SC Lawyer, July 2007, #3. Retiring the Title to Mobile Homes.

• Author: By Brian C. Phillips

South Carolina Lawyer

2007.

SC Lawyer, July 2007, #3.

Retiring the Title to Mobile Homes

South Carolina LawyerJuly 2007Retiring the Title to Mobile HomesBy Brian C. PhillipsSouth Carolina has among the highest percentage of mobile homes in the nation. According to the U.S. Census Bureau, in 2003 nearly 18 percent of total housing units in South Carolina were mobile homes, ranking it number two nationally. See www.census.gov/statab/ranks/rank38.html. Consequently, closing attorneys in South Carolina frequently handle transactions involving mobile homes.

The most common scenario encountered by closing attorneys involves a mortgage lender extending a loan on real estate that has, or will have, a mobile home situated on the property. Typically the lender's closing instructions either expressly require retirement of title to the mobile home or require issuance of an ALTA 7 endorsement to the lender's title insurance policy. The ALTA 7 generally assures the lender that "the term 'land' as defined in the policy includes the manufactured housing unit located on the land at the Date of Policy." ALTA 7 Manufactured Housing Unit Endorsement, 1987. Title insurance companies will typically require retirement of title before they will issue an ALTA 7 endorsement.

To accommodate the requirements of lenders and title insurers, closing attorneys must be familiar with the procedures for retiring the certificate of title (CT) to mobile homes. The purpose of this article is to explain the procedures. A better understanding can help minimize the risk, costs and delays inherent in handling transactions involving mobile homes. This article will only address retirement of title and will not address the procedures detailed in S.C. Code § 56-19-550 for severance of a mobile home for which title has been retired.

Note that the retirement procedures require considerably more work than the typical residential closing, and the clerk of court and Department of Motor Vehicles charge additional fees for retirement of title. Consider adjusting attorney fees accordingly.

Procedures

Mobile homes are classified as personal property. Brockbank v. Best Capital Corp., 341 S.C. 372, 534 S.E.2d 688; City of North Charleston v. Claxton, 315 S.C. 56, 431 S.E.2d 610 (Ct. App. 1993) (finding that mobile homes were personal property because they had no significant attachments to the property such as permanent foundations or additions). S.C. Code § 56-19-500 et. seq. provides the procedure for affixing a mobile home to real estate and retiring the title so that it is treated "for all purposes except condemnation as real property." S.C. Code § 56-19-510(C). "Title to the manufactured home is thereby vested in the lawful owner of the real property to which it is affixed." Id.

The first step is to determine whether a mobile home is involved in the transaction. A thorough title search, in particular of plats and tax records, may reveal the presence of a mobile home. The sales contract should also be reviewed for language indicating that a mobile home is included in the sales transaction. In addition, sellers, buyers, lenders and brokers should be questioned to determine if the property contains a mobile home or if one is to be conveyed with the property. If a lender is involved, review the lender's closing instructions for instructions regarding mobile homes. However, it is not a good idea to wait on the closing instructions to determine if the collateral includes a mobile home, as it is often too late to adequately prepare for closing and retirement of title. If the lender intends to include a mobile home as collateral, the lender's appraisal will include the value of the home and specific details of the home. Therefore, regularly requiring review of the appraisal prior to closing is a good idea. This is the best source for an attorney to determine if the home is a mobile home.

If the transaction involves a mobile home, the next question is whether the certificate of title should be retired. If the lender's closing instructions require retirement, those instructions must be followed. Typically, the lender will require an ALTA 7 endorsement to the title insurance policy. Generally, title insurance companies will require an exception in the policy stating that it does not insure title to the mobile home. The company will only issue an ALTA 7 endorsement and allow deletion of the exception if certain requirements are met, including retiring the title to the mobile home. Consult your title company for specific requirements and procedures.

If a lender is involved but the closing instructions do not require retirement of title, consult the lender to determine whether the lender intends to secure the loan with a lien on the mobile home as well as the real estate. If so, the options for securing a loan on a mobile home, including notating the lien on the face of the title and retirement of title, should be discussed with the lender.

If the lender does not require retirement, or the deal is a cash transaction, the buyers should be consulted to determine whether they intend the home to remain as personal property or be affixed to the land.

S.C. Code § 56-19-510 provides the requirements for retiring the title:

(A) An owner of a manufactured home may affix the home to real property by:

(1) installing the home in accordance with the required installation standards and removing the wheels, axles, and towing hitch; and

(2) filing with the register of deeds or clerk of court, as appropriate, for the county in which the manufactured home is located the Manufactured Home Affidavit for the Retirement of Title Certificate in the form prescribed in this article together with proof of ownership as evidenced by a copy of the most recent deed of record or other instrument vesting title, and paying the filing fee required for affidavits by Section 8-21-310.

(B) The register of deeds or clerk of court must record the affidavit as if it were a deed to real property with the homeowner being identified as grantor and give notification to the county assessor.

S.C. Code § 56-19-510(C) provides that "upon the filing of the affidavit, the manufactured home is to be treated for all purposes except condemnation as real property and title to the manufactured home is thereby vested in the lawful owner of the real property to which it is affixed." Part (D) provides the form and content of the affidavit. Certain aspects of the form deserve special mention.

First, the form is an affidavit that will be recorded on the public records; therefore, the attorney should take care that the content is true to the best of the affiant's knowledge. Second, the "owner" for purposes of the affidavit means "homeowner" as defined in S.C. Code § 56-19-500(3), i.e., the current owner of record of the mobile home. To determine the current owner, contact the Department of Motor Vehicles to perform a search of DMV records. Obtain the original certificate of title, and verify the information on the title matches the DMV records. If the person in possession of the mobile home is not shown as owner on the current CT, the current owner will need to be located and will need to convey title to the correct person. That person would then need to sign a Form 400 Application for Certificate of Title to get a new CT in his or her name before proceeding. You will also need the CT to complete the information identifying the mobile home on the affidavit.

Under item (3) of the affidavit, the affiant must state whether there are liens on the mobile home. S.C. Code § 56-19-290(3) provides that the CT shall contain "the names and addresses of any lienholders, in the order of priority as shown on the application, and dates of the liens." However, under the procedures detailed in S.C. Code § 56-19-630 and § 56-19-650 for perfecting a security interest in a mobile home, a security interest may be perfected but not reflected on the CT. As a result, in addition to reviewing the original CT for liens, the attorney should perform a search of DMV records for liens on the mobile home. Contact the local DMV for specific procedures for searching DMV records. For attorneys who regularly close transactions involving mobile homes, the search process may be expedited by opening a records search account with the DMV. DMV records search forms are available on the DMV's Web site at www.scdmvonline.com.

If liens shown on the CT are being paid off in the transaction, the affidavit should state the mobile home "is not subject to a security lien," provided the requirements of 520(2), regarding release of liens, can be met. Section 520 is discussed further below.

Under S.C. Code § 56-19-540, if the mobile home is subject to a lien "not otherwise evidenced by a mortgage" that is not being paid off and satisfied, a separate Manufactured Home Lien affidavit must be filed with the register of deeds or clerk of court. S.C. Code § 56-19-540(B) provides the form of the affidavit. "Upon filing, the lien becomes a lien against the real property to which the manufactured home is affixed and is to be indexed in the name of the owner identified on the Manufactured Home Lien Affidavit as mortgagor and secured parties, as mortgagees. Any lien on the manufactured home at the time of retirement of the title certificate must be perfected and have priority in the manner provided for a lien on real property."

Item (4) of the affidavit requires the affiant to state whether the jurisdiction where the mobile home is located has locally enforced building and safety codes. Contact the county or city building and codes office. If the local jurisdiction has building and safety codes for mobile homes, written evidence of compliance, such as a certificate of occupancy, statement from the code enforcement office or inspection report, must be attached to the affidavit. However, according to some practitioners, this requirement has been relaxed even in those counties with locally enforced codes. In those counties, the affidavit will be accepted by the clerk or register without evidence of compliance. Check with the local recording office.

S.C. Code § 56-19-210 states "it shall be unlawful for any person to sell or offer for sale or mortgage in this State . . . any mobile home, unless a certificate of title has been issued therefor and is currently valid." S.C. Code § 56-19-360 provides the procedure for transfer of title to a mobile home. Under that section, when title to a mobile home is transferred, the seller must sign an assignment and warranty of title/bill of sale, Form 4031. This form is included on the back of most certificates of title. However, the DMV will only retire the title in the name of the current owner as shown on the CT. If the assignment of vehicle/bill of sale is signed, the DMV will require a new title to be issued in the name of the transferee. The new owner would then need to sign a Form 400 Application for CT and submit it to the DMV for a new title in the transferee's name. Once the new title is issued, the DMV would then retire the title in the name of the new owner. The manufactured home affidavit would need to be signed by the new owner.

The better procedure when a mobile home is being sold as part of the transaction is for the bill of sale/assignment of vehicle to NOT be signed. The manufactured home affidavit should be signed by the current owner as shown on the CT. Under 510(c) the filing of the affidavit then vests ownership of the mobile home in the owner of the real property. The original CT, without the assignment of vehicle/bill of sale signed, along with the recorded manufactured home affidavit signed by the seller of the mobile home, would then be forwarded to the DMV for retirement.

Because S.C. Code § 56-19-340 requires that the certificate of title be mailed to the first lienholder named in the CT (or the lienholder's authorized agent), the current owner often will not possess the original CT. If the CT is in possession of a lender whose lien is being paid off in the transaction, the attorney will need to get the original CT from the lender, with the lien canceled on the face of the CT. If the title has been lost, the owner will need to sign a Form 400 application for a new CT and forward it to the lienholder to cancel any liens. The attorney will then need to retrieve the CT with the lien canceled and forward it to the DMV. It is a good practice to routinely have the parties to the transaction sign a Form 400 in case the need for a new CT arises.

After closing, the affidavit should be recorded, along with any other recordable documents. For a purchase transaction, the deed should be recorded first to convey the real property to the purchaser, followed by the affidavit, which attaches the home to the real property, followed finally by the mortgage(s). For a refinance, the affidavit should be recorded prior to the mortgage.

It is important to note that the "owner" of the manufactured home, as identified in the affidavit, need not be the owner of the real property. The affidavit should be signed by the current owner of record of the mobile home, which may or may not be the seller of the real property. Upon the recording of the affidavit, "the manufactured home is to be treated for all purposes except condemnation as real property and title to the manufactured home is thereby vested in the lawful owner of the real property to which it is affixed." S.C. Code § 56-19-510(C).

While recording the affidavit qualifies the mobile home to be treated as real property, the title will not be retired until the requirements of S.C. Code § 56-19-520 are met. Under § 56-19-520, the DMV will retire the CT upon the receipt of: 1) a clocked, stamped copy of the Manufactured Home Affidavit; 2) the original CT; 3) a receipt demonstrating payment of the most recently billed property taxes for the manufactured home; and 4) payment of a fee established by the department not to exceed $50 for retirement of the certificate of title. If no taxes are owed on the home, the DMV will accept a statement on the county treasurer's letterhead stating that no taxes are owed. See www.scdmvonline.com/DMVNew/default.aspx?n=manufactured_home_titling. Since the DMV will require a clocked, stamped copy of the affidavit, the documents should be recorded first, and then these items should be forwarded to the DMV.

If there is a lien on the mobile home, the items sent to the DMV must be accompanied by a release of lien, or written consent of the secured party, indicated on the CT, to the retirement of title, which authorizes the department to cancel its record of lien as if it had been released. S.C. Code § 56-19-520(2) provides that the lien may be released either by the appropriate notation on the title or by an affidavit of a South Carolina licensed attorney, provided the attorney can provide proof of payment of funds. Section 56-19-520(B) provides the form of the affidavit/lien release. This is similar to the attorney satisfaction of mortgage found in S.C. Code § 29-3-330(e).

Due to the many post-closing requirements, a good practice tip is to have both buyer and seller sign a power of attorney giving the attorney the authority to complete any paperwork such as DMV forms.

S.C. Code § 56-19-560 provides that, when an owner of a manufactured home has met all requirements of § 56-19-500, et. seq. for retiring the certificate of title on the mobile home and having it treated as real property, the register of deeds or clerk of court in the county where the home is located must treat it as real property "in all indexes and transactions regarding the manufactured home and the real property to which it is affixed," and may not treat it as personal property. Title to the manufactured home is thereby vested in the lawful owner of the real property to which it is affixed.

Note that, under S.C. Code § 56-19-510(C), upon the filing of the manufactured home affidavit, the mobile home is to be treated "for all purposes except condemnation as real property," and title is vested in the owner of the real property. However, S.C. Code § 56-19-560 provides that, upon an owner meeting all requirements for retiring the title and having the home classified as real property, "the register of deeds or clerk of court . . . in all indexes and transactions . . . must treat the mobile home as real property," and may not treat it as personal property. Hence, it is possible to classify the home as real property and vest title in the owner of the real property by filing the affidavit, without completing the subsequent retirement requirements. Presumably, in this circumstance, a lender's security interest would be protected in the event of foreclosure since under 510(C) the filing of the affidavit vests title in the owner of the real property and classifies the home as real property "for all purposes except condemnation." In light of 510(c), the meaning of 560 is unclear.

Conclusion

Mobile homes present unique challenges for the transactional lawyer. Because they are classified as personal property, to meet the requirements of mortgagees and title insurers, lawyers must be familiar with the procedures outlined in S.C. Code § 56-19-500 et. seq. for affixing a mobile home to real estate and retiring the title so that it is treated as real property. The procedures require considerably more work than the typical residential real estate transaction.

Brian C. Phillips practices with the Shaw Law Firm in Rock Hill. He wishes to thank his colleagues for their insight and suggestions.

Fees

Mobile home retirement affidavit: clerk/register recording fee; check with local office

Mobile home lien affidavit: check with local clerk/register

DMV records search fee: varies; check with DMV

DMV detitling fee: $50

Form 400, if needed: $15

Lien Satisfaction Affidavit: local clerk/register recording fee; check with local office