Legal Descriptions: Wait! I Can’t Locate My Real Property
In the automotive world, each vehicle is uniquely identified by a vehicle identification number (VIN), a distinct code used by the car industry. This identifier is used in various ways, such as for insurance and department of motor vehicles records, ensuring each vehicle is clearly and accurately tracked.
There is a similar concept that applies in the area of real property, and it’s not the parcel identification number shown on a county appraisal district or a property appraiser or assessor’s website. The true identifier for real property is the property’s “legal description.” However, errors with a property’s legal description can lead to complex issues affecting transactions. Let’s discuss some common issues and strategies to prevent and address these problems.
Legal descriptions come in various types, such as metes and bounds, or plats, just to name two. The legal description is created by a professional surveyor and is used to locate and identify the real property it describes. This information is located on deeds, deeds of trust, mortgages, and other instruments pertaining to real property. Without a legal description, it is nearly impossible to determine where a property is located and the boundaries of the property on the ground. Absent a legal description, it is also extremely difficult to determine who holds title to the property, who can convey title, what property is being pledged as collateral to secure a loan, and much more.
At Alliant National, the claims team regularly sees cases involving legal descriptions. Here are just a few of the more common issues:
- the legal description is not included with the recorded deed, mortgage, or deed of trust;
- the legal description is incomplete;
- the legal description has typographical errors;
- the legal description references an incorrect subdivision or references an erroneous plat book or page; or
- ownership of property is being challenged due to a gap in the property or an overlap of the property’s legal description with that of a neighboring property owner.
When a legal description is missing or not correctly identified in an instrument, it may result in a title claim involving intervening conveyances or liens on the real property. In some cases, a person may not be able to convey title to property they believe they own, or they may face challenges from others who believe they have better title.
Legal description issues can be timely or difficult to cure. In some states, there are statutes that permit certain legal description errors to be corrected through the use of a correction affidavit. However, states that have such corrective statutes generally limit their use and have certain requirements that must be met before a correction affidavit may be utilized. If the situation is not covered or the requirements are not met under the statute, then a correction affidavit is not available. In those cases, it may require a corrective instrument be obtained from a party or costly litigation. Even though it is not an exhaustive list, the Resources section below includes links to a few states’ corrective statutes.
Familiarizing yourself with your state’s laws is crucial to understand if there are corrective statutes relevant to legal descriptions, along with their specific limitations and requirements.
Happily, experience teaches that attention to detail can significantly reduce the occurrence of legal description issues. Here are a few tips for avoiding legal description headaches:
- Purchase Contract and Addendums. If parties make changes to the purchase contract’s legal description, make sure to have those changes incorporated into your real estate closing platform to ensure, when it is time to print documents, that the documents properly reflect the accurate legal description.
- For example, the parties may have originally contracted for Lots 1, 2 and 3, Main Plat. Subsequently, through an addendum, the contract now only dealing with Lots 1 and 3, Main Plat. Make sure the documents reflect only Lots 1 and 3, Main Plat.
- Who else should know of changes? Let your team and any third-party vendor know of any changes made to the legal description since the last time products were obtained and request that the products be revised, and new products issued to reflect the change. Then, distribute the revised products to the proper parties.
- Remember to let the lender know of any changes to the legal description as soon as you know. Lenders may use this information to obtain an appraisal of the property to determine its value and may have to adjust the lender’s underwriting review.
- In some cases, if the lender prepares the deed of trust or mortgage, it may pre-print the legal description on the instrument. Review the instrument prior to closing for accuracy of the legal description. If the legal description is inaccurately reflected, contact the lender immediately to discuss.
- Review and ask questions. If a survey was purchased or a prior survey is being reviewed showing the property’s legal description, review the survey for any differences shown in the seller’s vesting deed (and those in the chain) against what is being prepared to be conveyed. If there are differences, ask questions and review with the surveyor and the parties to clear up any discrepancies and document your file indicating how the parties addressed and resolved the situation.
- The parties. Review all documents prior to the closing to ensure they accurately reflect the legal description the seller intends to convey and the buyer intends to purchase. Don’t forgot to review and compare any legal description changes that the parties agreed to in the contract or purchase contract addendum.
- Recording. When sending the instrument to the county recorder’s office, remember to include the correct legal description with the instrument.
- Policies. When a final title policy is issued, review to make sure the correct legal description is included in Schedule A before sending it to the recipient.
Taking a moment to thoroughly address a property’s legal description can greatly reduce potential errors that could lead to claims. If you have questions, please feel free to reach out to me or any member of the Alliant National claims team. We’re eager to help!
Resources:
Colorado Revised Statutes Title 38, Sec. 38-51-111 – https://leg.colorado.gov/colorado-revised-statutes
Florida Statutes, Title XL, Sec. 689.041 – http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0600-0699/0689/Sections/0689.041.html
Texas Property Code, Title 2 – Conveyances, Chapter 5 – Conveyances, Sec. 5.027-5.031 https://statutes.capitol.texas.gov/Docs/PR/htm/PR.5.htm
This blog contains general information only, not intended to be relied upon as, nor a substitute for, specific professional advice. We accept no responsibility for loss occasioned to any purpose acting on or refraining from action as a result of any material on this blog.
Tags: fraud, real estate