January 2002

A PUBLICATION OR THE TITLE COMPANY OF NORTH CAROLINA

     

MANUFACTURED HOMES - HOUSE BILL 253 PASSES

1. General comments.

House Bill 253, pertaining to manufactured homes, has become law. It represents a vast improvement over prior law. The North Carolina Land Title Association (NCLTA) was very active in proposing legislation to clarify this area of the law and in the passing of the bill.

In our Summer 1998 (Issue #4) issue, we discussed the basics of, and problems with, manufactured housing. That issue and our Fal11998 (Issue #5) issue discusses one important aspect not remedied by the bill: the need to ascertain whether manufactured housing is prohibited or restricted by restrictive covenants. This article will discuss the bill and its implications.  

2. G.S. 105-273(13).

G.S. 105-273(13) is part of Chapter 105 pertaining to taxation, particularly ad valorem taxation. House Bill 253 amends G.S. 105-273(13) effective for taxes imposed for taxable years beginning on or after July 1, 2000.  See Sec. 4 of H.B. 253. 

G.S. 105-273(13), as amended, provides as follows:  

When used in this Subchapter (unless the context requires a different meaning):...  

(13) 'Real property,' 'real estate,' and 'land' mean not only the land itself, but also buildings, structures, improvements, and permanent fixtures on the land, and all rights and privileges belonging or in any way appertaining to the property.  These terms also mean a manufactured home as defined in G.S. 143- 143.9(6) if it is a residential structure; has the moving hitch, wheels, and axles removed; and is placed upon a permanent foundation on land owned by the owner of the manufactured home. A manufactured home as defined in G.S. 143-143.9(6) that does not meet all of these conditions is considered tangible personal property.  

G.S. 143-143.9(6) contains a very precise and detailed definition of "manufactured home."  

Note that G.S. 105-273(13) requires the manufactured home to be a "residential structure", Does this mean a structure that is readily identifiable as a home used only for residential purposes? Or, does this mean a structure that is readily identifiable as a home but that is actually used for residential or other permitted purposes? Perhaps the first construction is intended. However, if that is true, the question must be "why," since the purpose of G.S. 105-273(13) for taxes and for the statutes discussed below is: when is a manufactured home so related to real property or land so as to become part and parcel thereof?  

3. G.S.20-109.2.

G.S. 20-109.2 is news.  It is effective January 1, 2002 and the statute, as in the case of new G.S. 47-20.6 and new G.S. 47-20.7 discussed below, applies to manufactured home title cancellations, declarations of intent, deeds, deeds of trust and other instruments recorded after that date. Note that recordation and not execution is the key to applicability.  

G.S. 20-109.2(a), entitled "Surrender of Title," provides that:  

If a title has been issued for a manufactured home and the manufactured home qualifies as real pr<perty as defined in G.S. 105-273(13), the owner shall submit an affidavit to the Division that the manufactured home meets this definition and surrender the certificate of title to the Division.  

Note the reference in G.S. 20-109.2(a) to G.S. 105-273(13) discussed in 2. above. G.S. 105-273(13), as amended by House Bil1253, is not a new statute; it is an amended statute. Note the discussion in 2. above as to when amended G.S. 105-273(13) becomes effective and for what purposes. It would seem that the session laws should have specified what was intended by G.S. 20-109.2(a)'s reference to (as well as G.S. 47-20.7's reference to and G.S. 47-20.6's dependency upon) amended G.S. 105-273(13). Section 4 of House Bill 253 should have also said that amended G.S. 105-273(13), for purposes of G.S. 20-109.2, G.S. 47- 20.6 and G.S. 47-20.7, is effective January 1, 2002. "The Division" is the Division of Motor Vehicles.  

It is noted that G.S. 20-109.2(b) contains information required in the affidavit in addition to the requirement in G.S. 20-109.2(a) that the affidavit state that "the manufactured home meets [the definition in G.S.105-273(13)]." Also, a review of G.S. 20-109.2(d), quoted and discussed below, shows that an affidavit pursuant to G.S. 20-109.2(d) must also contain the information required by G.S. 

20-109.2(b). Therefore, G.S. 20-109.2(a) would have been better had the phrase after the comma read, "the owner shall submit an affidavit to the Division that the manufactured home meets the definition in G.S.105-273(13) as to the real property described in the affidavit and complies with the additional content requirements of subsection (b), and surrender the certificate of title to the Division."  

G.S. 20-109.2(b), entitled “Affidavit," states that the affidavit must be in a form approved by the Commissioner and shall include or provide for all of the following information: (1) the manufacturer and, if applicable, the model name of the manufactured home; (2) the vehicle identification number and serial number of the manufactured home; (3) the legal description of the real property on which the manufactured home is placed, stating that the owner of the manufactured home also owns the real property; (4) a description of any security interests in the manufactured home; and (5) a section for the Division's notation or statement that the title has been surrendered and cancelled by the Division.  

G.S. 20-109.2(b) would have been better had it contained (6), stating: “Any additional information required by subsection (a), subsection (c) or subsection (d)."  

The first two sentences of G.S. 20-109.2(c), entitled "Cancellation," state that:  

Upon compliance by the owner with the procedure for surrender of title, the Division shall rescind and cancel the certificate of title. If a security interest has been recorded on the certificate of title, the Division may not cancel the title without written consent from all secured parties.  

The proposed form of affidavit (required by G.S. 20-109.2(a) and outlined in G.S. 20-109.2(b)) has a place for the written consent of secured parties. Apparently, written consent of a secured party will extinguish that party's lien on the title.  

The third sentence of G.S. 20-109.2(c) provides that:  

After cancelling the title, the Division shall return the original of the affidavit to the owner, or to the secured party having the first recorded security interest, with the Division's notation or statement that the title has been surrendered and has been cancelled by the Division. (Emphasis added.)  

In that third sentence, does the italicized phrase mean that if there is at least one secured party that the original affidavit must be returned to the holder of the first recorded security interest and not the owner or does the phrase mean that the original affidavit can be returned to either the owner or the holder of the first recorded security interest? Perhaps the following indicates that the answer is "either."  

The last sentence of G.S. 20-109.2(c) states that:  

The owner or secured party shall file the affidavit returned by the Division with the office of the register of deeds of the county where the real property is located. (Emphasis added.)  

This last sentence sets out a rule that is repeated in the first sentence of new G.S. 47-20.6(a) set out below, except that the last sentence of G.S. 20-109.2(c) uses the phrase "file the affidavit" and G.S. 47-20.6(a) uses the phrase "record the affidavit." This is not deemed significant. However, cleaner drafting would have avoided duplication and phrased the last sentence of G.S. 20-109.2(c) as follows: "G.S. 47-20.6(a) shall be complied with."

G.S. 20-109.2(d) is entitled, “Application for Title After Cancellation." The first sentence provides:  

If the owner of a manufactured home whose certificate of title has been cancelled under this section subsequently seeks to separate the manufactured home from the real property, the owner may apply for a new certificate of title.  

The way the first sentence is structured, it, and the rest of G.S. 20-109.2(d), is subject to the literal interpretation that the owner who surrendered and had cancelled the certificate of title is the only owner who can apply for a new title under G.S. 20-109.2(d). However, if the manufactured home has been cancelled by A, the owner on the title and the owner of the real property, under G.S. 20-109.2, and the affidavit is recorded under G.S. 20-109.2(c) and G.S. 47-20.6(a) (discussed below), and the manufactured home and the real property become one tract of real property under G.S. 47-20.6(b) (discussed below), and A conveys such real property to B and B records, B should be able to utilize a statute such as G.S. 20-109.2(d) - if the other conditions to its use exist-even though B is not the "owner...whose certificate of title has been cancelled..." The first sentence of G.S. 20-109.2(d) should be clarified to clearly permit this.  

The rest of G.S. 20-109.2(d) states:  

The owner must submit to the Division an affidavit containing the same information set out in subsection (b) of this section, verification that the manufactured home has been removed from the real property, and written consent of any affected owners of recorded mortgages, deeds of trust, or security interests in the real property where the manufactured home was placed. The Commissioner may require evidence sufficient to demonstrate 

that all affected owners of security interests have been notified and consent. Upon receipt of this information, together with a title application and required fee, the Division is authorized to issue a new title for the manufactured home. (Emphasis added.) 

G.S. 20-109.2(d) refers to submitting an affidavit containing the same information in G.S. 20-109.2(b) and verification that the manufactured home has been removed from the real property. Presumably, the affidavit could contain the owner's statement of removal. However, it is not clear how removal is to be verified under G.S. 20-109.2(d). Can the owner's statement alone constitute the verification? Or, must there be a verification by an independent party? If so, who can that party be? Any knowledgeable adult, it would seem. The way the second sentence of G.S. 20- 109.2(d) is written, must the affidavit also contain the verification and the below mentioned consent of interest holders or may the verification and consents be in form(s) separate from the affidavit? It is believed that the affidavit, verification and consents can be contained in the affidavit (if possible at the time the affidavit is given) or can be in separate documents.  

Note G.S. 20-109.2(d)'s reference to consent of "any affected owners of recorded mortgages, deeds of trust, or security interests in the real property" "Security interest" is a term defined in G.S. 25-1-201(37) of the U.C.C. to mean "an interest in personal property or fixtures" securing an obligation. However, the definitions section of the U.C.C. (G.S. 25-1-201) makes it clear that the definitions are for terms used "in this Chapter"; that is, Chapter 25. Therefore, while the term "security interests" should have been defined in G.S. 20-109.2 to include "liens" or the word "liens" should have been added to G.S. 20-109.2(d), we are informed that "security interests" was 

intended to include judgment liens and other liens. This is not an unreasonable interpretation. Note, however, that G.S. 20- 109.2(d) does not require the written consent of, for example, a lessee with a valid unrecorded or recorded lease of the land and improvements thereon. (See G.S. 47-18 for when a lease must be recorded.) A lease is not usually considered a security interest. It would seem that if a valid lease existed on or before January 1, 2002, consent of the lessee would have to be obtained for a G.S. 20-109.2(d) procedure notwithstanding G.S. 20-109.2(d). See Sec. 4 of House Bil1253 regarding applicability of the act: As to leases becoming effective for priority purposes after January 1, 2002, the argument could be made that the lease is subject to the rule in G.S. 20-109.2(d) and that statute would not require the consent of the ten ant.  

It is noted that when written consent is given pursuant to G.S. 20- 109.2(d), the clear implication is that the lienor giving consent is giving up his lien (which encumbers the land and all improvements thereon, including the manufactured home) on the manufactured home.  

As noted above, G.S. 20-109.2(d) refers to "recorded mortgages, deeds of trust, or security interests." Under the analysis above, that would certainly cover a claim of lien for labor, services, materials or equipment docketed pursuant to G.S. 44A-12. The quoted language seems to require the consent of a party holding a recorded (or docketed) lien only. It would therefore appear that a lien for labor, services, materials or equipment for which a claim of lien could be filed but was not filed at the time of removal and application pursuant to G.S.20-109.2(d) would not be a lien for which consent is required. Such a lien, once eventually docketed against the land and the improvements thereon, would be lost to the extent of the manufactured home. This result would be based upon not only the language of G.S. 20-109.2(d) but also the fact that G.S. 20-109.2(d), being a specific statute as to the manufactured home, "trumps" Chapter 44A, including G.S. 44A-7(2) (definition of "improvement"), G.S. 44A-7(4) (definition of "real property"), G.S. 44A-8 (grant of lien), G.S. 44A-9 (extent of lien), G.S. 44A-10 (effective date of lien) and G.S. 44A-14(a) (priority of lien).  

4. G.S. 47-20.6.

G.S. 47-20.6 is entitled, Affidavit for permanent attachment of titled manufactured home to real property:" It becomes effective January 1, 2002.  

The first sentence of G.S. 47-20.6(a) provides that:  

If the owner of real property has surrendered the title to a manufactured home that is placed on the real property and the title has been cancelled by the Division of Motor Vehicles under G.S. 20-109.2, the owner, or the secured party having the first security interest in the manufactured home at time of surrender, shall record the affidavit described in G.S. 20-109.2 with the office of the register of deeds of the county where the real property is located.

 

This dovetails with the last sentence of G.S. 20-109.2(c).

 

The second sentence of G.S. 47-20.6(a) states as follows:

 

Upon recordation, the affidavit shall be indexed on the grantor index In the name of the owner of the manufactured home and on the grantee index in the name of the secured party or lien- holder, if any.  

Note how this sentence uses the terms "secured party" and "lien- holder." As pointed out, G.S. 20-109.2 does not use the term "lienholder."  

This is probably an oversight. Presumably, "secured party or lienholder" was intended to mean, "secured party of record or lienholder of record."  

G.S. 47-20.6(b) provides that:  

After the affidavit is recorded, the manufactured home becomes an improvement to real property. Any lien on the manufactured home shall be perfected and given priority in the manner provided for a lien on real property. 

In the first sentence of G.S. 47-20.6(b), while use of the term "improvement" is satisfactory, the statute would have been better had it said, "improvement to and part of the real property."  

We are told that the second sentence of G.S. 47-20.6(b) is intended to mean, “Any lien on the real property and the manufactured home located thereon arising and having an effective date of priority after the affidavit is recorded pursuant to G.S. 47-20.6(a) shall be perfected and given priority in the manner provided for a lien on real property."  

G.S. 47-20.6(c) states as follows:  

Following recordation of the affidavit, all existing liens on the real property are considered to include the manufactured home. Thereafter, no conveyance of any interest, lien, or encumbrance shall attach to the manufactured home, unless the interest, lien, or encumbrance is applicable to the real property on which the home is located and is recorded in the office of the register of deeds of the county where the real property is located in accordance with the applicable sections of this Chapter.    

The first sentence of G.S. 47-20.6(c) is a nice touch. The existing lien will, in essence, attach to after acquired real property in the form of the manufactured home. Of course, since the statute uses the phrase "existing liens," one can assume that this would include not only a docketed claim of lien against the land at the time the affidavit is recorded, but also a lien that is unfiled at the time the affidavit is recorded and is thereafter perfected by docketing a claim of lien pursuant to G.S. 44A-12. That is because of the broad language of the first sentence of G.S. 47-20.6(c).  

The second sentence of G.S. 47-20.6(c) is fine except that it should be noted that a judgment or claim of lien is docketed with the clerk of superior court. But since the second sentence seems to state the obvious result even absent the second sentence, no real substantive harm has occurred. Also, the second sentence is somewhat redundant in view of the last sentence of G.S. 47-20.6(b), although the last sentence of G.S. 47- 20.6(b) does not refer to conveyances.  

G.S. 47-20.6(d) and G.S. 47-20.7(d) state as follows:  

The provisions of this section control over the provisions of G.S. 25-9-334 relating to the priority of a security interest in fixtures, as applied to manufactured homes.  

5. G.S.47-20.7.

G.S. 47-20.7 is entitled, "Declaration of intent to affix manufactured home; transfer of real property with manufactured home attached." 

G.S. 47-20.7(a) is set forth as follows:  

A person who owns real property on which a manufactured home has been, or will be placed, as defined in G.S. 105- 273(13), and either where the manufactured home has never been titled by the Division of Motor Vehicles or where the title to the manufactured home has been surrendered and cancelled by the Division, may record in the office of the register of deeds of the county where the real property is located a declaration of intent to affix the manufactured home to the property and may conveyor encumber the real property, including the manufactured home, by a deed, deed of trust, or other instrument recorded in the office of the register of deeds. (Emphasis added.)  

G.S. 47-20.7(a) literally also applies to a situation where a manufactured home "has been...placed" on the real property, as in the situation described in G.S. 47-20.6. That includes "where the title...has been surrendered and cancelled..." Such a circumstance need not have been included in G.S. 47-20.7(a), unless the intent was to cover a situation where the title was surrendered and cancelled by the Division, but the affidavit required by G.S. 20-109.2(c) and G.S. 47-20.6(a) to be recorded in the register of deeds office has not been recorded by the owner surrendering title pursuant to G.S. 20-109.2 or the holder of the first recorded security interest. That appears to be the intent. In such a case, the owner surrendering the title or a subsequent owner can utilize the statute. The statute can be used were the manufactured home has been placed on the real property but has never been titled. The statute is available even in a situation where the manufactured home "will be placed" on the real property, unlike G.S. 47-20.6 where the manufactured home has been placed on the real property. And that is true if the home has never been titled or the title has been surrendered and cancelled by the Division. So, G.S. 47-20.7 is intended to govern situations where G.S. 47-20.6 has not been used and cannot easily be used.  

The document referred to in G.S. 47-20.7(a) is a declaration of intent to affix. Depending upon the facts, this will be recorded after the home is affixed or prior to affixation. When the declaration is recorded prior to affixation, it is unclear, by reading G.S. 47-20.7(a), whether, for example, a deed to the real property recorded before affixation will be deemed to also convey the subsequently affixed home. G.S. 47-20.7(a), when it says, "may conveyor encumber the real property, including the manufactured home," is inconclusive since the statute does not say when the manufactured home is deemed conveyed. G.S. 47-20.7(c), discussed below; is not conclusive, since it, too, refers to a manufactured home "to be placed" upon the real property. Perhaps the following is the correct analysis. If, for example, A conveys real property to B after the declaration is recorded and before the manufactured home is affixed, B will get title to the home under general principles of law, regardless of what G.S. 47-20.7(a), in its present form, says. Or, G.S. 47-20.7(a) is just stating the obvious regardless of when affixation occurs. G.S. 47-20.7(c) could be cited as supportive of this position. 

G.S. 47-20.7(b) states that:  

The declaration of intent, deed, deed of trust, or other instrument shall contain a description of the manufactured home, including the name of the manufacturer, the model name, if applicable, the serial number, and a statement of the owner's intention that the manufactured home be treated as real property. 

Particularly with respect to the declaration of intent, the following should have been substituted for the last four words of G.S. 47-20(b): "treated as part of the real property described in the description."  Note that while the serial number is required by G.S. 47-20.7(b), the "VIN"  number is not, in contrast to G.S. 20-109.2(b)(2).  G.S. 47-20.7(c) provides as follows:  

On or after the filling of the instrument with the office of the register of deeds pursuant to subsection (a) of this section, the manufactured home placed, or to be placed, on the property becomes an improvement to real property. Any lien on the manufactured home shall be perfected and have priority in the manner provided for a lien on real property. 

The last sentence of G.S. 47-20.7(c) should be construed as is the last sentence of G.S. 47-20.6(b). 

6. Summary.

The NCLTA is working with the Division to come up with (1) a form that will satisfy the requirements of G.S. 20-109.2(a) and (b), G.S. 20-109.2(d) and G.S. 47-20.6 and (2) a form of declaration to be used under G.S.47-20.7. There is some concern that, since the statutes do not exempt the forms from Chapter 47 acknowledgment requirement, the forms contain proper acknowledgment provisions. Form MVR-46G, an “Affidavit For Removal of Manufactured Home From Vehicle Registration Files," in accord with G.S. 20-109.2, is finalized. We have a copy. 

The bill should eliminate many of the problems with manufactured home titles. The bill is a very good achievement on the part of the NCLTA and others and should be improved upon as analysis and experience requires. 

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