Effective immediately, Iowa’s General Assembly has amended Iowa’s Code relating to the execution, filing and recording of a mortgage release certificate.

Application:
The title guaranty division in the Iowa finance authority may execute and record a certificate of release in each county’s real property records in which a mortgage is recorded if the applicant submits in writing a payoff statement or other documentation of the amount due as evidence that the mortgage no longer secures an unpaid obligation or unfunded commitment. The applicant may provide evidence that payment was made, as well as the date payment was received, by providing a check, wire receipt, or other documentary evidence that had been negotiated by the mortgagee or mortgage servicer. The applicant must then confirm in writing that more than thirty days have passed since payment was sent, and effective satisfaction has not been executed and recorded within the thirty days.

Notice:
The division shall notify the mortgage servicer in writing about each of the following before executing and filing a certificate of release. The mortgage has not been released and indicates the division’s intention to execute and record a certificate of release upon the completion of the thirty day notice period. The notice must contain instructions for the mortgage servicer to notify the division in writing of any reason the certificate of release should not be executed.

Effective notice may be served by certified mail or any commercial delivery service, fax or email, publication in a local newspaper of general circulation, or by otherwise causing notice to be received within the time it would have taken to send by certified mail or commercial delivery service. Notice becomes effective upon the following circumstances: the day after notice is sent via commercial delivery service for overnight delivery, three days after sending via USPS, the day notice is electronically transmitted, the last day of newspaper publication, or otherwise, the day notice is received by the mortgage servicer.

Execution and Recording:
A certificate of release shall be executed and acknowledged as would a deed, and recorded in each county where the mortgage is recorded.

Effect:
A certificate of release that contains the information and statements required under the revised provisions shall serve as prima facie evidence of the facts contained therein, is entitled to be recorded with the county recorder, operates as a release of the mortgage described within, and may be relied upon by any person owning an interest or acquiring an interest in the subject property. The wrongful or erroneous recording of a certificate of release does not relieve the mortgagor from any personal liability remaining on the loan. However, if the division negligently or wrongfully records a certificate of release, the division shall be liable to the mortgagee and mortgage servicer for any actual damages sustained.

Recently Iowa’s General Assembly revised and clarified provisions and requirements relating to transfers of interests in real property by unincorporated business entities, including nonprofit organizations. The revisions reflect the nature of these sorts of entities’ organizational structure and decision making protocols, granting deference towards operating agreements and statements of authority, but providing a default practice for transferring real estate where those documents may be silent.

Section 1-3:
A statement of authority for unincorporated business entities duly filed with the secretary of state and county recorder where a mortgage is recorded is effective until amended or canceled, unless a cancellation date has already been provided for in the original statement. This statute revision eliminates the previous five year automatic cancellation provision affecting statements of authority for partnerships, limited liability companies, and nonprofit organizations.

Section 4:
In a member-managed LLC, a transfer of an interest in real property held by the organization may be executed as provided in the LLC’s operating agreement or statement of authority. If these organizational agreements do not provide a suitable method of transferring interests in real estate, the transfer may only be undertaken with the consent of all members whether or not such transfer is in the ordinary course of the LLC’s business.

Manager-managed LLC’s face similar limitations when transferring interests in real estate: should the operating agreement or statement of authority remain silent on a real estate action, the transfer may only commence with a majority of managers consenting. Again, these rules apply regardless of the transfer being within the LLC’s ordinary course of business.

Section 5:
Instruments transferring any interest in real property held by an entity carry warranties to the transferee by the person executing the instrument unless the instrument clearly and conspicuously provides for the contrary. The first warranty is that the entity exists at the time of transfer. Second, the person executing the instrument both has been duly authorized by the entity and has the legal capacity to execute the instrument. Fourth, the person knows of no facts or legal claims that may negatively or adversely affect the transfer.

Section 6:
Actions to invalidate a transfer of real estate by an entity are subject to statutory timing restrictions. The holder of an adverse claim shall not file an action to enforce such a claim five years after the effective date of this Act. The adverse claim holder, also, shall not file an action to enforce their claim or invalidate the real property transfer more than two years after the instrument’s recording date. Section 6 provisions do not limit any personal action against a person having executed an instrument transferring real estate for damages arising out of an allegation that the execution and delivery of the instrument was not authorized by the entity or a failure to meet any of the warranties listed in Section 5.

 

 

Louis Danastorg, J.D., M.B.A. is Regulatory Compliance Consultant at Bankers Advisory, Inc. He is a graduate of Vanderbilt University and earned his Juris Doctor and Masters of Business Administration from Suffolk University. He can be reached at Louis@bankersadvisory.com