Rhode Island Real Estate Practices
- Attorney Involvement
- Cancellation/Commitment Fee
- Certificate of Release (of Mortgage)
- Good Funds Requirements
- Joinder of Spouses
- Mortgage Tax
- Payment Customs
- Policy Countersignatures
- Real Estate Taxes
- Search and Examination Fees
- Search Requirements
- Security Instruments (Deed of Trust vs. Mortgage)
- Standard Exceptions and Requirements
- State-specific Policy Variations
- Title Insurance Form and Filing Regulations
- Transfer Taxes
- Withholding Taxes
- Witness Requirements
Please describe any requirements under applicable state law for attorney, abstractor or other special professional involvement, for example, in the search, examination, opinion of title, signing, closing, disbursement, recording, preparation of documents, and/or policy-issuance.
Rhode Island General Laws, Section 19-9-6, gives every prospective mortgagor the right to select his own qualified title attorney or title insurance company. Title Insurance agents must be licensed by the Rhode Island Department of Business Regulation, Insurance Division, under Rhode Island General Laws, Section 27-2.6-1. There is no license necessary to be a title searcher.
On May 29, 2020, the R.I. Supreme Court issued an opinion holding that title insurance companies and their agents do not engage in the unauthorized practice of law when they: (1) conduct a residential real estate closing; (2) draft a residency affidavit; and (3) draft a durable power of attorney limited to the closing, so long as these activities are carried out in connection with the issuance of title insurance. Non-attorney closing agents must, however, make certain disclosures to the buyer and seller that the closing agent is not an attorney, and the disclosures must be signed by all parties.
The Court has held that the examination of title for marketability, and the drafting of a deed, constitute the practice of law and must be undertaken by a licensed attorney. There is no state statute requiring a title certification from an attorney.
Does your state permit or require a cancellation fee or commitment fee upon cancellation?
Rhode Island permits Cancellation or Commitment Fees.
Certificate of Release (of Mortgage)
If anyone other than the lender (such as a title agent, settlement agent, underwriter or attorney) has the authority to release the security instrument, please describe.
Only an authorized signatory of a lender, or holder of the mortgage, may execute a Discharge of Mortgage. Statutory forms are found at Rhode island General Laws, Section 34-11-12.
Please describe the kinds of deeds that are customary for commercial and residential transactions. Please describe the kinds of deeds that are generally not insurable.
Warranty deeds are commonly used for residential closings, by contract. Quitclaim Deeds and Bargain and Sale Deeds are commonly used for commercial closings. Statutory Forms are found in Rhode Island General Laws, Section 34-11-12. Generally, tax deeds, sheriff’s deeds, transfer on death deeds, and deeds of trust are uninsurable.
Joinder of Spouses
If a non-title holding spouse is required to join in the execution of a deed or a security instrument, please describe. Any analogous rights, such as those in a civil union or equivalent, should also be addressed.
Non-title holding spouses are not required to sign a deed or mortgage. Dower was abolished in April, 1978. In its place, Rhode Island General Laws, Section 33-25-2 et seq. was enacted establishing a statutory life estate. The statute specifies that no conveyance by a married person recorded prior to his or her death shall be subject to the statutory life estate.
Is there a mortgage tax in your state? If yes, is it uniform across the state or does it vary? If it is uniform, please describe.
There is no mortgage tax in Rhode Island.
Who customarily pays for:
(a) Owner’s Policy?
(b) Transfer Tax & Recording Fee?
(c) Survey Charges?
(d) Closing/Settlement Fees?
- Who customarily pays for the Owner’s Policy? The buyer pays for the Owner’s Policy.
- Who customarily pays for the transfer tax? The seller pays for revenue stamps to be affixed to the deed.
- Who customarily pays for the recording fees? The buyer pays to record the deed and mortgage, while the seller pays for the mortgage discharge recording fee.
- Who customarily pays the closing/settlement fee? The buyer customarily pays the closing/settlement fee.
Please describe any statutory or regulatory requirements for countersignatures in order to issue the policy (for example, residency requirements).
Only an Agent licensed by the Rhode Island Department of Business Regulation or an authorized employee of a title insurance company may sign title policies.
Real Estate Taxes
Please describe the general tax year, due dates, and delinquency dates, including lien dates and payment cycle.
There are thirty-nine cities and towns, as well as a large number of Fire Districts. Most have a calendar tax year running from January 1st to December 31st, except Newport, Barrington and Woonsocket, which have fiscal years running from July 1st to June 30th. Please consult a local underwriter for information relating to real estate taxes on the subject property.
Search and Examination Fees
Is it permissible and/or customary to charge a separate search and/or examination fee, and under what circumstances? If your jurisdiction is all-inclusive, please state that.
It is permissible to charge a separate search and examination fee. It is not customary to charge a separate search and examination fee.
Is there a minimum period of time for a title search required: (a) by state law, (b) pursuant to marketable record title acts, or (c) by any other applicable title examination standards (e.g., state bar association)? Please respond to each category. If a minimum search period exists for any category, please state it.
There is no minimum period of time for a title search required by state law. Rhode Island has a Marketable Title Act in Rhode Island General Laws, Section 34-13.1-1 (40 years). It has no provision relative to the length of title searches. The Rhode Title Standards, Standard No. 2.1, provides that a record title covering a period of 50 years or more is marketable, provided that it is based upon a warranty deed.
Security Instruments (Deed of Trust vs. Mortgage)
Please describe the customary and permissible form(s) of security instruments used in your state.
Who can be listed as the trustee on the Deed of Trust (e.g., residency and/or natural person requirements, etc.)? Can an underwriter or title agent be designated as the trustee, and, if so, is it customary?
Rhode Island General Laws, Section 34-13-1, provides that mortgages and UCC-1 forms are eligible for recording in the Land Evidence Records. Statutory Forms are to be found in Rhode Island General Laws, Section 34-11-12.
If a lender or individual executed a Deed of Trust for Rhode Island Land, would the recorder record it in the land records? There are thirty-nine separate recorders of deeds. They would probably record the document and mis-index or mis-interpret it. It is not eligible for recording under Rhode Island General Laws, Section 34-13-1.
How would it be enforced? Deeds of Trust are not used in Rhode Island. If it did not contain the necessary statutory power of sale delineated in Rhode Island General Laws, Section 34-11-22, it could not be foreclosed by non-judicial foreclosure. If the Rhode Island Superior Court found it to constitute an actual mortgage, it could possibly be foreclosed by judicial foreclosure.
Standard Exceptions and Requirements
Please identify the standard exceptions and requirements that are customarily used in your state.
The Stewart Title Guaranty Company national standard exceptions are:
Rights or claims of parties in possession not recorded in the Public Records.
Easements or claims of easements not recorded in the Public Records.
Any discrepancies, conflicts or shortages in area or boundary lines, or any encroachments or protrusions, or any overlapping of the improvements.
Any lien, or right to a lien, for services, labor, material or equipment, heretofore or hereafter furnished, imposed by law and not recorded in the Public Records.
Taxes or assessments which are not recorded as existing liens in the Public Records.
If you have any questions about the use of these standard exceptions, please consult with state underwriting counsel. Similarly, if you have any questions about the form of specific exceptions, please consult with state underwriting counsel.
State-specific Policy Variations
If there are state-specific changes to the provisions in the ALTA policies (e.g., Arbitration, Minerals), please describe.
There are no state specific changes to the provisions in American Land Title Association policies.
Title Insurance Form and Filing Regulations
Please describe the form and/or rate filing requirements, if any, related to policies and endorsements. Please describe any applicable rating bureau.
Rhode Island General Laws, Section 27-2.6-1, requires that all title insurance forms must be filed with the Rhode Island Department of Business Regulation and all premium rates must be approved before use.
Is there a transfer tax in your state? If yes, is it uniform across the state or does it vary? If it is uniform, please describe.
Revenue Stamps are required on the deed. Rhode island General Laws, Section 44-25.3-41, mandates a rate of $2.00 per $500 of the sales price or any fraction thereof. There is no credit for any mortgage.
Is usury coverage available?
Usury coverage is available. Rhode Island General Laws, Section 6-26-2 provides for a maximum rate of interest of 21% or an alternative rate of 9% over the prime rate shown in the Money Rates section of the Wall Street Journal. The lender can use either rate with no restriction. A loan to a commercial entity over $500,000.00 is exempt where there is no mortgage on the personal residence of any borrower.
What are your state’s requirements, if any, with regard to withholding proceeds from a sale, similar to but not including FIRPTA?
– What are Rhode Island’s requirements with regard to withholding proceeds from a sale?
Rhode Island General Laws, Section 44-30-71.3, Withholding Lien, states that any conveyance, other than a mortgage, creates a ten year invisible lien unless the deed contains specified withholding language. There are numerous forms of withholding language fitting every grantor entity and situation. The Act took effect on January 1, 1992 and requires the buyer of real estate owned by a non-resident seller to withhold a percentage of the net proceeds paid to the seller, which are remitted to the State. All of the necessary Regulations and forms can be found on the Rhode Island Division of Taxation website, www.tax.state.ri.us . Instructions, forms and Regulations are found under the heading “Personal Income Tax.” The withholding for individuals and other assorted entities is six percent (6%), except for corporations, for which nine percent (9%) is withheld. These sums must be remitted to the R.I. Division of Taxation within three banking days.
If a seller is a Rhode Island resident, it is not necessary to withhold any amount from the seller’s proceeds, but specific withholding language must be included in the deed, so as to discharge the withholding lien. The language must state that the seller is a resident as evidenced by affidavit. There is a specific residency affidavit on the above state website. The language in the deed would read as follows:
“This transfer is such that no R.I.G.L. 44-30-71.3 withholding is required as sellers are residents of Rhode Island as evidenced by affidavit.”
Where a conveyance is a gift, the language would read:
“This transfer is by gift so that no documentary stamps are required
and no R.I.G.L. 44-30-71.3 withholding is required.”
Where a seller is a non-resident, the prescribed percentage of the seller’s net proceeds is withheld and remitted to the R.I. Division of Taxation within three banking days along with the prescribed remittance form. The buyer must then obtain an Acknowledgment of Discharge of Lien from the R.I. Division of taxation and record the same in the appropriate Land Evidence Records located in the thirty-nine cities and towns. Otherwise, the lien expires ten years from the date of the deed. The lien is subordinate to the lien of any purchase-money mortgage made by the buyer, except for a purchase-money mortgage to the seller. Consequently, the lien is extinguished by any foreclosure of the purchase money mortgage.
There are a large variety of withholding situations dependent on the type of seller or grantor involved in a Rhode Island conveyance. All Rhode Island issuing offices should contact the Stewart Underwriter responsible for Rhode Island for appropriate guidance and assistance.
Are witnesses required on a deed or security instrument? If so, please describe.
No witnesses are necessary on deeds or mortgages.