S.B. 196 Wrongful Lien Act Amendments: transcript

Uh, and there is, I wanna move the amendment first. Maybe I need to move the sub first.

So the, I'm gonna have court Ashton talk about this bill and the, this first sub has the, the points that he's gonna be talking to. And then I'll make a motion to move. Okay. Sounds Good. So, should I make a motion to move the sub now?

Thank you, Mr. Chairman. Um, my name's Court Ashton. I represent the Utah Land Title Association. I'm also a Vice President at Cottonwood Title. Um, thank you, uh, to the sponsor for working with us on this. First of all, speaking to the first sub, uh, this is not about reinvestment fee covenants. The first sub clarifies that there, that we're not talking about reinvestment fee covenants. There's a couple of other bills that exist, uh, that are up here this session dealing with reinvestment fee covenants. Those are obligations placed on a property that every time the property changes hands, uh, there's a fee paid to the association to benefit the association. What we're talking about today are transfer fee covenants, which was a creature of 2007 to 2010, where, uh, owners would burden their properties with covenants. And every time the property ev once they sold it, and every time that it was sold at thereafter, they got 1% wherever they were. And whatever they were doing that didn't benefit the property and the legislature in 2010, outlawed transfer fee covenants. Uh, the stipulation was though they, that they grandfathered in any existing transfer fee covenants, you had to refile a notice by a deadline or your transfer fee. Covenant became void and unenforceable. Fast forward 2024, legislature has another bill dealing with the transfer fee covenant issue that says, yeah, you had to renew 'em in 2010. If you wanted to keep 'em, we want you to renew 'em every three years now. And if you fail to do so, they are void and unenforceable. 'cause we really don't like 'em. Lenders don't like 'em. You can't get loans on properties. Um, so in 2024, that new legislation, uh, prompted some of the original holders of those reinvestment fee covenant, or, sorry, transfer fee covenants to refile their notices, even though they failed, either failed to file the original 2010 notice that was required, or the the transfer fee covenant was rescinded and, and, uh, removed from the property, or it may have been cut off through foreclosure. We saw all three scenarios where those transfer fee covenants, they would rerecord a notice. We're calling them zombie transfer fee covenants because they attempted to resurrect those old unenforceable transfer fees. Well, what's happening is now they're showing up in the title record and we, um, and homeowners, in many cases, you're just paying the, the, the fee to these original, uh, transfer fee holder interest holders. So what this would do is just moves this behavior into the category of a wrongful lien in those scenarios, if they were cut off in foreclosure, if they were rescinded in the first place, or if they failed to file any of their notices, either the 2010 notice or the 2024 notices, or any notices thereafter, every three years, they have to renew them. If they want to keep them alive and they, and they attempt to enforce a lien on the property, it would be deemed a wrongful lien and would give homeowners an opportunity to, uh, to get those taken care of in through the court system. And that's, that's what the bill does.

Okay, I, I can't add anything to that and it's very eloquently done. I'd like to delete and title and Body Senate bill 1 96 and replace it with Senate bill 1 96. First substitute.

Uh, motion is to do it entitled and Body Senate bill 1 96 replace with first substitute Senate bill 1 96.

Then I need to move amendment number one in my name.

Oh, it just technical change. It's, it adds the, the verbiage absence of a previously recorded notice required by the section.

So I make a motion that first substitute Senate bill 1 96 as amended pass.

I, I'm, I'm skimming through really fast and everything makes sense to me. Um, I'm just wondering if you dealt with in drafting and I, I couldn't find it if there's, lemme see how I put this. Um, if there's a, a, maybe a clerical area that, that could cause a problem with unenforceability or anything along those lines. And I don't know if I'm, if I'm going way too far in the weeds, Mr. Ashton, I, I, I don't know. But is there a possibility that we could be catching up, you know, something that's just a clerical error that makes it unenforceable and, uh, 'cause we're, we're, it's being pretty prescriptive right? In dictation here. Do you understand what I'm getting at? Or am I looking for ghosts that, that really need, that aren't, aren't really there?

Well, we tried to just identify those three scenarios that, that either they failed to file Just on their face, the, Just in, in, they're unfortunately the record itself. Yeah. So they were withdrawn appropriately. And each of those transfer fee covenants, uh, you've probably seen them, Senator Musselman, each of those, um, had provisions in internal provisions that said you can withdraw them prior to the first transfer. For example, they have their own terms and conditions on when they can be withdrawn and, and in some cases, they were withdrawn by those land hold landowners before the first transfer. Um, in other cases they were cut off through foreclosure. So, so I think we're, we're those, at least for those three scenarios that we're, that we're seeing and are concerned with, those would have to be the facts of the case that would be brought before the judge. So even if there were a clerical error that just on their face based on what your experience is and, and mine, they would be unenforceable and, yeah.

Yeah. All right. If you don't mind, Well, clerical error as in not abstracted to the property, what would a Clerical Yeah, yeah. Maybe something like that, I suppose. Right? But on its face, it would still be unenforceable, I suppose, if I, I'm inclined to vote for, but maybe we could just talk and, and just make sure that I'm, I'm clear on couple things. We could do this offline. Yeah. Yeah. Okay. All right. Happy To. Thank you.

I waive. I think we've done a good job explaining the bill.

Honor to be here.

Okay, thank you. I have court Ashton with me. They'll be part of my presentation. What we're going to be speaking to substitute Senate bill 1 96 second sub, which when we're finished, we'll need to move. And what this bill does is amends provisions related to wrongful liens. And Mr. Ashton will go through that with you.

Um, my name is Court Ashton. I'm here on behalf of the Utah Land Title Association. Uh, to, those are strong support for this bill. The second substitute, to be clear, this bill does not affect reinvestment fee covenants. Those are used by HOAs to benefit the local community. The second substitute corrects heirs in the prior v uh, draft that referred to reinvestment fee covenants. Those are not the issue. Uh, Senate bill 1 96 addresses private transfer fee covenants fees created by former property owners starting in 2007 that require future buyers to pay a percentage to the sales price to someone who is no longer has any connection to the property. These covenants provide no benefit to homeowners or communities. Your predecessors in 2010 acted to restrict these, and again, in 2024 by placing additional, uh, notice requirements on them. However, we've now seen, uh, some of those holders of those former interests rerecording and attempting to resurrect those old prior transfer fee covenants. And, um, so this basically would consider them that if, if you had a private transfer fee and, and you either rescinded it or it was foreclosed, or if, um, you failed to file the, the mandatory notices that had been required in prior statutory changes, then it's considered wrongful lien. And homeowners would have a tool, a lever, if you will, to be able to get those removed from their properties. Um, we, on behalf of the Land Title Association, we, we support this. And, and, uh, it's an important component to, to keep, um, these fees and, and to give homeowners a tool to deal with them if they do show up on their properties. Thank you.

What this bill do, it, it eliminates the person that shows up and puts an arbitrary lien on a property and forces, rather than kill any more time, they, they force fees into the closings. And we, this bill tries to eliminate that or, or will eliminate that. That's our presentation.

Thank you, Mr. Chair. Um, I thought that transfer fees were not authorized. That they were, they were not permitted in the state of Utah. Did they? Did we grandfather the existing transfer fees that were in the, that were existing at the time?

Thank you. Yes. In, uh, 2010, we said no more going forward. But if you had an existing transfer fee that you recorded prior to 2010 legislative session, you were required to file a notice to keep it alive. If you failed to file that notice and didn't keep it alive by May of 2010, then it became void and unenforceable. The legislature did a similar act in 2024, uh, requiring transfer fee covenants to, to refile every three years or lose their, or they, those liens too would become unenforceable that assumed that they were legitimate and they had filed them originally in 2010.

So, um, when we're looking at the wrongful lien, are you looking at, uh, essentially new applications of transfer fee covenants that are, uh, illegal essentially? Or are you looking at a, uh, lien that is improperly, um, recorded for these permitted trans, uh, transfer fees prior to, um, March 16th, 2010?

Thank you. So, so it, it is the, what we've seen is three different scenarios. One, they failed to file their notice in 2010 to keep it alive. And now all of a sudden in 2024, they file a notice or 2025, they file a notice attempting to, to bring it back to life. And they referenced this prior recorded document as, and said there may be some lien issues that you have to deal with here. And what's happening is that the closing table buyers and sellers are being surprised and they're just writing a check to deal with it because it's on record. So they are, uh, the other scenario is they were foreclosed, uh, and they're still trying to assert those rights, uh, that, that they filed in 2007 or 2 0 0 8. Or the third scenario is that they were legitimate withdrawn, uh, sometime from 2 0 0 7 through whenever it was withdrawn. And yet they try to refile 'em again and bring them back to life.

Thank you. I appreciate you looking after, uh, homeowners for, uh, these, uh, uh, wrong, frankly wrongful. So thank you. Thank you.

Thank you Mr. Chair. I move that, that we, uh, adopt the second substitute to Senate bill 1 96 wrongfully act amendments.

Uh, I think this is, this is, to me, this is a really important issue. We've been working on these various forms of the way that, uh, real property transfers happen. We've been trying to clean that up. Uh, we've worked really hard on the, um, the, uh, reinvestment fees. We've worked hard on the administrative or the association transfer fees and HOAs. Um, uh, the association set up fees, I'm sorry, we're renaming them now. So we'll try to keep all the terminology straight. And, uh, these old, uh, transfer fee covenants, um, that are lingering out there, just the having some good enforcement around that and avoiding the situation where somebody shows up and they feel under duress obligated to pay something that they shouldn't be paying is like, this is an important issue. And I, I appreciate the clarification here.

Be grateful. No

Thank you. I think we have an amendment. It needs to be adopted. Is that correct or did that get picked up in the substitute?

No, I, I think I'm just, I'm just double checking. It was on the first substitute, not on the second substitute.

So, uh, I move that we recommend favorably, uh, Senate bill 1 96, second substitute wrongful lie act amendments.

I already did. In the substitute adoption of the Substitute. Thank you to the committee, to the motion

It's a great bill. Thank you. And I'll waive

Thank you Mr. President. This bill amends provisions related to wrongful liens. One of the things that's happening is that homeowners get to closing and these wrongful liens come from HOAs and different places and they, they've assessed a 1% fee and it becomes easier for 'em to just pay the fee than it is to fight it. This bill eliminates that. I'm open for questions. I looking for questions to the bill. Say, honor me to go to you for action. Thank you. I waive summation and move that first substitute Senate bill 1 96. Be read for a third time.

Occasionally the a wrongful lien will show up at closing and they'll put a 1% of the sales price of the, the closing of the sale. And rather than fight it, people have just been paying these. And this takes that provision out and we're ready for questions.

Representative Walter. Thank you, Mr. Speaker. Uh, a couple of decades ago, we started to see the emergence of what we call transfer fee covenants, uh, in the state of Utah. So when a developer would build a, uh, development, they would put a deed restriction on that, that would require the property owner essentially to pay them forever. They were bad, they're very, very bad. Um, a co, uh, 15 years ago, we prohibited transfer fee covenants in the state of Utah and, and, uh, made it, made sure that that kind of beha, that kind of, uh, tool wouldn't be able to, uh, continue. Uh, this is where SB 1 96 wrongful Lien Act amendments comes into play. In some cases, we have situations related to some of these old transfer fee covenants or some other forms of, uh, inter, uh, wrongful liens that were, that are filed against a real property in an effort to get either money or value from a homeowner. Uh, SB 1 96 clarifies, uh, some of the restrictions around this in a fine drawn wrongful lien. And it clarifies and makes it easier for a homeowner who has, uh, been impacted by a wrongful lien to have that lien removed and, uh, protect their property right interests, uh, for their home or other real property. Uh, Mr. Speaker, that concludes my presentation.

You Mr. President. I will move to Concur. What a, I actually made the a amend the second sub in committee to accommodate some wishes of the HOAs minor adjustments in this bill.

Senator Vickers Baldy Lewin Ramer Bus Fillmore Aye. Esca Fillmore Grover Harper Hankins Ipson. A Johnson Johnson Aye. Juab McKay Mikel Milner Musselman Owens pitcher Aye. Some Reeb Sandal Stevenson Stratton Bickers Weiler Wilson Winterton.

Senator Grover? Yes. Motion to Concur.