03RS SB202


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SB 202 (BR 1558) - R. Roeding

     AN ACT relating to real property transactions.
     Amend KRS 376.050 to prohibit a person from willful misappropriation or misapplication of proceeds from a loan to finance improvements to real property; amend KRS 376.070 to prohibit willful misappropriation or misapplication of payments from the owner to the contractor, architect, or other person who builds, repairs, or improves real property of another under circumstances that a mechanic's or materialman's lien may be imposed on the property; amend KRS 376.990 to establish penalties for such misappropriation or misapplication; create a new section of KRS Chapter 376 to provide that the seller of real property must deliver to the purchaser at the closing an affidavit that the seller has paid, or will pay, each person for all labor and materials used in the construction or improvements on the real property and that the seller is not indebted to any person by reason of the construction; create a new section of KRS Chapter 376 to provide that if any contract to build, repair, or improve real property between the owner and the architect, builder, or other person requires the owner to obtain a mortgage from a third party lender, the contract shall also require that all payments, draws, or advances from the lender must be payable jointly to the owner and the contractor, architect, or other party to the contract; as a alternative, permit the owner to authorize the lender to make payments, draws, or advances directly to the contractor, architect, or other party to the contract; create new sections of KRS 382 to create the Kentucky Real Estate Settlement Protection Act to regulate settlement agents in transactions involving the cash purchase of or lending on the security of real estate in Kentucky consisting of one (1) to four (4) residential dwelling units; require the settlement agent to be a licensed attorney, a licensed title insurance agent, a licensed real estate broker, or a financial institution or subsidiary or affiliate licensed under KRS Chapter 287 or 290; permit the settlement agent to provide escrow, closing, or settlement services; require all contracts involving the purchase of real estate consisting of one (1) to four (4) residential dwelling units to include specific language on the role of the settlement agent, guidelines for escrow, closing and settlement services, and an explanation of title insurance; require funds deposited with a settlement agent to be deposited in a fiduciary trust account in a qualified financial institution; require the funds to be applied only in accordance with the terms of the individual instructions or agreements under which the funds were accepted; allow funds held in a post-closing escrow account to be disbursed only according to written instruction or agreement as to how and to whom the funds may be disbursed; prohibit a settlement agent from intentionally making any materially false or misleading statement or entry on a settlement statement; require the settlement agent to maintain sufficient records to ensure the agent is acting in compliance with this Act; require settlement agents who do not hold a license from a licensing authority to register with the Department of Financial Institutions; require the Commissioner of Financial Institutions to refer complaints and other information of willful violation of this Act to the appropriate licensing authority, or if the settlement agent does not hold a license from another licensing authority, hold a hearing; create new sections of Subtitle 22 of KRS Chapter 304 to create the Kentucky Title Insurance Agent Act; define "title agent", "title insurance business", "title insurer", and other terms; permit the agent to only sell for an insurer with whom the agent holds an appointment; provide that the title agent must complete continuing education requirements; authorize the commissioner of insurance to examine, audit, and inspect the books and records maintained by the title insurance agent; require a title insurance report be given to the purchaser-mortgagor prior to the day of closing, unless the agent documents reasons for delay, when constituting an offer to issue an owner's title insurance policy covering resale of owner-occupied residential property; require a title agent who issued a lender's title policy in conjunction with a mortgage loan made simultaneously with the purchase of real estate securing the loan to provide notice to the purchaser-mortgagor at the time the commitment is prepared; require the notice to explain the lender's title insurance policy and that the purchaser-mortgagor may obtain a owner's title insurance policy; permit a title insurance agent to operate as a settlement agent if the title insurance agent complies with Sections 6 to 15 of this Act known as the Kentucky Real Estate Settlement Protection Act; require the title insurance agent to maintain sufficient records for five (5) years; amend KRS 304.9-030 and 304.9-105 to make technical changes.


     SCS - Maintain original provisions except provide that misappropriation or misapplication of loan proceeds occurs if the person deposits the proceeds in an account controlled by the person if the lender does not give express written consent; exempt real estate transactions by an electric supplier or generation and transmission cooperative from the requirement that a seller provide an affidavit that persons have been paid in full for materials and labor; delete provision that specifies who may act as a settlement agent.

     Feb 18-introduced in Senate
     Feb 20-to Banking and Insurance (S)
     Feb 24-reported favorably, 1st reading, to Consent Calendar with Committee Substitute
     Feb 25-2nd reading, to Rules
     Mar 3-recommitted to Appropriations and Revenue (S)

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