In December 2011, Governor John Kasich signed SB 117 into law. This piece of legislation, which takes effect on March 22, 2012, will have a significant impact on title agents and real estate practitioners. Most notably, the measure will allow for conveyances directly into a Trust. Prior to this law, a conveyance into a Trust was deemed void from the beginning, as if the Deed had no legal effect at all.

For such a conveyance to be valid under SB 117, the Trust into which the Deed is being conveyed, must have been in existence at the time of the original conveyance into the Trust. Additionally, a Memorandum of Trust must be recorded. The new statute will apply retroactively to cure previous conveyances that would have otherwise created a title defect. Nonetheless, the law will not set aside previous conveyances made subsequent to any defective deed that would otherwise be cured by this statute. The curative effect will be codified under ORC 5301.071(E).

The U.S. Supreme Court heard oral arguments this morning in First American Financial Corporation v. Edwards. This case arose in 2006 when Tower City, a title agency representing Denise Edwards during her purchase of a home, referred Edwards to First American Title Insurance. Edwards brought a class action lawsuit against First American under the Real Estate Settlement Procedures Act (RESPA) when she learned that First American was paying a substantial amount of money to Tower City so that Tower City would refer home buyers specifically to First American. RESPA prohibits the payment of kickbacks in connection with “a federally related mortgage loan.”

First American moved to dismiss the case on the grounds that Edwards suffered no direct injury (e.g. lower-quality service from First American) as a result of the kickback and thus she had no standing to sue the company. The U.S. Court of Appeals for the Ninth Circuit affirmed the district court’s ruling that RESPA provides a sufficient basis on which Edwards can sue First American. In its opinion, the Ninth Circuit cited Warth v. Seldin, which held that a statute like RESPA can create legal rights and provide a remedy when those rights are invaded. RESPA allows for plaintiffs like Edwards to recover a penalty of up to three times the amount paid for the service without having to prove a specific injury resulting from the kickback. The Supreme Court will now have the final say on whether Edwards can challenge First American’s kickback payment under this provision of RESPA.

To learn more about the arguments in this case, visit the Supreme Court of the United States Blog at http://www.scotusblog.com/?p=132413.