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Certification of Trust: A New Title Clearance Document

By Douglas M. Karlen
Vice President and Regional Counsel 
Chicago Title Insurance Company

DOWNLOAD THE ARTICLE HERE.

Since August 10, 2015, trustees of personal trusts have enjoyed the benefits of a new statute that protects the privacy of trust information. An amendment to the Trusts and Trustees Act reduces, or even eliminates, the need for a trustee to deliver a copy of a personal trust agreement to anyone other than a beneficiary. See Public Act 99-337 (SB 1877), effective August 10, 2015, codified at new 760 ILCS 5/8.5. The new section creates a Certification of Trust upon which third parties may rely. In doing so, Illinois joins several other states that protect the privacy of trust information and documents.

New Section 8.5 applies to personal trusts (revocable, irrevocable, living, etc.). It does not apply to Illinois land trusts. For example, it does not apply if title to real estate is vested in an institutional trustee, such as the Chicago Title Land Trust Company.

Title companies have adjusted title examining and clearance practices to accommodate the new Certification of Trust.

THE CERTIFICATION OF TRUST

Instead of furnishing a copy of the trust instrument to a person other than the beneficiary, the trustee may furnish to the person a Certification of Trust. A Certification of Trust form is set out at 760 ILCS 5/8.5(j), but use of this statutory form is not mandatory. Like the statutory form, however, a non-statutory Certification of Trust must contain the following information:

  1. A statement that the trust exists and the date the trust instrument was executed;
  2. The identity of the settlor;
  3. The identity and address of the currently acting trustee;
  4. The powers of the trustee;
  5. The revocability or irrevocability of the trust, whether the trust is amendable or unamendable, and the identity of any person holding a power to revoke or amend the trust;
  6. The authority of co-trustees to sign or otherwise authenticate and whether all or less than all are required in order to exercise powers of the trustee;
  7. The trust’s taxpayer identification number; and
  8. The manner of taking title to trust property.

See 760 ILCS 5/8.5(a).

A Certification of Trust need not include the dispositive terms of the trust, 760 ILCS 5/8.5(d), but it must include a statement that the trust has not been revoked, modified, or amended “in any manner that would cause the representations contained in the certification of trust to be incorrect.” 760 ILCS 5/8.5(c). One or more of the trustees must sign the Certification, and the recipient (third party) may require an acknowledgement. 760 ILCS 5/8.5(b).

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An Introduction to the 2016 Minimum Standard Detail Requirements for ALTA/NSPS Land Title Surveys

DOWNLOAD THE ARTICLE HERE.

Introduction

The ALTA/NSPS Liaison Committee (consisting of both the American Land Title Association and the National Society of Professional Surveyors) has approved modifications to the 2011 version of the Minimum Standard Detail Requirements for ALTA/NSPS Land Title Surveys. The new version will be referred to as the 2016 Standards.

These standards will be effective on February 23, 2016. Why was this date chosen? In ancient Roman religion, Terminus was the god who protected boundary markers. The name “Terminus” was the Latin word for a boundary marker. On February 23rd, Roman landowners celebrated a festival called the “Terminalia” in honor of Terminus.

This article is intended to provide a broad overview of those changes to the land title survey standards that will be of the most significance to the title insurance industry and real estate practitioners.

A complete copy of the 2016 Standards can be found HERE.

It is suggested that you print out a copy and follow along as the sections are discussed below:

Section 5 Fieldwork

Section 5 of the 2016 Standards generally concerns the fieldwork of the surveyor.

Section 5.B.ii. Rights of Way and Access

Section 5.B.ii. of the 2011 Standards imposed a duty on the surveyor to show the “width and location of the traveled way.” Under the 2016 Standards, this amended section now requires the land surveyor to also show “the location of each edge of the traveled way” unless there is no access from the land to said traveled way. In addition, the 2016 Standards include a reference to divided streets and highways.

The term “traveled way” is a term of art, used in many court decisions. It has been defined as “the portion of the roadway used for movement of through traffic.”

In other words, although a plat of a residential subdivision may indicate that the dedicated roads have a width of 50 feet, the distance from one edge of the surface of the asphalt to the opposite edge of the asphalt may be only 29 feet. The land surveyor will have to show both widths—the width of the dedicated road and also the width of the asphalt—on the plat of survey.

This additional information should be helpful to those trying to determine access to a particular parcel of land, including curb cuts.

Section 5.B.ii. of the 2016 Standards is as follows. The italicized words are new.

The name of any street, highway or other public or private way abutting the surveyed property, together with the width of the traveled way and the location of each edge of the traveled way including on divided streets and highways. If the documents provided to or obtained by the surveyor pursuant to Section 4 indicate no access from the surveyed property to the abutting street or highway, the width and location of the traveled way need not be located.

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Ask the Experts: Construction

TRUE OR FALSE: Title companies analyze three different points when a lender is seeking construction coverage: (1) contracts let prior to closing; (2) contracts which will be let subsequent to the closing but paid for out of the proceeds of the insured mortgage; and (3) how much of the loan will be disbursed at closing.

TRUE!  One of the more complex and confusing issues that can rear its ugly head at a real estate closing is that of the existence of past, present, or, in some cases, future contracts for construction on the land. These contracts can create headaches for owners, purchasers, lenders, attorneys, and title insurers if the issues surrounding these contracts are not dealt with prior to closing. Check out our article, "Construction Issues at Closing: A Title Company's Perspective" which will help identify construction issues that arise at closing and how Chicago Title Insurance Company deals with these issues.

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#CTtalk: What’s New in Mortgage & Mortgage Foreclosure Law

By Douglas M. Karlen
Vice President and Regional Counsel 
Chicago Title Insurance Company

DOWNLOAD THE ARTICLE HERE.

Several new laws affecting mortgages and mortgage foreclosures recently became effective. This article will describe these new laws.

Mortgage Originators

Public Act 99-113 (HB 2814), effective July 23, 2015, amends Section 1-3 of the Residential Mortgage License Act of 1987, 205 ILCS 635/1-3, to counteract the holding in a recent Illinois appellate court case. See First Mtg. Co. v. Dina, 2014 IL App. (2d) 130567 (a mortgage is void ab initio if originated by an unlicensed lender and any judgment of foreclosure based on such a mortgage is also void).

Section 1-3, entitled Necessity for License, is amended at paragraph (e) to state:

A mortgage loan brokered, funded, originated, serviced, or purchased by a party who is not licensed under this Section shall not be held to be invalid solely on the basis of a violation under this Section.

The amendment goes on to state that this enactment is declarative of existing law—the usual remark when the legislature seeks to upend a judicial ruling.

COMMENT

The amendment effectively eliminates one defense to a mortgage foreclosure proceeding. See also LVNV Funding, LLC v. Trice, 2015 IL 116129 (a judgment is not void if the court that entered the judgment had both personal and subject matter jurisdiction).

Deceased Mortgagors

In a mortgage foreclosure proceeding, case law, court rule, and statute now require the appointment of a special representative for a deceased mortgagor in order to vest subject matter jurisdiction in the trial court. See ABN AMRO Mtg. Group, Inc. v. McGahan, 237 Ill.2d 526 (2010); Ill. S. Ct. Rule 113(i) (referencing 735 ILCS 5/13-209); and Section 15-1501(h) of the Illinois Mortgage Foreclosure Law, 735 ILCS 5/15-1501(h). Public Act 99-24 (SB 735), effective January 1, 2016, amends Section 15-1501(h) to clarify when a special representative need not be appointed. As amended, paragraph (h) states that the court is not required to appoint a special representative for a deceased mortgagor if there is a:

  1. Living person, persons, or entity holding a 100% interest in the property as the deceased mortgagor’s surviving joint tenant or surviving tenant by the entirety;
  2. Beneficiary under a transfer on death instrument (TODI) executed by the mortgagor and recorded prior to the mortgagor’s death;
  3. Person, persons, or entity who acquired title through a conveyance of the property from the mortgagor prior to the mortgagor’s death;
  4. Person, persons, or entity who acquired title through a conveyance of the property from the administrator or executor of the mortgagor’s probate estate; or
  5. Trust that acquired title through a conveyance of the property from the mortgagor or from any other person, persons, or entities identified above.

COMMENT

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#CTtalk: Limited Liability Companies in Illinois

By Ann E. Minarik
Assistant Vice President and Commercial Counsel
Chicago Title Insurance Company, Chicago NCS

DOWNLOAD ARTICLE HERE.

Introduction

Illinois was the 18th state in the Union to adopt a version of the limited liability company concept. The original Illinois Limited Liability Company Act (“ILLCA”) [1] took effect as of January 1, 1994. Since 1994, all 50 states have enacted similar legislation. The ILLCA is by no means a carbon copy of any other state’s version, and revisions to ILLCA, effective January 1, 1998, affect all Illinois limited liability companies (“LLC”) as of January 1, 2000. The most noteworthy revisions regard (1) permitting almost perpetual life for LLCs, (2) authorizing single-member LLCs and (3) permitting the conversion and merger of LLCs and other entities.

Illinois real estate practitioners have embraced the LLC concept, and the popularity of LLCs has grown steadily every year since 1994. A high percentage of commercial real estate transactions in which the parties would customarily have conveyed the land into land trusts, corporations or partnerships are increasingly using existing or newly-created LLCs. From a title company’s perspective, it is common to see single-purpose LLCs formed. An example of this is an LLC with a name bearing a property address, with the sole purpose of this LLC to acquire and manage this particular real estate. Members and managers of this single-purpose LLC may be members and managers of other similar single-purpose LLCs.

What is an LLC and what makes it so popular? How does it differ from corporations and partnerships, since it appears to be a blend of both? An LLC is an unincorporated entity and offers its members (with some exceptions) protection from personal liability for a debt, obligation, or liability of the LLC solely by being or acting as a member or manager.[2] Another attractive feature is favorable tax treatment. Although an LLC may elect to be taxed as a corporation, most LLCs are “pass through” entities. Typically, a multiple member LLC is treated for tax purposes, like a partnership with members paying federal taxes, and no federal tax owed by the LLC.[3] A single member LLC can be treated, for tax purposes, as a “disregarded entity,” with all tax ramifications reported by the sole member. LLCs offer flexibility in operation in that they may be managed by members, designated managers, or a combination of both.

Formation of an LLC

When a new LLC is created, a document called Articles of Organization must be executed and filed with the Illinois Secretary of State’s office along with the appropriate filing fee. The Secretary of State’s form LLC-5.5 must be used. Articles of Organization contain information about the name, principal place of business, purpose of the LLC and the name of the registered agent. The LLC must contain one of the following designations in its name: (1) LLC (2) L.L.C. or (3) Limited Liability Company. [1]   The LLC name cannot contain any word or abbreviation that confuses the LLC with any other type of entity such as (1) Corporation (2) Corp. (3) Incorporated (4) Inc. (5) Ltd (6) Co. (7) Limited Partnership or (8) L.P. The person who executes and delivers the Articles of Organization is called the organizer. (9) Company, except as part of the phrase “Limited Liability Company.” As with corporations, the name of the LLC cannot be a duplicate of an existing LLC filed in Illinois. If the LLC anticipates extensive out-of-state contacts, whether through expected real estate ownership or as an ongoing business, it is prudent to search the Secretary of State’s records in these other states to make sure the same name is not already in use. A box must be checked on the second page of the Articles of Organization form as to whether LLC management is vested in the member(s) or in designated manager(s). The ILLCA does not require management by members. As a result, members can manage the LLC, or they can appoint outsiders to manage the LLC. ILLCA allows the filing of Articles of Amendment to the Articles of Organization at a later time as needed.

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#CTtalk: Construction Issues at Closing

By Jeffrey P. York
Assistant Regional Counsel
Chicago Title Insurance Company, Chicago NCS

One of the more complex and confusing issues that can rear its ugly head at a real estate closing is that of the existence of past, present, or, in some cases, future contracts for construction on the land. These contracts can create headaches for owners, purchasers, lenders, attorneys, and title insurers if the issues surrounding these contracts are not dealt with prior to closing. This article will identify construction issues that arise at closing and discuss how Chicago Title Insurance Company deals with these issues. The scope of this discussion will be limited to acquisition and refinance transactions rather than construction loan closings.

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#CTtalk: IL Real Estate Liens

Illinois Real Estate Liens & Encumbrances

By Richard F. Bales
Office Counsel
Chicago Title Insurance Company

Illinois real estate liens and other documents in the nature of encumbrances are, for the most part, scattered throughout the Illinois Compiled Statutes. Their statutes of limitation are as varied as their citations.  This article is an attempt to list, briefly describe, and, when applicable, note the statutes of limitation for these documents.

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#CTtalk: Bond in Lieu of Property

Bond in Lieu of Property - Something New in Mechanics Lien Law

By Douglas M. Karlen
Vice President and Regional Counsel
Chicago Title Insurance Company

Recent legislation creates a new concept in mechanics lien law, namely, a bond in lieu of property. Public Act 99-178 (HB 2635), effective January 1, 2016, adds new Section 38.1 to the Mechanics Lien Act to permit the substitution of a surety bond in lieu of real property in the context of the enforcement or possible enforcement of mechanics lien claims. See new 770 ILCS 60/38.1. By shifting the focus of mechanics lien litigation from the subject real property to the proceeds of a surety bond, the new Section allows owners to refinance construction loans or to sell newly constructed condominium units, single family homes, and commercial developments free and clear of mechanics lien claims.  

How does it work?

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#CTtalk: Illinois Statutes

Illinois Statutes (and a Few Court Cases) Relating to the Subdivision of Land

By Richard F. Bales
Office Counsel
Chicago Title Insurance Company

Compiled List:

Building Lines

55 ILCS 5/5-13001; a county can regulate building lines

65 ILCS 5/11-14-1; a municipality can regulate building lines; this statute states that “the corporate authorities in each municipality have power by ordinance to establish, regulate and limit the building or setback lines on or along any street. . . .[These powers] shall not be exercised so as to deprive the owner of any existing property of its use or maintenance for the purpose to which it is then lawfully devoted.”  This statute seems to suggest that in order to abrogate a building line, the parties benefited as well as burdened must join in the agreement.   A building line violation may render a home unmarketable, even if a title company agrees to endorse over it; in this regard, see Nelson v. Anderson, 286 Ill.App.3d 706, 676 N.E.2d 735, 221 Ill.Dec. 932 (5th Dist. 1997).

Plat Act (court cases)

In Heerey v. City of Des Plaines, 225 Ill.App.3d 203 (1992), the court held that a plaintiff who was merely seeking to remodel his building, and not subdivide it or sell it, did not have to first have the property subdivided.  In other words, the court determined that the Plat Act was not applicable.

In Orrin Dressler, Inc. v. Village of Burr Ridge, 173 Ill.App.3d 454 (1988), the owner of the land felt that the proposed subdivision of his land was exempt from the Plat Act, as it was a “division into no more than two parts of a particular parcel or tract of land existing on July 17, 1959. . . .” The plaintiff felt that the transaction was exempt, since the original parcel was divided into two parts, but then the lot line between two of the resulting parts was merely "relocated."  The court disagreed.

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#CTtalk: UCC Policy

Understanding the UCCPlus Insurance Policy

An interview with Gary Zimmerman
Senior Vice President and Chief Underwriting Counsel
of Fidelity National Title Group's UCCPlus Division

What is a UCCPlus Insurance Policy?

A UCCPlus Insurance Policy (UCCPlus Policy) is a title insurance product that insures most personal property taken as collateral for a loan.  Similar to a lender's real estate title insurance policy that insures a mortgage or deed of trust is a fist priority lien on real property, a lender's UCCPlus Policy insures that the personal property pledge to the lender as collateral for a loan is a first priority lien.  The UCCPlus Policy shifts all of the risk from the insured lender to the title company by insuring proper validity, enforceability, attachment, perfection and priority relating to the lender's security interest or lien on the personal property.  Secured lenders value this as a risk management toll that decreases their operational risk by shifting the documentation, perfection and fraud risk to the title company.  Leading commercial law firms and lending institutions recognize the use of a UCCPlus Policy as a best practice.

Are there other ways that a UCCPlus Policy shifts risk?

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