Nevada Legislative Update

Nevada Legislative Update

The Nevada legislature recently amended its laws governing ownership interests in real property, reconveyances of deeds of trust, and bona fide purchasers effective July 1, 2013.

NEVADA SENATE BILL 493

 

 

Except as otherwise provided by law or by agreement between the parties and regardless of the date the interests were created, if the beneficial interest in a loan or the ownership interest in the real property previously securing the loan belongs to more than one person, the holders of the beneficial interest in a loan whose interests represent 51% or more of the outstanding principal balance of the loan or the holders of 51% or more of the ownership interest in the real property, as indicated on a trustee’s deed upon sale, a deed recorded upon sale, or a deed in lieu of foreclosure, and any subsequent deed selling, transferring or assigning an ownership interest, may act on behalf of all the holders of the beneficial interests or ownership interests of record on matters which require the action of the holders of the beneficial interests in the loan or the ownership interests in the real property, now including, without limitation:

  • The designation of a mortgage broker or mortgage agent, servicing agent or any other person to act on behalf of all the holders of the beneficial interests or ownership interests of record;
  • The foreclosure of the property for which the loan was made;
  • The subsequent sale, transfer, or encumbrance of real property owned by the holders resulting from a foreclosure or the receipt of a deed in lieu of a foreclosure in full satisfaction of a loan, to a bona fide purchaser or encumbrancer for value;
  • The release of any obligation under a loan in return for an interest in equity in the real property or, if the loan was made to a person other than a natural person, an interest in equity of that entity; and
  • The modification or restructuring of any term of the loan, deed of trust, or other document relating to the loan, including, without limitation, changes to the maturity date, interest rate, and the acceptance of payment of less than the full amount of the loan and any accrued interest in full satisfaction of the loan.

 

A person designated to act on behalf of the holders of the beneficial interest in a loan or the ownership interest in real property must, not later than 30 days before the date on which the holders will determine whether or not to act, send a written notice of the action to each holder of a beneficial interest or ownership interest at the holder’s last known address, by a delivery service that provides proof of delivery or evidence that the notice was sent.  The written notice must state:

  • The actions that will be taken on behalf of the holders who consent to an action, if the holders of the beneficial interest in a loan whose interests represent 51% or more of the outstanding principal balance of the loan or the holders of 51% or more of the ownership interest in the real property act;
  • The actions that will be taken on behalf of the holders who do not consent to an action, if the holders of the beneficial interest in a loan whose interests represent 51% or more of the outstanding principal balance of the loan or the holders of 51% or more of the ownership interest in the real property act; and
  • The amount of the costs or, if an amount is unknown, an estimate of the amount of the costs that will be allocated to, or due from, the holder and deducted from any proceeds owed to the holder.

 

If real property is sold, transferred, encumbered, or leased, any beneficial interest in the loan or ownership interest in the real property of a holder who does not consent to the sale, transfer, encumbrance, or lease, including, without limitation, any interest of a tenant in common who does not consent to the sale, transfer, lease, or encumbrance, must be sold, transferred, encumbered, or leased and contain the signatures on the necessary documents of the holders consenting to the sale, transfer, lease, or encumbrance of the real property.  The holders consenting to the sale, transfer, lease, or encumbrance of the real property must designate a representative to sign any necessary documents on behalf of the holders who do not consent to the sale, transfer, lease, or encumbrance and, if the representative maintains written evidence of the consent of the number of holders, the representative is not liable for any action taken.

 

 

A mortgage broker must not place or arrange to place a private investor into a limited-liability company, business trust, or other entity before or after foreclosure of the real property securing the loan, or receipt of a deed in lieu of foreclosure in full satisfaction of a loan secured by the real property, unless the mortgage broker:

  • Provides a copy of the organizational documents of the limited-liability company, business trust or other entity to each investor not later than 5 days before the transfer of the interest in the loan or the interest in the real property;
  • Obtains the written authorization of a sufficient number of the investors to act on behalf of all the investors; and
  • Obtains the written authorization of each investor consenting to the transfer of his or her interest in the loan or in the real property to the limited-liability company, business trust or other entity.

 

Whenever the debt or obligation secured by a deed of trust has been paid in full or otherwise satisfied and the lender cannot be located after diligent search or refuses to execute and deliver a proper request to reconvey the estate in real property conveyed to the trustee by the borrower or whenever a balance, including, without limitation, principal and interest, remains due on the debt secured by the deed of trust and the trustor or the trustor’s successor in interest cannot locate after diligent search the lender, the trustor or the trustor’s successor in interest may record or cause to be recorded a surety bond and a declaration.

 

 

The surety bond recorded must:

  • Be acceptable to the trustee;
  • Be issued by a surety authorized to issue surety bonds in Nevada in an amount equal to the greater of:
    • Twice the amount of the original obligation or debt secured by the deed of trust plus any principal amounts, including, without limitation, advances, indicated in a recorded amendment thereto; or
    • 1.5 times the total amount of the original obligation or debt secured by the deed of trust plus any accrued interest on that amount;
  • Be conditioned on payment of any amount which the lender recovers in an action to enforce the obligation or recover the debt secured by the deed of trust, plus costs and reasonable attorney’s fees;
  • Be made payable to the trustee who executes a reconveyance and the lender or the lender’s successor in interest; and
  • Contain a statement of:
    • The recording date and instrument number or book and page number of the recorded deed of trust;
    • The names of the original trustor and lender;
    • The amount shown as the original principal amount secured by the deed of trust; and
    • The recording information and new principal amount shown in any recorded amendment to the deed of trust.

 

The declaration recorded must:

  • Be signed under penalty of perjury by the trustor or the trustor’s successor in interest;
  • State that it is recorded;
  • State the name of the original trustor;
  • State the name of the lender;
  • State the name and address of the person making the declaration;
  • Contain a statement of the following, whichever is applicable:
    • That the obligation or debt secured by the deed of trust has been paid in full or otherwise satisfied and the lender cannot be located after diligent search or refuses to execute and deliver a proper request to reconvey the estate in real property conveyed to the trustee by the borrower; or
    • That a balance, including, without limitation, principal and interest, remains due on the debt secured by the deed of trust and the trustor or the trustor’s successor in interest cannot locate after diligent search the current lender;
  • Contain a statement that the declarant has mailed by certified mail, return receipt requested, to the last known address of the person to whom payments under the deed of trust were made and to the last lender at the address indicated for such lender on the instrument creating, assigning or conveying the deed of trust, a notice of the recording of the surety bond and declaration, of the name and address of the trustee, of the lender’s right to record a written objection to the reconveyance of the deed of trust and of the requirement to notify the trustee in writing of any such objection; and
  • Contain the date of the mailing of any notice and the name and address of each person to whom such a notice was mailed.

 

The trustee must execute and record or cause to be recorded a reconveyance of the deed of trust not earlier than 30 days after the recording of the surety bond and declaration, delivery to the trustee of the fees charged by the trustee for the preparation, execution or recordation of a reconveyance, plus costs incurred by the trustee, and a demand for reconveyance, unless the trustee has received a written objection to the reconveyance of the deed of trust from the lender within 30 days after the recording of the surety bond and declaration.  The recording of a reconveyance has the same effect as a reconveyance of the deed of trust and releases the lien of the deed of trust.  A trustee is not liable to any person for the execution and recording of a reconveyance if the trustee acted in reliance upon substantial compliance by the trustor or the trustor’s successor in interest.  The sole remedy for a person damaged by the reconveyance of a deed of trust is an action for damages against the trustor or the person making the declaration or an action against the surety bond.

 

 

Upon the recording of a reconveyance of the deed of trust, interest no longer accrues on any balance remaining due under the obligation or debt secured by the deed of trust to the extent that the balance due has been stated in the declaration.  Any amount of the balance remaining due under the obligation or debt secured by the deed of trust, including, without limitation, principal and interest, which is remitted to the issuer of the surety bond in connection with the issuance of that surety bond must, if unclaimed within 3 years after remittance, be property that is presumed abandoned.

 

 

From the date on which the amount is paid or delivered to the Administrator of Unclaimed Property (the “Administrator”), the issuer of the surety bond is relieved of any liability to pay to the lender or its heirs or successors in interest the amount paid or delivered to the Administrator.  Any failure to comply does not affect the rights of a bona fide purchaser or encumbrancer for value.

 

 

The above procedures are not exclusive for the reconveyance of a deed of trust and the issuance of surety bonds and declarations to release the lien of a deed of trust, and do not affect any other procedures, whether or not the procedures are statutory, for the reconveyance of a deed of trust and the issuance of surety bonds and declaration to release the lien of a deed of trust.

 

 

The trustor or the trustor’s successor in interest may substitute the current trustee of record without conferring any duties upon that trustee other than duties which are incidental to the execution of a reconveyance, if:

  • The debt or obligation secured by a deed of trust has been paid in full or otherwise satisfied;
  • The current trustee of record and the lender cannot be located after diligent search;
  • The declaration filed:
    • In addition to the information required to be stated in the declaration, states that the current trustee of record and the lender cannot be located after diligent search; and
    • Contains a statement that the obligation or debt secured by the deed of trust has been paid in full or otherwise satisfied and the lender cannot be located after diligent search or refuses to execute and deliver a proper request to reconvey the estate in real property conveyed to the trustee by the borrower;
  • The substitute trustee is a title insurer that agrees to accept the substitution, except that a duty is not imposed on a title insurer to accept the substitution; and
  • The surety bond is for a period of at least 5 years.

 

A diligent search has been conducted if:

  • A notice stating the intent to record a surety bond and declaration, the name and address of the trustee, the lender’s right to record a written objection to the reconveyance of the deed of trust and the requirement to notify the trustee in writing of any such objection, has been mailed by certified mail, return receipt requested, to the last known address of the person to whom payments under the deed of trust were made and to the last lender at the address indicated for the lender on the instrument creating, assigning or conveying the deed of trust;
  • A search has been conducted of the telephone directory in the city where the lender or trustee of record, whichever is applicable, maintained its last known address or place of business;
  • If the lender or the lender’s successor in interest, or the trustee of record or the trustee’s successor in interest, whichever is applicable, is a business entity, a search has been conducted of the records of the Secretary of State and the records of the agency or officer of the state of organization of the lender, trustee or successor, if known; or
  • If the lender or trustee of record is a state or national bank or state or federal savings and loan association, an inquiry concerning the location of the lender or trustee has been made to the regulator of the bank or savings and loan association.

 

“Surety” means a corporation authorized to transact surety business in Nevada that:

  • Is included in the United States Department of the Treasury’s Listing of Approved Sureties; and
  • Issues a surety bond that does not exceed the underwriting limitations established for that surety by the United States Department of the Treasury.

 

“Surety bond” means a bond issued by a surety for the reconveyance of a deed of trust.

 

Any purchaser who purchases an estate or interest in any real property in good faith and for valuable consideration and who does not have actual knowledge, constructive notice of, or reasonable cause to know that a defect or adverse rights exist in the title or interest to the real property is a bona fide purchaser.

 

 

A conveyance of an estate or interest in real property, or charge upon real property will not be considered fraudulent in favor of a bona fide purchaser unless it appears that the subsequent purchaser in such conveyance, or person to be benefited by such charge, had actual knowledge, constructive notice, or reasonable cause to know of the intended fraud.