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Are the Carolinas Moving? NC and SC Border Change: Effects on Affected Properties

Posted By USFN, Tuesday, August 1, 2017
Updated: Monday, August 14, 2017

August 1, 2017

by Lanée Borsman, John Kay, and Alan Stewart
Hutchens Law Firm LLP
USFN Member (North Carolina, South Carolina)

Although we may have thought that the border between North and South Carolina was firmly established when the Province of Carolina was divided in 1729, the truth is that the line once thought of as the border between the two then-colonies contained numerous and substantial errors in its measurements. These discrepancies in the border have now been resolved through cooperation of the two states by a comprehensive re-survey of the North Carolina/South Carolina boundary line.

The boundary line between North and South Carolina has not actually moved. The ground, at least, is just where it has always been. However, the natural monuments that marked the respective territories have shifted or disappeared over the years. So, those who staked claims along those boundaries and thought that they were in one state (or the other) have left their heirs and assignees scratching their heads.

The line has been re-surveyed, not re-drawn. The Carolinas did not swap any properties or buy out tracts from one another. Instead, the true historical boundary line has been identified by the new survey and … well … some folks aren’t in the state that they thought they were in.

The two states cooperated in the re-survey and enacted sister legislation to deal with the practical effects of the “new” line. The North Carolina General Assembly enacted Session Law 2016-23, and the South Carolina General Assembly enacted Senate Bill 667. Each clarified the location of the boundary between the two states. Both laws took effect on January 1, 2017 and are expected to impact approximately 1,400 parcels of real property.

Judicial or Nonjudicial?
As a result of the boundary re-survey, certain properties previously believed to be in one state are in fact wholly or partially within the other state. Generally, North Carolina is nonjudicial, or quasi-judicial, when it comes to foreclosure. South Carolina, on the other hand, uses a judicial foreclosure process. So, how does the foreclosing entity proceed when it’s discovered that the ground they’ve put the lien on is actually in the other state?

First, it is not necessary, nor is it recommended, that copies of documents from one state be re-recorded in the other. The “official title” is found in that state in which the property has been taxed and where it was considered to lie prior to January 1, 2017. From the effective date of the boundary certification (January 1, 2017), North Carolina will extend full faith and credit to all conveyances and instruments of title made in accordance with South Carolina law prior to the boundary certification with respect to parcels of property that are now wholly or partially within the boundary of North Carolina. Any liens recorded with any register of deeds or clerk of superior court prior to the boundary certification shall attach to the affected parcels as of the date of the boundary certification. This class of liens will have priority with respect to other liens as of the date of boundary certification, but will retain the same priority among them as they had before certification, and the same is true for property that — prior to the boundary certification — was located in North Carolina but is now located in South Carolina.

Second, the title examination must be undertaken in the correct state(s) and be carefully reviewed by foreclosure counsel. Pursuant to the new laws, a “Notice of Affected Parcel” is recorded in each North Carolina county, and a “Notice of Boundary Clarification” is recorded in each South Carolina county. These documents are indexed so that they appear in the chain of title for the borrower/landowner. There will be occasions where a search in both states is warranted and a dual state foreclosure may be necessary.

Additionally, any South Carolina foreclosure proceedings filed with respect to an affected parcel must comply with S.C. Code § 29. As of January 1, 2017, when a mortgagee initiates a foreclosure proceeding with respect to “affected land” (defined as “real property of an owner whose perceived location has been clarified pursuant to the boundary clarification legislation”), the mortgagee’s attorney of record must file, with the court, a copy of the Notice of Boundary Clarification (together with the attorney’s certification) that title to the real property has been searched in the affected counties — in both South Carolina and North Carolina — and that all parties having an interest in the real property have been served with notice of the foreclosure action.

The foreclosure proceedings are stayed until the attorney has filed the certification. The mortgagee’s attorney of record must also serve, along with the summons and complaint, a copy of the recorded Notice of Boundary Clarification on all parties identified in the notice or known to have an interest in the affected land.

With respect to foreclosure actions already pending as of January 1, 2017, before any hearing on the merits (or if an order for sale has already been entered, then before sale), the mortgagee’s attorney of record must serve (by certified mail or overnight delivery) a copy of the Notice of Boundary Clarification and all filed pleadings on any party identified in the notice — or known to have an interest in the affected land — who is not already a party to the action. These additional parties shall have 30 days from the date when the mortgagee’s attorney mails the notice to file an answer or other response to the foreclosure complaint.

If any party who is served with the Notice of Boundary Clarification in connection with a foreclosure proceeding does not file a response within 30 days of service, the mortgagee’s attorney shall certify that fact to the court. The case will proceed as with any other foreclosure case; however, the mortgagee must continue to serve all parties with notice of any hearing and of the sale.

Moving Forward

These are unchartered waters, so it is critical to proceed on a case-by-case basis. When a Notice of Affected Parcel or Notice of Boundary Clarification, as applicable, is discovered in the title search, foreclosure counsel needs to carefully review the title and also examine the security instrument to determine whether it can be foreclosed using the respective Carolina’s usual process. This will help to ensure that the foreclosure process moves smoothly forward, while the ground stays in place.

Copyright © 2017 USFN. All rights reserved.
Summer USFN Report

Note for consideration of the USFN Award of Excellence: This article is a "Feature."


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