The Role Of The Title Attorney In The Process Of Buying A Home

Over the past year, as a result of COVID-19 we have seen a surge in buyers looking to live in and work from homes in the Hamptons. Typically buyers focus on location, price, amenities, financing, how soon they can gain occupancy, and a myriad of other features, depending upon their particular needs and preferences. Little thought is given to issues of prior ownership, liens, encumbrances, and other matters that are the subject of a title search. In order to explore this critical subject, I interviewed (by telephone) Steve Bodziner, a New York State attorney and manager of Bridge Abstract, a fully owned subsidiary of Dime Community Bank. Steve’s office is located in Bridgehampton, N.Y.

In the typical real estate transaction, title attorneys don’t usually share the spotlight with real estate brokers, attorneys, home inspectors, bank appraises, to name a few, so let me ask you to provide the reader with some facts about your professional background.

SB: I’m a native of Brooklyn, NY. I graduated from Brooklyn Law School in 1978 and was admitted to the bar shortly thereafter. For seven years, my law office was on Court Street in Brooklyn. I started my first abstract company in 1989 and my current one, Bridge Abstract in 2004 as a wholly owned subsidiary of Bridgehampton National Bank (BNB), which on February 1st merged with Dime Savings and is now known as Dime Community Bank, of which I am an officer. I moved from Brooklyn to East Hampton when I became affiliated with BNB.

Tell us the basics of a title search.

SB: We check the records of a property recorded in the County Clerk’s Office of the County where the property is located. We go back fifty years or more to identify current and previous owners (chain of title), whether the property is owned by one person (severalty), two or more as tenants in common or jointly, or as a married couple (by the entirety). In what form the buyers take ownership is very important in the event of the death of the owner, a divorce, especially at a time when divorces are common. We also look at the dates that title passed throughout the history of ownership, any recorded financial liens (tax liens, mortgages, mechanics liens), and judgments outstanding.

And those tax liens include the New York’s Seller’s Transfer Tax, New York’s “Mansion Tax,” and the Community Preservation Fund Tax in Effect in the five towns of the Peconic Bay Region, all of which have to be paid at the closing?

SB: Yes. Except for any exclusions or exemptions that may apply.

Since the Supreme Court struck down the Defense of Marriage Act, have you seen an increase in purchases by same sex couples?

SB: Yes, we have. Same sex couples may now own properties by the entirety.

The NYRPL prohibits a real estate broker from filing a lien for an unpaid commission on the sale of a property of one to four units. It does permit a filing of an affidavit of entitlement record in the County Clerk’s office, but doesn’t affect the transfer of title, but does enable the County Clerk to hold in escrow the amount of the commission in dispute. Have you encountered any of those situations?

SB: Yes, but only after the matter has been resolved. Otherwise, we play no role in those situations.

You mentioned that you checked all recorded documents going back fifty years or more. Home ownership in the Hamptons may go back well beyond fifty years. How do you make representations about those properties?

SB: There is no fixed time for how far we have to go back. What applies is what’s known as the “industry standard,” a point at which, based upon the examiner’s professional experience, the owner is presumed to have “good title.”

Let’s talk about two litigious subjects: prescriptive rights and adverse possession.

SB: I spend the majority of my time on those issues, especially adverse possession. To acquire a prescriptive right to use an adjoining property, the property must have been used openly, notoriously, without permission, and continuously for ten years, either by a single user or any previous users that adds up to ten years. To claim ownership by adverse possession, the structure on an adjoining property must have been there for at least ten years. The State Legislature amended the law with respect to adverse possession claims after July 7, 2008 to say that certain encroachments that previously may have given rise to adverse possession, such as shrubs, a fence extending no greater than one foot onto the adjoining property, a shed that extends no more than one foot onto the adjoining property, mowing, and other maintenance activities are de minimis and do not give rise to adverse possession. It also redefined what constitutes a claim of right: being able to establish that you have a legitimate reason to believe you owned the property in question.

Didn’t the law state that the new law only applied to claims of adverse possession going forward from July 7, 2008?

SB: It did, and those issues have to be decided on a case by case basis.

Define for us the Common law term, “laches,” and how it applies to claims of adverse possession?

SB: Laches is an undue delay in asserting a right which may result in the loss of the right! So if you sit back for up to ten years waiting to file a claim of adverse possession, the court may deny your claim.

Let’s discuss the issue of title insurance. My understanding is that Fannie Mae and Freddi Mac, the biggest purchasers of loans on the secondary market, will not buy mortgages where the borrower has not purchased title insurance for the lender. Is that correct?

SB: Yes. But the borrower is not required to purchase a fee policy, a policy covering the borrower. Nor is a cash buyer required to buy either a fee policy nor a policy for the lender since there is no lender. What is common in today’s market, sellers don’t want the buyer’s ability to close contingent upon a mortgage. So the buyer pays cash and then gets a loan from a lender after, or even at the closing.

What effect has COVID-19 had on the process from your perspective?

SB: It has made the closing process much more difficult. Documents are exchanged and signatures have to be obtained remotely. Often the attorney for the bank doesn’t attend the closing. I had a situation where the seller and my closer had to exchange documents through a window because the owner did want her to come into the house.

The Statute of Frauds requires that contracts for the transfer of property must be in writing to be enforceable, and recently, it has been determined that the signatures of buyers and sellers may be done electronically. Doesn’t that facilitate the process?

SB: Contracts may be signed and transmitted electronically, but in order to record deeds, mortgages, power of attorneys in the public record, a wet signature is required, and that requires the original document.

The last thing I would like you to clarify is the issue of certificates of occupancy. Am I correct that C of O’s are not a condition of title?

SB: They are not a condition of title, but we do note them in our report. They may be a condition of the contract that requires the seller to produce all required C o O’s by closing. But that is a contract issue between the buyer and seller.