Property line and survey problems are sometimes discovered during home closings. How they are handled is unique to the situation but most are fairly simple to address. Simple, as long as all involved are open to resolution and the process is executed correctly. Attorney Christian Ross of Campbell and Brannon sums it up in a clear, concise manner. He was happy to have a recent post shared here…
I was recently invited to join a panel with Mark Hall in which he shared with the group my three most common sayings:
1. Defining “Normal” within your transactions – this helps to avoid overreacting;
2. “It may not be your fault, but it is your problem”
3. Issue spotting.
This last one is something I want to explain in better detail in relation to a recent closing I had here in my office. I use the term “issue spotting” together with the acronym IRAC – Issue, Rule, Analysis, Conclusion. When dissecting the situation and attempting to provide a solution, I follow these steps… feel free to borrow and use it yourself!
The Survey Problem:
The Buyer, hoping to expand the master bathroom, ordered a survey which we received approximately two (2) weeks before closing. The survey showed that the fence and back patio of the Property actually encroached onto the neighbors property by more than five (5) feet.
A. The Basic Rule – everything that is within your property lines, is your property. Anything that extends (encroaches) past the property line…. isn’t.
B. Adverse Possession – in Georgia, a property owner may be able to claim adverse possession after adversely (i.e. notoriously and without permission) possessing the land for at least 20 years. This is a possible claim in court and is not automatic.
C. Contract Terms – There are a few different places one must look regarding the contract in regards to this issue:
1. Sellers Disclosure – The GAR Sellers Disclosure asks the Seller to disclose any encroachments or boundary disputes, as well as whether any improvements encroach onto a neighboring property (see the below excerpt):
2. Title Insurance and Title Objections – Sections B(1)a and B(1)b of the Purchase and Sale Agreement require that the Seller convey “good and marketable title to said Property”… subject only to standard exceptions (CC&Rs, utility easements, etc.).
3. Property Condition – Sections A(1) and C(3) of the Purchase and Sale Agreement require that the Seller convey the Property in the same condition as the original Offer date “including all fixtures, improvements and landscaping therein.”
How to Resolve a Survey Problem:
In order to properly evaluate both the rights of the Buyer and Seller, you must take all of the applicable rules (see above) and evaluate them as a whole. Here’s the thing – everyone is entitled to their own analysis and conclusion! Below is my abbreviated analysis, though its likely there were more factors that could have impacted the situation.
• The encroachment means that a portion of what the Buyer assumed was part of the the property (fence and patio) is now on the neighbor property – its not theirs!
• Adverse possession, though possible, is not an easy case to win and not a practical solution prior to closing;
• According to the Purchase and Sale Agreement, the encroachment is a title issue and the Buyer can object by providing notice to the Seller – the Seller must now “cure” the defect;
• To attempt to cure the objection, the Seller realistically has two options: (1) remove the encroachment by taking out the fence and patio, or (2) get permission from the neighbor to keep them in place via an encroachment agreement or easement or conveyance of property;
• However, unless the solution is accepted by the Buyer neither of these are perfect cures.
o (1) Removing the patio and fence (to cure the title objection) now mean that the property is not in the same condition as when the original offer was made (i.e. property condition);
o Getting an encroachment agreement allows the improvements to remain (not affecting the property), but the easement wasn’t disclosed prior to signing the contract – a default by the Seller.
How to Best to Avoid Survey Problems:
This is the tricky part – it depends! The very best solution in almost every circumstance like this – removing the encroachment and possible objection before accepting offers on the property. The benefit is that the title objection no longer exists and the property can be conveyed as-is at the time of the original offer.
The next best solution, and assuming removing the objection isn’t feasible (driveway or pool encroachment) – is buying the property from the neighbor! This however is often not practical or even permitted – there may be zoning restrictions (minimum lot size, setbacks, etc.), HOA restrictions on splitting lots, and lenders who will not permit it (a lender would have to release their interest).
In both of these cases, the best bet is to deal with the solution BEFORE listing the property and accepting offers, therefore allowing maximum flexibility on timing. Given that these solutions are difficult to implement, with each having their pros and cons, remember to look to your client for the solution – do they still want to close?!? Most recently, this same scenario happened in my office and the solution was to get an encroachment agreement with the neighbor – the buyer was happy, so I was happy.
Getting ahead of issues keeps them from becoming obstacles that can derail a transaction. This is critical from both sides sellers must be fully transparent and buyers must understand that Georgia is a “buyer beware state”. The marketing blitz continues about how easy real estate is, but it’s not like buying a book on Amazon. Work ONLY with full time pros…like us and Christian at Campbell & Brannon