We've all heard about the scam where a man “sold” the Brooklyn Bridge to unsuspecting tourists. Obviously the naive buyers forgot to do a title search. A title search is basically a report establishing the person selling a piece of real property does, in fact, have the right to do so. And while sellers have certain legal obligations to disclose certain events that may affect title, that does not absolve the buyer of their duty to conduct a title search or examine the public record.
Eagan v. Glassbrenner
In June 2013, a couple purchased a house and the surrounding 64 acres of property for $900,000. In the sales contract, the sellers answered “no” to the statement, “The property has an uncapped natural gas and/or oil well.” The contract also included a Property Condition Disclosure Statement, where the sellers again answered “no” to a question asking if anyone else had a “lease, easement or any other right to use or occupy any part of your property other than those stated in documents available in the public record.”
The buyers conducted a title search prior to closing. Among other items, the title search uncovered five oil and gas leases dating as far back as 1949. The sellers separately disclosed four other leases that had applied to the property over the years, although they claimed they had all expired, and that as of the date of the sale, “no rents or royalties have been received under the terms of said leases” and no active wells or “storage facilities” existed on the property.
The sale closed in July 2013. Several months later, the buyers received a letter from an energy company, which claimed to have five “oil, gas and storage leases” affecting their property. The five leases matched the ones discovered in the title search, but not those disclosed by the sellers. The letter also included a check representing the most recent lease payment.
The buyers subsequently sued the sellers in New York Supreme Court, alleging breach of contract and fraud. The sellers transferred the case to federal court. The buyers moved for summary judgment, arguing the existence of the leases and the payment they received from the energy company definitively proved the sellers lied to them.
On June 10, a federal magistrate tentatively denied summary judgment, noting “all the Court has is a record of hard feelings.” While the sellers may have been “unhelpful” in certain respects, the buyers had yet to produce sufficient evidence to prove fraud or breach of contract. For one thing, according to the magistrate, the buyers' own title search disclosed the existence of the leases at issue. This provided “enough information to allow the [buyers] to search the public record for further information about those leases.” Indeed, the Property Condition Disclosure Statement only required the sellers to disclose the existence of those leases that were not already in the public record. The buyers also produced no evidence that the four leases the seller did disclose contained any misrepresentations.
Need Help With a Real Property Sale?
While the above case remains pending in federal court, the magistrate's preliminary decision suggests the buyers will have a hard time ultimately proving fraud or breach of contract. It's one thing if a seller fails to disclose a lease that is not a matter of public record. But it's another when the buyer fails to follow up on his or her own title search. That is why, whether you are a buyer or seller, you should always work with an experienced New York real estate attorney prior to closing any sale. Contact our offices today if you need to speak with an attorney right away.