Real estate law is very familiar with governmental regulation. This past month, new regulations and forms were implemented nationwide that affect all parties to a real estate transaction. These changes and forms are often called TRID by those familiar with the market, but what does TRID mean and why does it matter?

TRID stands for TILA/RESPA Integrated Disclosure. For individuals familiar with real estate over the last 5 years, they will recognize TILA and RESPA. TILA stands for the Truth In Lending Act, an act created by Congress to regulate lending practices in real estate transactions. RESPA stands for Real Estate Settlement Procedures Act. RESPA also governs real estate practice and the closing process. Both laws are extensive and still applicable.

After the market collapse of 2007, legislators searched for the cause of the real estate market collapse and its resulting aftermath. After assessing the issue, Congress determined that the lending practices of banks directly aided in the creation of the collapse. Congress enacted the Dodd-Frank Act in an effort to provide greater regulation to lending practices. The legislation of the Dodd-Frank Act provided for the creation of a new governmental bureau to regulate banking practices. The bureau is called the Consumer Financial Protection Bureau or CFPB.

The CFPB reviewed ways to improve the market for the protection of consumers and created TRID. The acronym TRID does not provide great insight into the meaning of the changes; however, reviewing the full name of the regulation clarifies its purpose and gives insight into its meaning.

As mentioned above, TRID stands for TILA/RESPA Integrated Disclosures. Please recognize that TILA and RESPA still apply to real estate regulation. The penalties, regulations, and law disseminated through TILA and RESPA, for the most part, remained untouched. The major changes under TRID are in the form of Integrated Disclosures. New disclosure documents and forms have been created to replace those used under TILA and RESPA. The purpose of the integrated disclosures is to provide information in a more concise manner, easier for the consumer to understand the contents of complicated lending documents. At minimum, its purpose is to make lenders more accountable and consumers more aware of the agreement they enter into. TRID also provides time tables for when the TRID documents can be executed. The time tables for the disclosures are the greatest change for lenders and real estate agents.

Having an understanding of the purpose of the CFPB and TRID provides insight into why the new disclosure regulations have been promulgated. When you understand what TRID actually stands for, it gives great insight into the purpose of the new regulations.

At Clemmons Law Firm, we understand that the recent changes may seem cumbersome, but we also see the bigger picture. Embracing the TRID changes is imperative to effectively prepare for your real estate closing. We are willing and able to provide instruction and insights into the new TRID changes for you and your business. Please reach out to us if you would like additional information and training on the new TRID regulations.

As always, your closing is our first priority.  If you want confidence in your closing, contact Clemmons Law Firm.

For real estate transactions, the responsibilities of realtors are governed by agency law. The responsibilities of lawyers in South Carolina are governed by the South Carolina Rules of Professional Conduct and well-developed case law. So, what legal responsibilities do South Carolina lawyers have in real estate transactions?

Attorneys have a duty of loyalty. There are multiple parties in every real estate transaction. Between the Seller, the Buyer, the Agents, and the Lender, it becomes clear why loyalty is so important. Loyalty is a principle that requires an attorney to represent the complete and best interests of their client. When an attorney has conflicting interests between parties, it is their duty to receive the informed consent of all parties to ensure ethical and legal compliance to continue representation. As attorneys must oversee the entire closing process, the duty of loyalty is paramount to effective representation. It is important to know you can trust your attorney, and that they have your best interests in mind.

Attorneys also have a duty to provide competent counsel. With the recent changes to closing disclosures and forms, it is even more imperative to choose legal counsel that can competently represent you in your real estate transaction. “Competent representation requires legal knowledge, skills, thoroughness, and preparation.” Personality might draw you to an attorney, but competency will keep you using their services. In the end, making sure the transaction gets completed correctly should be the attorney’s top responsibility.

In South Carolina, attorneys are responsible for supervising every facet of the real estate transaction. The South Carolina Supreme Court  has broken real estate transactions into five areas: the title search, loan documents, closing, recordation of documents, and disbursement of funds. For each of these areas, it is the attorney’s responsibility to supervise the work product. So, even though the title may be searched by an independent company, it is the attorney’s responsibility to ensure the search is complete. Each step is vital to each transaction, and each attorney must supervise each step.

At Clemmons Law Firm, we pride ourselves in providing loyalty and competency for each closing. We supervise each step of the process to ensure proper completion of each real estate transaction. We work, so you do not have to worry! With over a quarter century of experience, you can trust Clemmons Law Firm to get the job done with a high degree of efficiency. We look forward to helping you with your next real estate transaction!

Unlike the vast majority of states, South Carolina requires an attorney to be part, and oversee, every real estate closing. In fact, the only other state within the United States that requires an attorney to oversee the entirety of a real estate closing is Georgia. So, why does South Carolina require a lawyer to oversee the closing process?

The South Carolina Supreme Court has expressly concluded that “real estate and mortgage loan closings should be conducted only under the supervision of attorneys.” The Court reasoned that “protection for the public is of paramount concern.” Due to the nature of the various stages of a real estate closing, the South Carolina Supreme Court believes that requiring an attorney to oversee the closing process, in the end, protects the consumer.

The Court has broken the essential components of a closing into five categories: title search, loan documents, closing, recordation of documents, and disbursement of transaction funds. Each of these steps must be completed under the supervision of an attorney, providing an extra layer of protection to the consumer.

In most states, these various stages of real estate closings are completed by independent entities. They, in large part, remain independently responsible for their own work product and closing responsibilities. However, in South Carolina, attorneys oversee the entirety of the work production and ensure a clean closing for every step of the closing process.

Choosing an effective real estate attorney for a real estate transaction in South Carolina cannot be underestimated. Real estate attorneys are paramount to the real estate closing. Selecting the right attorney, who is engaged and well informed, provides confidence and comfort for the client during the duration of the real estate transaction.

At Clemmons Law Firm, our practice is completely centered in real estate law. We have been practicing real estate law for over a quarter century. We know what it takes to get your transaction closed effectively. We work, so you do not have to worry. With Clemmons Law Firm, you can have confidence in your closing!

There is no greater adventure than starting a business venture. One of the most important decisions a perspective entrepreneur makes is choosing what type of business entity to establish to further his or her business purpose. Entrepreneurs must consider the structure of how they would like to manage their business entity, whether they desire to have limited liability, potential capital assets that may be available through corporate structure, tax consequences, and how different business entities are formed.

At Clemmons Law Firm, we can help you through the formation process by helping you select the perfect business structure to meet your needs as an entrepreneur. After we help you create your business, we are available to continually assist you with all of your counseling needs. Below, you will find information about business entities in South Carolina. This information provides a platform to educate the entrepreneur about the business entities available and their relative strengths and perspective weaknesses. As always, Clemmons Law Firm exists to serve all of your legal needs. Call us today to schedule a consultation about forming your next business entity!

 General Partnerships

A personal entrepreneur and a partnership are the most basic business formations. Personal entrepreneurs may start a business entity simply by performing a task for profit. A partnership, can also be created by performance. A partnership is an association of two or more people for the carrying on of a business for profit. Partnerships can be created through express or implied agreement. An express agreement can be in writing or based upon oral representations. A partnership is implied when there is not an express agreement, and a partnership can be determined by the conduct between the potential partners. With partnerships, there is no required filing under South Carolina law to validate the partnership. Partners in a partnership have unlimited liability for the affairs and liabilities of the partnership. Therefore, you better trust who you are in partnership with because all partners are jointly and severally liable for the actions of the other partner when they are acting on behalf of the partnership.

Limited Partnerships

A limited partnership consists of one or more general partners and one or more limited partners. The general partner is responsible for the day to day operations of the partnership. He is also completely liable for the affairs of the limited partnership. His responsibilities are designated by the partnership agreement. A limited partner is a partner that contributes capital for the partnership. His sole function is to act as an investor to the partnership. As a limited partner, his activities are limited in relation to the general affairs of the limited partnership. As such, the limited partner receives limited liability. The limited partner will only be liable for his interest in the partnership. He will not be held personally liable for partnership affairs. The limited partnership structure is perfect for someone who wants to invest in a business but does not want to participate in the daily operations or open themselves up to liability.

Limited Liability Partnerships

Limited liability partnerships are partnerships where each individual partner receives limited liability from the affairs of the other partners. The partners of a limited liability partnership are only liable for their own actions and the actions of those they supervise. A limited liability partnership is generally formed by professionals (attorneys, accountants, and medical specialists) wishing to take advantage of the benefits that result from partnership, but they do not want to incur liability for the acts of the other partners. Additionally, the partners of an L.L.P. are not personally liable for the affairs of the partnership. Therefore, they are only liable for their own actions, the actions of those they supervise, and their investment into partnership assets. Limited liability companies are formed by meeting the statutory requirements of South Carolina and satisfying filing with the Secretary of State.

Corporations

Corporations are statutorily created, meaning that corporations are created by meeting the requirements set forth by the statutes of South Carolina. The filing requirement is called the Articles of Incorporation. The Articles of Incorporation contains the identification of the principle place of business, the business purpose, director(s), initial agent of the corporation, and the amount the shares the corporation is able to distribute. Corporations have an independent managing body from the ownership of the corporation. The ownership of the corporation consists of shareholders who receive ownership in the form of corporate stock. Shareholders have limited liability from the affairs of the corporation. The corporation itself is solely liable for the acts of the corporation. Directors who manage the corporation also have limited liability as they act within the scope of their fiduciary duty. Specific to the corporate entity, the ownership structure is very flexible. A corporation can distribute different types of stock to meet the needs of the corporation. This ownership structure provides more options to achieve the desired result. Corporations can also differ from other business entities by the manner in which they are taxed. Therefore, in relation to the other business entities, corporations require greater planning, but they also provide greater organizational flexibility.

Statutorily Close Corporation

A statutorily close corporation is a corporation with a limited number of shareholders. The shareholders often handle the day to day operations of the corporation. The shareholders are often family members or close associates who wish to limit the availability of shares to the open market. Generally, there is no market for the transfer of the shares. Typically, the shareholders wish to maintain their percentage interest, while taking advantage of the corporate structure. Shareholder of a statutorily close corporation maintain limited liability from the affairs of the corporation. Additionally, they can also elect how to be taxed, whether by flow through taxation or double taxation. Double taxation is the typical tax method identifiable with corporations, and flow through taxation occurs when the shareholders profits or losses are filed on their individual tax return as opposed to a separate filing.

Professional Corporation

Professional corporations are corporations that combine the benefits of a corporation with similarities of a limited liability partnership. Like the L.L.P., professional corporations are associations of professionals. However, as opposed to an L.L.P., the professionals have a corporate structure and can benefit from the protection of the corporate veil. Therefore, in a professional corporation professionals receive greater protections from liability than partners of a L.L.P. Professional corporations are formed by meeting the filing requirements with Secretary of State.

Limited Liability Company

Limited liability companies are companies that benefit from flexible management structure, limited liability for its members, and preferable tax treatment. Limited liability companies must elect to be member managed or manager managed. Members are the primary investors to the company. They can elect to manage the company themselves (member managed) or select someone to manage the company for them (manager managed). Members of a member managed L.L.C. maintain control over the day to day operations of the company. However, if a L.L.C. elects to be manager managed the member operates merely as an investor. A L.L.C. may elect to be taxed as a corporation through double taxation or it can elect to be taxed by flow through taxation where each individual member is responsible for recording profits on their individual tax return. The members of a limited liability company benefit from limited liability. Limited liability companies are formed by meeting the statutory requirements of the South Carolina Code and filing requirements of the Secretary of State.

 

As mentioned above, this information is solely for informational purposes only. Clemmons Law Firm is ready, willing and able to assist you to select the perfect business structure for your business purpose. Along with the many topics discussed above, it is also important to consider how a business entity dissolves and the ramifications for dissolution. From start to finish, Clemmons Law Firm is there for you to help you along your way. Contact us today for a consultation regarding your next business venture!

New Mortgage Disclosures for Real Estate Closing Transactions

Beginning this August, new mortgage disclosure statements will be used for real estate closing transactions in South Carolina. These changes are being implemented at the direction of the Consumer Financial Protection Bureau. The new disclosure statements and the rules governing their existence are intended to improve consumer understanding of real estate closing documents, better comparison shopping, and avoid surprises of additional costs at the closing table.

The new mortgage disclosure statements come at the direction of the Consumer Financial Protection Bureau, or CFPB. The CFPB is a governmental agency that reviews financial lending practices to insure greater consumer protection. The CFPB reviews current lending practices, makes recommendations, and implements changes in order to protect consumers from practices that led to the most recent recession. The CFPB was formed by the Congressional approval of the Dodd-Frank Wall Street Reform and Consumer Protection Act, or Dodd-Frank Act.

The Dodd-Frank Act was signed into law on July 21, 2010 as a reaction to the lending practices that contributed to the recession of 2007. The legislation implemented major financial regulatory reform aimed at preventing another significant financial crisis. Additionally, the Dodd-Frank Act focused on greater lending transparency, accountability, and implementing rules for consumer protection. As referenced above, it also gave rise to the CFPB.

On July 21, 2011, the CFPB gained control over the Real Estate Settlement Procedures Act, or RESPA. Since its adoption, RESPA has governed the closing of real estate transactions. Now, the CFPB is responsible for managing and enforcing RESPA’s rules and regulations. The new mortgage disclosure statements that are being implemented this August were created in harmony with the purposes of the CFPB.

The new mortgages disclosure statements are outlined in the “Final Rule” adopted by the CFPB. The Final Rule was released on November 20, 2013 in accordance with the Truth in Lending Act and RESPA. The Final Rule replaces the “Good Faith Estimate” and the “early” Truth in Lending disclosure. The two new mortgage statements are called the “Loan Estimate Form” and the “Closing Disclosure Form.”

The purpose of these new statements and the rules regarding their implementation are to provide consumers with increased information of the lending agreement and protection from abusive lending practices. Through their implementation, the consumer will be able to more easily ascertain the risk factors involved with the lending agreement, the actual cost of the lending agreement, and the monthly payment schedule. The changes will also make comparison shopping of lending institutions easier. The new statements also provide greater time for the consumer to review the agreement with the expectation of achieving greater awareness of the charges associated with the closing transaction.

Overall, the new mortgage disclosure statements to be implemented this August by the CFPB are intended to result in greater consumer awareness and protection in the lending process. However, it will take time and effort for lending institutions, real estate agents, and real estate closing attorneys to become familiar with the new rules governing the implementation of these new statements. At Clemmons Law Firm, we are committed and prepared to give instruction to those individuals in our community who will be impacted most by the implementation of these new mortgage disclosure statements and rules. Do not wait until August to make the changes you can make today. Whether you are a bank or a real estate brokerage, call Clemmons Law Firm today and we will help prepare you for the changes that await our industry in the coming months.

Clemmons Law Firm is excited to announce the creation of the Clemmons Law Firm Blog. Since its inception, the Clemmons Law Firm has prioritized its personal connection with the Grand Strand community. Whether through public service or offering top notch legal services, Clemmons Law Firm focuses on uplifting, informing, and advocating for the clients we serve. The Clemmons Law Firm Blog is another way we plan to reach out to our community and provide helpful insights into legal topics. Subscribe to our blog and receive notifications of new blog entries. Have a question about a legal topic? Contact Clemmons Law Firm and your question may become the subject of our next blog!

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