienced and knowledgeable counselors, transaction leaders, and business problem solvers, admitted to practice in North Carolina, South Carolina, Florida, Louisiana and New York. For assistance in commercial real estate, corporate law and business development matters, please call 919-785-9998 or email Susan Ellinger at sellinger@ellingercarr.com, Steven Carr at scarr@ellingercarr.com, Heather McDowell at hmcdowell@ellingercarr.com, and Sarah Goodin at sgoodin@ellingercarr.com.

The North Carolina Supreme Court announced its decision on August 19, 2016 in the Eastern Carolina Regional Housing Authority v. Lofton case.  This case was appealed by the Housing Authority from the earlier (2014) Court of Appeals decision entered in favor of the public housing tenant, Ms. Sherbreda Lofton. View the case in this link. Eastern Carolina Regional Housing Authority v. Lofton decision NC Supreme Court 8.19.16 32PA15-1.

The highlight of this decision is that the Court of Appeals went too far in requiring or permitting an unconscionability standard or equitable defense in summary ejectment proceedings.

The Supreme Court said that “unconscionability is not a consideration in summary ejectment proceedings. To prevail in a summary ejectment proceeding under North Carolina law, a landlord must establish by a preponderance of the evidence that a tenant breached the lease.”

And, because this case involves more than a private landlord-tenant relationship, the Supreme Court said that “when the government is the landlord, certain duties arise under applicable law.” In this case, the Supreme Court affirmed the outcome of the Court of Appeals and the trial court decisions ruling against the Housing Authority, “namely that summary ejectment was inappropriate in this case” but “we do so for a different reason. We hold that plaintiff [the Housing Authority] failed to exercise its discretion as required by federal law before pursuing defendant’s eviction.”

The Supreme Court reviewed the federal law and the U.S. Supreme Court’s Rucker decision of 2002, HUD regulations and post-Rucker HUD guidance, emphasizing “the importance of housing officials exercising discretion before pursuing these ‘no-fault’ evictions.”

So, with this decision, Housing Authorities don’t have to prove that their decisions to evict in cases involving drug-related crimes are “not unconscionable” as the Court of Appeals would have required.

But, we do have an affirmation that what has been considered a “one-strike” or “no-fault” eviction rule, if a public housing tenant or her guests have committed drug-related crimes, is NOT the rule of law in North Carolina. With this decision, the North Carolina Supreme Court has ruled that such evictions or summary ejectments must be done only after the Housing Authority exercises its discretion whether an eviction, based upon the actions of third parties, is appropriate in the circumstances — an exercise of discretion in such cases “guided by compassion and common sense.”

The Supreme Court said: “Discretion ‘involve[s] an exercise of judgment and choice, not an implementation of a hard-and-fast rule exercisable at one’s own will or judgment.’”

Ellinger Carr is a business law and commercial real estate law firm based in Raleigh, North Carolina.   Ellinger Carr lawyers are experienced and knowledgeable counselors, transaction leaders and business problem solvers, admitted to practice in North Carolina, South Carolina, Florida, Louisiana and New York.  For assistance in affordable housing, HUD financing, commercial real estate and corporate and business development matters, call 919-785-9998 or email Susan Ellinger at sellinger@ellingercarr.com, Steven Carr at scarr@ellingercarr.com, Heather McDowell at hmcdowell@ellingercarr.com and Sarah Goodin at sgoodin@ellingercarr.com.