Title Examination, GAP Insurance, and Recorded Deeds - Closing Title in a Quarantined World

As of March 24, 2020, both the Nassau County and Suffolk County Clerks have suspended in-person access to their offices. As previously reported on our blog, the Chief Administrative Judge of the Courts has ordered that county clerks shall no longer accept any filings, electronic or otherwise. It's still an open question whether this precludes the electronic recording of documents, but there is no doubt that title insurance is a whole lot more complicated right now.

How will your title insurer examine title and issue a policy if they cannot pull non-electronic records? While some clerks have a more robust electronic system than others, can title insurers be confident that the records are up to date given limited staffing and restrictions on filing?

What about the period between closing of title and the recording of your deed? It has always been theoretically (and unfortunately in some instances, actually possible) for a grantor to encumber title to the property you just bought after your title insurer had already performed its search, cleared for closing, and locked in its policy. If there is an even further extended period between closing and recording due to coronavirus closures, it is more vital than ever to ensure that you are protected against these unseen encumbrances.

Traditionally this "GAP Period" requires a special endorsement that protects the purchaser against encumbrances that occur after closing but before the deed is recorded, but will title insurers be willing to insure such an unknown and potentially length time period?

If you are closing in the next few weeks, make sure your attorney has all these questions answered.

What Happens When You Ignore the Essential Services Executive Order

Beyond injuring others and being a terrible person, have you looked-up the exposure for violating Executive Order 202.8.

To remind you, 202.8 is what provides, in pertinent part, that "[e]ach employer shall reduce the in-person workforce at any work locations by 100% no later than March 22 at 8 p.m."

As to exposure for violating 202.8, it provides that "[a]ny business violating the above order shall be subject to enforcement as if this were a violation of an order pursuant to section 12 of the Public Health Law." Then, section 12 of the Public Health Law provides for "a civil penalty of not to exceed two thousand dollars for every such violation" for the first violation and a penalty "not to exceed five thousand dollars for a subsequent violation." However, if your violation "results in serious physical harm to any patient or patients, the penalty is "not to exceed ten thousand dollars."

So, if you infect someone, you are getting charged with a $10K penalty per violation.

Oh, by the way, the State can also get an injunction against your continued violations and potentially shut down your business, remote or otherwise, with that injunction.

Don't be crazy and ignore the order. Instead, if you believe you are essential, apply for a designation here.

Coronavirus in Your Multi-Family / Commercial Building

If you learn that someone is infected with Coronavirus in a unit, do not notify other tenants or conduct cleaning.

Instead, contact your local (County / City) and follow their guidance. Do nothing else.

You are ill-equipped to create a protocol and may further injure your tenants by acting imprudently.

There are privacy concerns, cleanliness concerns, isolation concerns, testing concerns and the like.

Therefore, if you learn of a positive diagnosis in your property, contact your local health department and follow their guidance.

Federal Courts Remain Open Amid the Coronavirus Outbreak

While New York State Courts are currently not permitting individuals or businesses to commence new matters (with extremely limited exceptions), federal courts (Eastern District of New York and Southern District of New York) remain open. Individuals or businesses can, thus, still file new cases in federal court.

Potential causes of action that can be filed in federal court include, but are not limited to:

• Wage and Hour claims pursuant to the Fair Labor Standards act for unpaid wages, overtime, etc.;
• Bankruptcy petitions; 
• Discrimination/Retaliation claims under Title VII (race, age, sex, religion, disability etc.);
• Interference with rights under the Family Medical Leave Act.

NYS Mortgage Relief Plan – Guidance from DFS

Following Governor Cuomo’s announcement on a 90-day mortgage relief plan for borrowers affected by the novel coronavirus (COVID-19), the New York State Department of Financial Services (DFS) issued Guidance to regulated financial institutions concerning its implementation. The Guidance urges all regulated financial institutions to do their part in curtailing the effects of COVID-19 on consumers and small businesses by:

• Waiving overdraft fees;
• Providing new loans on favorable terms;
• Waiving late fees for credit card and other loan balances;
• Waiving automated teller machine (ATM) fees;
• Increasing ATM daily cash withdrawal limits;
• Waiving early withdrawal penalties on time deposits;
• Increasing credit card limits for creditworthy customers;
• Offering payment accommodations, such as allowing loan customers to defer payments at no cost, extending the payment due dates or otherwise adjusting or altering terms of existing loans, which would avoid delinquencies, triggering events of default or similar adverse consequences, and negative credit agency reporting caused by COVID-19 related disruptions;
• Ensuring that consumers and small businesses do not experience a disruption of service if financial institutions close their offices, including making available other avenues for consumers and businesses to continue to manage their accounts and to make inquiries;
• Alerting customers to the heightened risk of scams and price gouging during the COVID-19 disruptions, and reminding customers to contact their financial institutions before entering into unsolicited financial assistance programs; and
• Proactively reaching out to customers via app announcements, text, email or otherwise to explain the above-listed assistance being offered to customers.

Regulated financial institutions are also urged “to work with and provide accommodations to their borrowers during this unprecedented global emergency to the extent reasonable and prudent.” This includes holding off on taking adverse action for defaults. Regulated financial institutions include mortgage bankers, mortgage loan servicers, banks and trust companies, among others. For a full list of DFS-regulated financial institutions, click HERE.

While the efforts of DFS and New York State are definitely acknowledged and appreciated, Borrowers should be aware that the Guidance is simply that, guidance. The Guidance does not legally require financial institutions to take the above-listed actions and only encourages them to do so.

Stay tuned for more updates from New York State and DFS as to specific procedures on the NYS mortgage relief plan.