Do not buy NC notes with LNA

[Andy Mirza]

We were in the bidding phase of buying a NPN in Charlotte, North Carolina, when we discovered that Lost Note Affidavits (LNA's) only work for the entity that last had possession of the note. The right to enforce the provisions of the note do NOT transfer to subsequent assignees/buyers of the note.

See "Emerald Portfolio, LLC, v. Outer Banks/Kinnakeet Associates, LLC, et al" filed 9/6/2016. No. COA16-31.

The Court of Appeals said that Emerald, the buyer of a note lost by the seller of that note, didn't have standing to foreclose on the note. They stated that NC U.C.C. statutes had been amended to allow this but not for real estate. 

N.C. Gen. Stat. 25-3-309(a) states, "A person not in possession of an instrument is entitled to enforce the instrument if (i) the person was in possession of the instrument and entitled to enforce it when loss of possession occurred, (ii) the loss of possession was not the result of a transfer by the person or a lawful seizure, and (iii) the person cannot reasonably obtain possession of the instrument because the instrument was destroyed, its whereabouts cannot be determined, or it is in the wrongful possession of an unknown person or a person that cannot be found or is not amenable to service of process.

Keep this in mind when looking to buy notes with collateral in North Carolina!

[Don Konipol]

I have never closed on a note purchase when the seller couldn't provide the original note.  I like wearing a belt AND suspenders.