Ronald Markoff of the Law Offices of Ronald Markoff has handled countless title searches in his legal career. Such searches assure the purchaser of a property that the seller really does own the building and no one will emerge from the woodwork years later claiming to own the property. The searches are typically routine, but one Markoff handled recently for Community Works Rhode Island was a “nightmare.”
Markoff and another law firm, Chace Ruttenberg & Freedman, helped the organization purchase a mansion at 514 Broadway in Providence – known locally as the “Wedding Cake House” – which will be converted to affordable condominiums. In the process, Markoff sorted out more than a century of records that included a collection of owners, many bankruptcies, at least eight foreclosures and some 30 tax sales. Markoff recently took some time to speak about the project.
PBN: For folks unfamiliar with title searching, could you tell us why it’s important?
MARKOFF: When you buy a piece of real estate, the most important thing in reality is title, because you want to know whether the person selling the real estate to you actually owns it. You need to determine what liens are encumbering the property, because those liens need to be addressed and paid off.
For instance, if a seller has a mortgage and you don’t do a title search to see what’s affecting that title, then upon conveyance you’re going to be taking title subject to that encumbrance. It just does not go away, so any title attorney or any person who’s savvy in this area has to check the title to ensure you’re acquiring good, marketable and insurable title.
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PBN: What was the issue or issues with the Wedding Cake House?
MARKOFF: The issue here was a multitude of problems with the title, which are somewhat complex. But the major issue was that this property had gone through many foreclosures in the chain of title. It had also gone through many tax sales for unpaid taxes. There were unpaid sewer, unpaid water, unpaid real estate taxes. For the latter reasons, the municipal authorities can sell out a piece of property for those unpaid municipal liens. The problem here is there were maybe 30 of them. We had to make sure each one was properly addressed and redeemed.
PBN: How long did that take?
MARKOFF: The whole process from a title perspective took at least three to four months, because we had to check out each tax sale and we had to ensure that title was properly redeemed from the appropriate parties.
PBN: So what was the solution?
MARKOFF: When we do a title search we want to make sure what did happen was proper. So when you have 30 tax sales and you’re looking for redemptions of record, you’ve got to make sure, whether the proper parties redeemed and that the city record the proper deeds from the proper entities. The other major issue was that there were innumerable foreclosures. … If the foreclosure was conducted improperly, the foreclosure could be deemed void from the beginning.
Let’s assume you own the property and I foreclose upon you. And let’s assume there were two or three mortgages that were junior to the mortgage I foreclosed upon. My foreclosure is going to extinguish those junior mortgages.
However, let’s assume you – who was foreclosed – repurchase this property somewhere down the chain of title. Does your repurchase revive those mortgages that had been extinguished by the foreclosure?
Let’s assume I got a straw to foreclose and that straw buys in on your behalf and then that straw reconveys the property to you later on. These mortgages that you thought were extinguished by a foreclosure of a senior lien could in essence be revived.
Now this is exactly what was happening here. The person who was foreclosed repurchased the property through a corporation of which he was the sole shareholder. We had to be concerned that those junior lien holders could not then attempt to attack the title of any bona fide purchaser who acquired title later on.
In title work, we deal with possibilities not probabilities. So it’s always a possibility those junior lien holders – if they find out that person who was originally foreclosed reacquired that property either individually or through being a shareholder or whatever – could they now attempt to attack the title again? This is a major concern.
The title company passed on this particular issue because of the length of time that had passed. We felt that from a marketability point of view that if any junior lien holders were going to challenge title, so much time had passed and so many other owners had owned it in between that we didn’t really have to worry about it. But it’s always a concern and that’s why you buy a title insurance policy to protect against that eventuality.
A third major issue was that the entities that were foreclosed against had in fact filed bankruptcy at some point. A bankruptcy creates an automatic stay against the foreclosure. You cannot proceed with the foreclosure without getting permission from the bankruptcy court. It’s called relief from the stay. So a lot of these corporations that were in the chain of title that were foreclosed upon had actually filed bankruptcy, and we wanted to ensure in the bankruptcy court files that the lenders which foreclosed had in fact obtained reliefs from those stays.
Those reliefs should have been recorded initially when the foreclosures were conducted by those lenders that did the original foreclosures. None of them had. We had to check the bankruptcy records and dockets to make sure there was proper relief.
PBN: How did this compare to other title work?
MARKOFF: This was not your run-of-the-mill closing or title search. This involved hours and hours of tedious, laborious research. What was happening here was the property was changing hands innumerable times within a very short period of time.
We had to be absolutely positive about who owned what at a particular point in time. And because of the other issues I just discussed, it was an extremely complicated, convoluted, title nightmare. It was imperative to make sure all the players were in place where and when they should have been.
