justice-smiles-gold-large.pngBad neighbor relations do not start when someone conducts a survey and identifies “potential encroachments”. See my post “Encroachments are not identified by Surveys – …” and the comments which follow. Instead, that is just the yield from past actions … or more likely ommissions.

Due largely to ignorance of the law of real property until a need or desire to use or prevent the use of real property is determined, adjoining property owners often live in the bliss of this ignorance as good neighbors. 

But, this can all change in an instant when a survey reveals potential encroachments which should have been cleared up years or decades ago. The result, is a battle – often of wills – in which one party has perfected legal title which nonetheless must be recognized by court. This gets really messy.

So, when is the best time to clear up these matters? The answer is prior to home purchase.

Yesterday, I went to a class titled: Statewide Purchase & Sale Agreement which was taught by Real Estate Agent Donald Fillius to Real Estate Agents at the Northgate RE/MAX office.

Donald did a great job identifying the triggers as to when the purchaser can pull earnest money out of escrow (and to a much lesser extent when the seller can “push” earnest money out of escrow [i.e. scuttle the deal on a technicality when there is a better purchaser in the wings]; those instances when earnest money must remain untouched (i.e. the deal stays on course); and those instances where there would be room to argue either way (i.e. lawyer land). To do all this we read the document and various addendum, word for word and line by line.

One thing that we passed right over was paragraph 1 of Form 22D – “Optional Clauses Addendum to Purchase & Sale Agreement”. (A document which if not included in your own purchase and sales agreement signifies that you are dealing with a real eastate agent who is a complete greenhorn who should – if not will – soon be finding another occupation.)

Form 22D – Paragraph 1 states:

Square Footage/Lot Size/Encroachments. The Listing Broker and Selling Broker make no representations concerng: (a) the lot size or the accuracy of any information provideed by the Seller; (b) the square footage of any imporvements on the Property; (c) whether there are any encroachments (fences, rockeries, buildings) on the Property, or by the Property on adjacent properties. Buyer is advised to verify lot size, square footage and encroachments to the Buyer’s own satisfaction within the inspection contingency period.

I sought to offer some comments and Donald politely offered me an opportunity to teach the class. He then polled the class and only Jim Pettigrew wanted to know more about the ins and outs of this paragraph. (Hats off to Jim). Well, I declined Donald’s offer, it was his show not mine.

Returning to Form 22D, first Donald correctly indicated that realators should – as in “must” – always tick the box which precedes paragraph 1 so as to put it into effect. It is designed to protect realators and the companies that they work for.

Secondarily, it places the burden on the purchaser to have a survey done during the inspection period. Now, this may be problematic. Right now getting a survey completed is probably doable, the smaller outfits are scrambling for business since the economy turned down. Once it turns back up, if it is as in the past – a big if indeed – it may take 3 weeks to have the survey performed.

What is the alternative? Excellent listing agents should have their clients perform the survey beforehand. Then work with the neighbors to sort out any difficulties up front.

Yes, this potentially emperils the deal. But if teeing up a license agreement for the new purchaser or pulling a fence back to the titled property line is done prior to sale, then the land is being sold without these latent issues built in.

If not, the purchaser may have a claim against the seller – not the seller’s agent – in those cases where a latent defect in the boundaries are not disclosed on the Form 17. Or when the neighbor doesn’t poke his head over the fence somewhat akin to Wilson before asking: Hey neighbor, what’s goin’ on?

Well guess what, between suing the person up the chain, who might be a necessary witness to go against the neighbor and the neighbor, who “appears” to be causing the problem, the choice is likely going to be the latter.

Boom! The bomb goes off. (And its nuclear, so it triggers a cascading flow of subsequent explosions).

The reality is that most people really do not care about the edges of their land. They do not care until they feel – notice that I didn’t use the term “think” – that they are threatened there. So, solving these problems upfront would save a tremendous amount of social discord.

By now, if you have still read this far, you are probably thinking: This guy is living in his own little dreamland. With the possible exception of Mr. Pettigrew, no real estate agent is going to bring up this issue and scuttle a deal.

I know, I know. But, if you want to be the best of the best of real estate agents, I would suggest you still consider having the survey done and then working constructively with the neighbors to sort out any issues.

But, what’s in it for me? Those neighbors to whom you as a realator extended the courtesy of (a) defining their boundary line and (b) assisting them to prevent future boundary dispute issues may just be excellent leads and referral sources for you going forward.

That scenario versus the prospect of being dragged into a deposition and then possibly court over a boundary dispute in the future. It’s a pretty stark choice from my vantage point. 

Yes that nice little tick box is there. Yes “everyone does it.” But should you?

As an incidental aside, instructor David Fillius did indicate that people should be seeking extended title coverage if selling property which fronts water.

Well guess what, extended title coverage requires a survey. Ergo, real estate agents who would like to be involved with more high-end deals involving water might consider cutting their teeth a little more with those deals which though not requiring it, can benefit from clear real property delineations. Which deals are those? … every deal!

What do you think. I now turn the “class” over to you.justice-smiles-gold.png