Wednesday, May 28, 2014

M has an interesting question about a shared retaining wall. Who is responsible for fixing it?

Hello Diane,

I just saw your blog and it caught my eye on a situation I am going through.

Last summer 2013 I closed on a house.  A couple months ago, my neighbor (who's backyard faces up to mine --- I'm on a hill, her yard is at the bottom of it) started complaining about a retaining wall that divides her backyard and mine.  This wall is deteriorating and buckling on her side.  She says the wall is 100% my property and I need to fix it.  The wall is made of concrete cinder block and runs from one end of the block/street to the other, dividing all the houses on my block from the houses on her block.  The wall is connected so there is no "stop and end" in each person's yard.

My survey didn't indicate this wall.  I contacted my surveyor about this and he revised it to show the wall.  He said it now shows the wall is on the property line both hers and mine.  My neighbor showed me her survey and hers shows the wall is all on my property.  (No history of this wall's construction can be found as it was built in the mid 1950's.)

I went back again to my surveyor and he is revising the survey yet again (for second time since my closing in 2013).  

My question is: who is responsible for fixing this wall if both surveys are different ? Regardless of this, wouldn't I be able to file a claim with surveyor or title insurance because my original survey did not represent this wall on it ?  Had I known about this wall before my closing, I would have waited on purchasing this house.

Trying to avoid an expensive lawsuit here and my neighbor is starting to get everyone involved that lives on both sides of both blocks.

Thank you,

Hi, M:  Thanks for sending your question.  I am always interested in these types of situations.If this is an old plan chances are that the developer constructed the retaining wall for the benefit of lot owners above and below the wall.  It may have been a requirement of the local government who approved the plans but in any event, I think you are unlikely to find someone to take responsibility for the maintenance of the retaining wall. It's just one of those things that no one pays attention to until there is a problem. It's sort of like a private road.  Many have no maintenance agreements, they are just there.  Once the road falls apart, then lot owners have to come to an agreement or let the road go to pot.

I would pursue - with the help of a competent attorney - finding an agreement amongst all of the lot owners above and below the wall.  Afterall, if the land slides, the houses on both sides will be damaged and it serves no good purpose to let the wall fall for lack of agreement when some shared cost of maintenance will help everyone.  I hope this helps and good luck.


Tuesday, May 20, 2014

too bad the seller did not have title insurance

We have a title insurance order in process and our examination revealed that the seller bought the property from a bank who had foreclosed.  As usual, the our title examination included a review of the foreclosure to make certain that the bank had done everything correctly.  They did not.  Crap.  The bank's attorney had failed to give good service to a lien holder.  Crap.

The prior owner had a 2nd mortgage with Beneficial Consumer Discount Company. For some crazy reason the bank's attorney gave service to Household Realty Corp.  Now these two entities were under the same corporate family at the time, however, they are still two different entities.

Our seller is an estate. The deceased purchased the property from the bank for cash and did not opt to purchase title insurance.  Too bad.  If he had, someone might have noticed the flaw and fixed it a long time ago.  The estate attorney says his client probably thought the bank knew what they were doing and opted to forego any title examination - with or without title insurance.  Not a smart move. A buyer must always be savvy and have title examined and covered by a competent title insurer - even when paying cash for real estate. The first and primary purpose of title insurance is RISK AVOIDANCE. Look for problems and fix them before you buy.

Let's say the seller had purchased title insurance and his title insurer had missed the error in the foreclosure.  That's certainly possible.  A secondary - and just as important - reason for title insurance is that HUMANS MAKE MISTAKES.  The bank's attorney made a mistake and it's possible that a title examiner could miss it.  You could have a situation in which you are trying to sell real property and a problem isn't discovered until your buyer has a title insurance examination performed.

If our seller had an owner policy, we could have asked for indemnification and closed.  This is a reasonable circumstance for indemnification.  The error involved an entity under the same corporate umbrella.  Several years have passed and there has been no collection effort on the Beneficial mortgage.  It is reasonable to presume that Beneficial thought they had been served and were divested.  This is a technical flaw in title but a flaw none the less.  Indemnification coverage from a prior owner policy would have done the trick, but we have no title insurance to fall back on in our transaction, so what do we do?

In this case we offered our buyer - who is also paying cash - an option to allow us to put an exception in their owner coverage.  We did this with a suggestion that they negotiate with the seller for an escrow to be held pending the attorney obtaining acknowledgement of good service from Beneficial.  I don't want to insure over this because I'm not certain that the attorney will be successful.  Our buyer, however, is free to assume the risk.  The buyer decided to go for the escrow. They asked the seller to put $6000 aside for a few months during which the seller's attorney would attempt to get the acknowledgement.  If at the end of the period, the attorney could not, the buyer would get to keep the money.

Our seller stands to lose $6000 if this matter is not resolved.  They are lucky that they have a cash buyer willing to assume the risk.  Too bad the seller did not have title insurance.