AN ACT to validate certain subordination agreements and to clarify the law on the priority of instruments registered in the office of the register of deeds, as recommended by the general statutes commission.

The General Assembly of North Carolina enacts:

SECTION 1.  G.S. 39‑6.6 reads as rewritten:
"§ 39‑6.6.  Subordination agreements.
(a)	A subordination agreement shall be given effect in accordance with its terms and is not required to state any interest rate, principal amount secured, or other financial terms.(b)	The trustee of a deed of trust shall not be a necessary party to a subordination agreement unless the deed of trust provides otherwise.
(c)	For purposes of G.S. 1‑47, a subordination agreement is deemed a conveyance of an interest in real property.
(d)	This section is not exclusive. No subordination agreement that is otherwise valid shall be invalidated by this section.
(e)	This section applies to a subordination agreement regardless of when the agreement was signed by the party or parties thereto, except that this section does not apply to an agreement that (i) is the subject of litigation pending on the effective date of this subsection, and (ii) was filed or recorded before October 1, 2003.
(f)	In this section:
(1)	'Interest in real property' includes all rights, title, and interest in and to land, buildings, and other improvements of an owner, tenant, subtenant, secured lender, materialman, judgment creditor, lienholder, or other person, whether the interest in real property is evidenced by a deed, easement, lease, sublease, deed of trust, mortgage, assignment of leases and rents, judgment, claim of lien, or any other record, instrument, document, or entry of court.
(2)	'Subordination agreement' means a written commitment or agreement to subordinate or that subordinates an interest in real property signed by a person entitled to priority."
SECTION 2.  G.S. 47‑18(a) reads as rewritten:
"(a)	No (i) conveyance of land, or (ii) contract to convey, or (iii) option to convey, or (iv) lease of land for more than three years shall be valid to pass any property interest as against lien creditors or purchasers for a valuable consideration from the donor, bargainer or lesser but from the time of registration thereof in the county where the land lies, or if the land is located in more than one county, then in each county where any portion of the land lies to be effective as to the land in that county. Unless otherwise stated either on the recorded registered instrument or on a separate recorded registered instrument duly executed by the party whose priority interest is adversely affected, (i) instruments registered in the public record shall be presumed to office of the register of deeds shall have priority based on the order of recordation registration as determined by the time of recordation. If registration, and (ii) if instruments are recorded registered simultaneously, then the order of recordation the instruments shall be presumed as follows, in order of priority: to have priority as determined by:
(1)	The earliest document number set forth on the recorded registered instrument.
(2)	The sequential book and page number set forth on the document registered instrument if no document number is set forth on the recorded registered instrument.
The presumptions presumption created by this subsection are is rebuttable."
SECTION 3.  G.S. 47‑20(a) reads as rewritten:
"(a)	No deed of trust or mortgage of real or personal property, or of a leasehold interest or other chattel real, or conditional sales contract of personal property in which the title is retained by the vendor, shall be valid to pass any property as against lien creditors or purchasers for a valuable consideration from the grantor, mortgagor or conditional sales vendee, but from the time of registration thereof as provided in this Article; provided however that any transaction subject to the provisions of the Uniform Commercial Code (Chapter 25 of the General Statutes) is controlled by the provisions of that act and not by this section. Unless otherwise stated either on the recorded registered instrument or on a separate recorded registered instrument duly executed by the party whose priority interest is adversely affected, (i) instruments registered in the public record shall be presumed to office of the register of deeds shall have priority based on the order of recordation registration as determined by the time of recordation. If registration, and (ii) if instruments are recorded registered simultaneously, then the order of recordation the instruments shall be presumed as follows, in order of priority: to have priority as determined by:
(1)	The earliest document number set forth on the recorded registered instrument.
(2)	The sequential book and page number set forth on the document registered instrument if no document number is set forth on the recorded registered instrument.
The presumptions presumption created by this subsection are is rebuttable."
SECTION 4.  This act is effective when it becomes law.
In the General Assembly read three times and ratified this the 11th day of July, 2005.

	_____________________________________
		 Marc Basnight
	 President Pro Tempore of the Senate

	_____________________________________
		 James B. Black
	 Speaker of the House of Representatives

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		 Michael F. Easley
	 Governor

Approved __________.m. this ______________ day of ___________________, 2005