USA – NORTH CAROLINA Law and Practice Contributed by: John Livingston and Brittani Miller, Kilpatrick Townsend & Stockton LLP
3.4 Taxes or Fees Relating to the Granting and Enforcement of Security Nominal recording fees will be applied to any docu - ment recorded in a North Carolina county. Notary fees vary based on the notary but are typically nominal as well. 3.5 Legal Requirements Before an Entity Can Give Valid Security Before an entity can give valid security over its real estate assets, it must have clear authority to grant the security, which typically requires authorisation from its governing body and compliance with its governing documents, such as operating agreements or by-laws. The entity must have clear legal title of the property being used as collateral, and the security instrument must be executed in writing, notarised, and recorded in the Register of Deeds office in the county where the property is located. 3.6 Formalities When a Borrower Is in Default A lender must typically follow the non-judicial fore - closure process under a power of sale clause, which requires the lender to provide a notice of default, file a notice of hearing with the Clerk of Superior Court in the county where the property is located, and prove the borrower’s default and the lender’s right to fore - close at a hearing. If approved, the property is sold at a public auction, with a ten-day upset bid period allowing additional bids. Alternatively, judicial foreclo - sure is used when the deed of trust lacks a power of sale clause, requiring the lender to file a lawsuit and obtain a court order, a process that is more time- consuming and costly. The typical period of time necessary to successfully enforce and realise on real property security through non-judicial foreclosure is 90 to 120 days, provided there are no significant delays such as borrower bankruptcy or disputes over default. This process includes required steps such as filing a notice of hearing, obtaining approval from the Clerk of Supe - rior Court and completing a foreclosure sale, along with a ten-day upset bid period that may extend the timeline if additional bids are submitted. For judicial foreclosures, which involve court proceedings and are used when the deed of trust lacks a power of sale clause, the process can take significantly longer,
• if no consideration in property or money is due or paid by the transferee to the transferor; • by merger, conversion or consolidation; and • by an instrument securing indebtedness. Additionally, the following seven of North Carolina’s 100 counties impose a local transfer tax of up to 1% of the value of the property: Camden, Chowan, Curri - tuck, Dare, Pasquotank, Perquimans and Washington Counties. 2.11 Legal Restrictions on Foreign Investors There are currently no restrictions on foreign investors acquiring real estate in North Carolina. 3. Real Estate Finance 3.1 Financing Acquisitions of Commercial Real Estate Most acquisitions of commercial real estate are financed through commercial loans with banks or other financial institutions, with the subject property acting as the collateral. Mezzanine debt is also a pos - sibility in larger transactions. Certain real estate pur - chases may also include tax-equity investors. 3.2 Typical Security Created by Commercial Investors The most common form of security created is a mort - gage or deed of trust, which grants the lender a lien on the property as collateral for the loan. In addition to the mortgage or deed of trust, lenders often require the borrower to execute other security instruments, such as an assignment of rents and leases, personal or corporate guaranty, and/or a fixture financing state - ment. 3.3 Restrictions on Granting Security Over Real Estate to Foreign Lenders There are currently no restrictions on granting security over real estate to foreign lenders in North Carolina. The applicable lender may be required to register with the Secretary of State.
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