USA – NORTH CAROLINA Law and Practice Contributed by: John Livingston and Brittani Miller, Kilpatrick
allowing additional bids. Alternatively, judicial foreclosure 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 suc - cessfully 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, obtain - ing approval from the Clerk of Superior 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 judi - cial foreclosures, which involve court proceed - ings and are used when the deed of trust lacks a power of sale clause, the process can take significantly longer, typically ranging from six to 18 months or more due to litigation and proce - dural requirements. The exact timeline depends on factors such as the complexity of the case, borrower challenges, and compliance with statu - tory notice and procedural requirements. Properly recording the deed of trust with the Register of Deeds is essential, as priority follows the “first in time, first in right” rule, with earlier- recorded liens generally taking precedence. Lenders may also negotiate subordination agreements with pre-existing lienholders or pay off prior liens, such as mortgages or mechanic’s liens, to secure first-priority status. 3.7 Subordinating Existing Debt to Newly Created Debt Subordination can occur through a subordina - tion agreement, where the existing lienholder voluntarily agrees to subordinate their lien to the newly created debt. Subordination agreements
must be in writing and recorded in the land records in the county where the subject property is located to provide public notice. Additionally, under North Carolina law, lien priority is generally determined by the order of recording, following the “first in time, first in right” principle. 3.8 Lenders’ Liability Under Environmental Laws Lenders holding or enforcing security over real estate can face liability under federal and state environmental laws, particularly if they partici - pate in the management of a facility. However, liability protections are available under CER - CLA’s secured creditor exemption and through environmental due diligence. 3.9 Effects of a Borrower Becoming Insolvent A borrower’s insolvency does not automatically void security interests created in favour of a lender. However, the enforceability and priority of such security interests may be affected under federal and state bankruptcy laws in limited cir - cumstances. 3.10 Taxes on Loans Borrowers pay the recording fees to record the loan documents in the county where the prop - erty is located. 4. Planning and Zoning 4.1 Legislative and Governmental Controls Applicable to Strategic Planning and Zoning Planning and zoning are primarily governed at the local level by municipalities and counties, under the authority granted by state enabling legislation, such as N.C. Gen. Stat. §160D.
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