By Lori DaCosse, JD (bio)
Problem: A successful East coast professor retired from his profession and determined to move to the Midwest near to where his brother had moved after college. As part of this relocation, the professor decided to acquire farm land and transition it into an admission paying wildlife sanctuary. He went under contract with a local farmer and conducted minimal due diligence. He procured the services of a surveyor the seller recommended but declined the services of any additional professionals. He was adamant that the transaction was based on a “trust relationship” he had forged with the real estate seller. The contract closed at a local title company and the title insurance policy issued to the buyer did not obtain any endorsements or extended coverage.
After Closing, the buyer, now owner of the real estate, attempted to drive his car over the road that had historically accessed the real estate he just purchased. However, there was a chain link fenced placed across the road. Upon investigation, the buyer found that the chain link fence had been placed over the roadway by another neighboring farmer that lived down the road. The neighbor alleged that he (or his predecessors in title) had farmed the small section of real estate that included the access to the buyer’s land for in excess of twenty (20) years and had, therefore, acquired it by adverse possession. Further, the roadway on which this section of real estate was situated was the only point of ingress and egress by which anyone could obtain access to the buyer’s property by car or by foot. Otherwise, it was a quarter mile boat ride on a creek that was, at times, dry. For all practical purposes (and certainly for purposes of creating an admission paying animal sanctuary), the real estate was landlocked.
The buyer hired counsel and the title insurance policy (because no extended coverage or access endorsements were procured) obtained the following standard exception from coverage: “Any facts, rights, interests of claims not shown by the public records but that could be ascertained by an accurate survey of the Land by making inquiry of persons in possession thereof.” The title insurance underwriter denied coverage based on this exception. The neighboring farmer refused to grant an easement.
Result: This fact scenario gave rise to nine (9) years of litigation including two (2) interlocutory appeals. As of last confirmation of status, the matter was still in litigation but the lower court had determined that the neighboring farmer had acquired the land at issue by adverse possession. The land remains landlocked to the buyer and sits fallow.
Lessons Learned: First, a survey is critical to a real estate deal. Second, the title insurance policy you get at Closing (and what it excludes or endorses) matters. In this case, the buyer was entitled to ask for “extended coverage” which would have waived the exception upon which the title insurance underwriter hung its hat in denying coverage.