Most real estate agents and attorneys work on the assumption that going back one or two deeds in the title history is sufficient to establish the title to the property. But we don’t always think about the “quality of title”. A recent Appellate Court decision in Florida is making title insurers and real estate attorneys scratching their heads on how just how careful they need to be!
Another issue is that we usually look to see who is in title but we don’t necessarily go over the deed that created their title – much less the previous deeds that created title, with a fine tooth comb. Think again!
The Hayslips bought a house from the Kennisons in 2010. The Kennisons bought their home from the builder in 2007. The developer conveyed the home to the Kennisons by Special Warranty Deed, as is usually the case with a builder or developer. Beside the covenants, conditions, and restrictions that usually make up a Special Warranty Deed, the provisions included these terms (which I have abbreviated to keep this article short):
G. All covenants, conditions and restrictions contained in this Deed are equitable servitudes, perpetual and run with the land…. .
I. Grantor and Grantee specifically agree that this transaction involves interstate commerce and that any Dispute… shall first be submitted to mediation and, if not settled during mediation, shall thereafter be submitted to binding arbitration…and not by or in a court of law or equity.
J. Grantee, by acceptance of this Deed, automatically agrees for itself and its heirs, personal representatives, successors and assigns, to observe and be bound by all the terms and conditions set forth in this Deed.
When the Hayslips bought the house, the Warrant Deed from the Kennisons did not contain any express provisions regarding the arbitration but did say that the conveyance was subject to easements, restrictions, reservations and limitation, if any. This is typical language in any Warranty Deed.
In 2017 the Hayslips file a lawsuit against the builder for defective stucco. The builder moved to stay the lawsuit and compel arbitration based on the 2007 Special Warranty Deed provisions. The Hayslips countered that because the Kennisons did not sign and accept the Special Warranty Deed, they were not bound to the arbitration condition.
But their defense is another issue irrelevant to this article. What is relevant is that the Hayslips also raised the issue that the arbitration covenant was “personal” between the builder and the Kennisons – the first purchaser of the house, and not binding on subsequent purchasers. The appellate court found that the covenant was not “personal” but did run with the land.
What this means comes full circle to my original statement – the “quality of title” involves many things such as access to roads, but also undertakings the buyer is assuming by accepting the deed in the current transaction. Looking at just the next predecessor deed in this transaction, you would say there is nothing special. However, as seen in this case, obviously there was plenty more just below the surface of that Warranty Deed that affected the new buyer.
You may say that the buyer was covered by title insurance. I am going to speculate that there would not be title insurance coverage because the deed to Hayslip contained the catchall phrase of subject to easements, restrictions, reservations and limitations. So no title claim and the Hayslips had to litigate this issue on their dime. See the entire case at Hayslip vs. U.S. Home Corporation
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copyright 2019 - Richard P. Zaretsky, Esq.
Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This article is for information purposes and is not specific advice to any one reader.
Richard Zaretsky, Esq., ZARETSKY LAW GROUP. ATTORNEYS AT LAW, 1615 FORUM PLACE, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660 RPZ@ZARETSKYLAW.COM - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide www.ZARETSKYLAW.com.
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