Transferring property from seller to buyer is often a complicated transaction. Although many people carefully review and revise the necessary closing documents, errors still occur. The incorrect legal description of the property has caused some long-term litigation for buyers and sellers. While Texas Property Code Sections 5.027-031 allows for the correction of errors, all parties must usually agree to material changes. Clerical mistakes are most often corrected with little effort or expense. However, when one party does not agree, problems, sometimes quite costly, arise.
An example of that type of error and its severe consequences arose in 2001. A seller who owned two city lots with a structure that occupied space on both lots listed both lots and the structure. The property was purchased by a couple. The closing seemed straightforward, held at a title company with the deed and deed of trust drafted by the title company’s attorney. Everything seemed to be in order, even when the couple refinanced their home the following year for a better interest rate. As part of the refinancing, the couple began to escrow their taxes and insurance and continued to do so for nine years without any issue.
Eventually, the original owner realized an error of some sort when she received notice that she was being sued for nonpayment of taxes on one of the lots she had sold. Upon further investigation, her attorney discovered that the signed deed only conveyed one of the two lots, meaning that she owed back taxes on the other lot. When she contacted the couple who had purchased the property from her, they contacted their title company to file a claim.
The title company then filed a correction deed to convey both lots to the couple. At that point, the tax assessor dismissed the original owner from the suit and joined the current owners in a suit against the title company. The title company acknowledged its responsibility for the mistake made by its attorney and paid interest, penalties, and cost of the suit for the couple. The couple then requested that the title company also pay the taxes that had accrued during the ten years since the faulty deed was written, reasoning that they would have escrowed the required funds instead of paying one lump sum all at once. The title company did not agree to their request.
Next, the couple filed a third-party suit against the title company and the drafting attorney, increasing their damages. They felt that the actions of the title company and attorney qualified as fraud under the DTPA (Deceptive Trade Practices Act).
After several years of litigation, the Court of Appeals verified the initial judgment for the title company and drafting attorney as well as a final judgment creating a lien for the tax office. As a result of their error in the legal description of the land, the title company paid several thousand dollars in order to correct the error. Both the title company and the attorney also paid the additional costs for defending themselves in the suit.
Years of litigation resulted from the simple mistake of including one lot on the deed instead of two, reiterating the necessity of reviewing documents with great care before closing a real estate transaction. Scrutiny by a lawyer with expertise in real estate law might have prevented the careless error that led to this protracted litigation.
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