Commercial Real Estate – Q1 Review
As the market bounces back from the effects of the COVID-19 pandemic, government closures, and a recession, things are picking up and getting busy in the commercial real estate industry. With the first quarter of 2021 officially over, this article outlines some of the most important real estate changes that have taken place in 2021 so far and what may be coming.
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New 2021 Minimum Standard Detail Requirements for ALTA/NSPS Land Title Surveys
Effective Feb. 23, 2021, the 2016 Minimum Standard Detail Requirements for ALTA/NSPS Land Title Surveys (the “2016 Standards”), the standards by which ALTA/NSPS Land Title Surveys are conducted, were replaced with the new 2021 Minimum Standard Detail Requirements (the “2021 Standards”). Therefore, all ALTA surveys conducted in connection with contracts that are executed on or after Feb. 23, 2021, must be performed under the new 2021 Standards, which can be found here.
In general, these standards have been revised to limit a surveyor’s liability and provide the surveyor greater clarity as to his/her role in meeting the requirements and performing various tasks in connection with each ALTA/NSPS Land Title Survey. Overall, the 2021 Standards include eight sections that detail the minimum standard requirements for an ALTA/NSPS Land Title Survey and Table A which describes optional survey responsibilities and specifications that may be requested by the parties.
One example concerns the deletion of 2016 Table A item 18 regarding wetlands. If a client wants this notation on the survey the client will have to negotiate this an as additional Table A item 20. Other changes relate to recorded easements, title documents, and utilities, and a redline of the 2016 versus new 2021 standards can be found here.
Retroactive Repeal of the Notarized Witness Requirement for Recorded Documents
Indiana’s legislature moved quickly to pass the retroactive repeal of the July 2020 statute, which required all recorded documents in Indiana, including deeds, easements, mortgages, etc., to have a notarized witness signature. You may recall that this new requirement was the unintended result of a change in Indiana Code 32-21-2-3 from “or” to “and” that caused chaotic closings and headaches for brokers, title companies, lenders, and attorneys all across Indiana. This was particularly cumbersome given the pandemic and the general population’s aversion to having more people in a room at one time to sign documents. Governor Holcomb signed HB 1056 on March 18, 2021, which retroactively reverted the recording requirement back to either a notarized signature or a common law proof, not both.
Revised Sales Disclosure Form (State Form 46021)
The Indiana Department of Local Government (the “Department”) has issued a revised Sales Disclosure Form (State Form 46021, the “Revised Form”) effective as of Jan. 1, 2021. The Revised Form is required to be completed by the applicable parties when a conveyance document is filed. Indiana Code 6-1.1-5.5-1 defines a conveyance as “any transfer of a real property interest for valuable consideration”, and the definition of a conveyance document includes — without limitation — deeds, contracts of sale, agreements, judgments, certain leases, and documents presented for recording — unless an exclusion applies — pursuant to Indiana Code 6-1.1-5.5-2.
Pursuant to the memo from the Department, the Revised Form “remains a tool primarily intended to capture sales data so that assessors can develop trending factors used in the annual adjustment process,” and the revisions “are intended to help obtain better and more complete information.” Of note are the revisions creating a separate addendum for agricultural or residential property, as well as an addendum for commercial or industrial property. Pursuant to the memo, the Department’s intent in creating a separate addendum for each property type is to “streamline the filing process as well as assisting the assessing official to identify the property being conveyed.”
Cities and Local Government Can No Longer Take Action on Landlord Tenant Matters
In 2020, Marion County, Ind. passed a local ordinance, which provided more restrictive rules for landlords than what is provided under Indiana statutory law, including the requirement to provide tenants with the Tenant Bill of Rights. Due to recent activity in this 2021 legislative session, the year-old tenant protection ordinance has been undone. In the 2020 legislative session, Senate Bill 148 was passed by the General Assembly to prevent individual cities from taking action on landlord and tenant matters, including expedited evictions and regulating rental properties. March 25, 2020, the governor vetoed the bill for being too broad. In February of the 2021 legislative session, the Senate and House voted to override Governor Holcomb’s veto. Senate Enrolled Act 148 prevents all local governments from regulating any aspect of landlord-tenant relationships. There may be efforts to pass a new bill this session that permits a local government to pass landlord tenant laws, but currently, none have been passed. This was the first time since Governor Holcomb took office that the legislative branch has voted to override one of his vetoes.
Possible Changes to Eminent Domain Proceedings
House Bill 1527, which affects eminent domain proceedings in Indiana is currently active in the 2021 legislative session. If passed, this bill would act to change the procedure in which appraisers are appointed, allow business owners to claim compensation for intangible business losses and loss of driveway access due to condemnation, and require a county’s legislative body's approval for a city or town condemning property within the unincorporated area. Further, this change would result in the plaintiff paying the defendant’s attorney’s fees and costs and not being allowed to file a new complaint in condemnation against the same property for five years unless the plaintiff proves the urgent necessity for the condemnation and demonstrates payment of the defendant’s attorney’s fees and costs incurred for the previous condemnation action, if a defendant’s objection to the condemnation is sustained. Those entitled to exercise the power of eminent domain, including public utilities, should take note of this new fee shifting rule. It is unknown at this time if this bill will pass. The Indiana State Legislature is scheduled to adjourn on April 29, 2021.
Commercial real estate in Indiana and across the country is still picking up steam as we move into Q2 of 2021. It is important to take a moment and review the changes we saw in the first quarter as many of them have already taken effect or will take effect soon.
For additional assistance with any commercial real estate-related matter, please contact an attorney in Taft’s Indianapolis Real Estate department.
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