Saturday, September 08, 2007

query: indiana quiet title to extinguish reversionary clause

Interesting tool, those reversionary clauses, aren't they? Yes, if you want to rid your title of a reversionary clause and you can't identify and find the heirs of the grantor who created the damn thing, you'll have to hire an attorney to try to quiet title.

So, what's a reversionary clause? It's a restriction of some kind that if violated causes you to lose your ownership of the property. The title reverts back to whomever owned the land when the clause was first inserted into the deed.

What the hey? Yes, it's true.

Reversionary clauses should be rare but we find lots of them in Cambria County here in good ole Pennsylvania. I think the local bar association must have had a meeting and decided these things were great. Instead of creating normal restrictive covenants when they helped a developer create a new plan of homes, they created reversionary clauses instead. Go figure.

So, while normal title insurance underwriting would cause us to go bananas when we find reversionary clauses, we can't do that in Cambria County or no one would be able to insure title in the City of Johnstown. Yes, it's the city of floods and the reversionary clause capital of the world.

Here's an example. Part of the City of Johnstown is called Moxham. The developer of Moxham must have been a teetotaler. Moxham is a dry community. There are no bars or beer distributors or liquor stores - none. As far as I know, there is no ordinance prohibiting the sale of alchohol, but the entire community is subject to a reversionary clause which prohibits the manufacture or sale of spiritous liquors. You open a bar - BING - lose your land.

Now, I'm not a Johnstown native and so maybe we have a reader out there who can shed light on this unusal use of reversionary clauses, some of which include simple things like building setback lines. Are the heirs of these original grantors actually still around and waiting to see if someone violates their clause?

Yes, it is interesting and unless Johnstown turns into something like Atlantic City where cheap properties suddenly become very valuable, my guess is that those reversionary clauses will remain dormant, like bad seeds, waiting for their day in the sun.

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