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| CRE Online > Real Estate Law > Bill Bronchick > Question and Answer |
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Question :
I had a property in which I "sandwich" leased to a tenant. They lived in the house for a 15 months and attempted to exercise their lease option. Through a survey, they discovered there were significant encroachment problems with the property.The title owner was aware of the problems and so was I. The tenant then decided that because of these encroachment issues, he did not want to exercise the option. He asked for a refund of the earnest money and the additional rent credit money, claiming that I didn't have clear title to the property. The only out I have in the Lease Option contract is a clause guaranteeing a refund for not being able to convey "Clear Title." I did some research on the property and discovered myself that the builder had built the encroached addition without a permit or plans submitted to the city. Originally I refused to return their money on the grounds that I had clear title regardless of the encroachment. They in return hired an Real Estate Attorney who is now attacking me from a variety of angles including the fact that I'm not a licensed Real Estate Broker, Fraud and Deceit. What should I do? Answer By William Bronchick: The encroachment does prevent you from conveying clear title, but also provides an opportunity. The encroachment, unless barred by the statute of limitations, would entitle the owner to demand that the builder either remove the building or pay you money for a deed to the piece of land on which the building sits. This may entitle the owner to thousands of dollars for a small strip of land that won't affect the use of the rest of the parcel. My father, also an attorney, had a similar case years ago upon which he recovered hundreds of thousands of dollars from Chicago title, who issued the insurance policy on the transaction. The fact that you are not a licensed real estate agent is irrelevant, since presumably you acted as a principal in the transaction. The attorney is probably blowing a lot of hot air about the fraud and deceit since, from the facts stated, you have not misrepresented anything. Assuming the encroachments don't materially affect the use of the property, I would bring these facts to the attorney's attention. His client could profit by buying the property subject to the encroachments, then sue from the builder to remove them. In the future, it is not a bad idea to do a title search before entering into a lease/option transaction. Disclaimer: The foregoing is not intended to be given as legal, financial or tax advice, but intended for instructional use only. If you require legal, financial or tax advice you should seek the assistance of a qualified professional.
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