In my blog yesterday I discussed a Realtor's duty to make disclosure of known pertinent facts under the Code of Ethics and Standards of Practice of the National Association of Realtors (the "Code of Ethics"). I did notice that the Code of Ethics does not expressly require a Realtor to inspect the property to discover pertinent facts that should be disclosed, and the Realtor is not required to make inquiry of the seller as to any specific facts. There are two situations under the rules of real property law as existed at common law which are still followed in most jurisdictions today, which do require an inspection of the property, at least by the buyer so as to avoid some potential problems down the road.
At common law a buyer of real property takes title to the property subject to the rights of tenants and parties in possession. A buyer is charged with the obligation to inspect the property to determine if 
someone other than the seller is in possesssion of the property. Thus, you will see a standard exception in most buyer commitments for title insurance, an exception for the rights of tenants and parties in possession. Most title companies will take an affidavit from the seller to clear this exception, but the common law rule placed the burden on the buyer to make a determination of the rights of any parties living at the property other than the seller. As an extension of this rule, most contract forms do require the seller to deliver possession of the property at the closing, free and clear of the rights of tenants and other parties in possesssion.
Another common law rule that has given rise to a standard exception to title is that the buyer takes title to a property subject to any state of facts that an accurate survey or personal inspection of the property may reveal. While title companies have developed ways to eliminate this exception on a lender's policy of title insurance without a survey, the title insurance company will not remove the exception for an owner's policy of insurance without a survey. There are varying standards for surveys and the gold standard today are the requirements for accuracy as set forth by the American Land Title Association.
If the property is subject to an easement which is obvious upon inspection of the property, the title is subject to that easement even though there may not be a document on the land records that creates the easement. An easement may be created by adverses use of the easement for a period of generally 15 - 20 years depending on the specific laws of the state in which the property is situated.
About 12 years ago I was involved in a transaction involving a large parcel of rural real property. The buyer did have a survey done, and I did a title search for the buyer. Neither I nor the surveyor could find any easement recorded in the land records, but the surveyor did indicate that his field inspection did reveal some signs of an easement that may not have been used for some time. The surveyor asked me for a letter to confirm our joint findings from our search of the land records that in fact there was no easement of record. Based upon the fact that neither I nor the surveyor found a recorded easement and based upon the fact that the field inspection did not reveal a current use of the easement, the surveyor omitted the easement from the final survey. After the closing of the purchase of the property, a neighbor did claim an easement over the property and in fact filed suit to enforce his rights to the easement. Ultimately, the lack of use and lack of a recorded document that even made mention of the easement was the neighbor's downfall and loss in his legal action. The buyer was put through a fire drill for no legitimate reason.
The bottom line is that even if the Code of Ethics does not impose an obligation to inspect the property, the buyer needs to inspect the property and it is also a good practice to have a survey of the property prepared, even if it is only a "mortgage" survey. Someone needs to walk the property, and someone needs to determine who is living on the property to fully cover the buyer's exposure to potential problems.
The foregoing is not to be construed as a legal opinion or legal advice. If you have any question concerning your rights under real estate laws, consult a local real estate attorney for advice.
Image courtesy of avalonroofing.com
Comments(1)