Unforgiven
Tempe, AZ--These new homes in the "Rendezvous" subdivision
hit the market at the right time. Priced in the $200,000 range,
they sold briskly. First American insured twenty new homeowners.
Then one day each house was posted with a foreclosure notice, naming
a lender no one had ever heard of. The story made local news.
What happened? The foreclosing deed of trust
had been given years ago by a prior owner. Securing payment
of $1.8 million, it covered two tracts described by metes-and-
bounds legal descriptions. When recorded it was stamped with
instrument number 85-013260, by the recorder's office.
In following years there were recorded six partial releases
referencing instrument number 85-013260. Each partial release
had a legal description referring to lots shown on a recorded
condominium plan known as "Cottonwoods at Campbell."
Together, the partial releases covered (and therefore released)
all of the lots in the Cottonwoods condominium plan.
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Forgotten, But Not Forgiven
-- The Rendezvous subdivision remained
subject to a long-forgotten mortgage. |
And what does all this have to do with our twenty new homes? Nothing,
that's the problem.
Earlier title work for the Rendezvous subdivision had been done
by one of our competitors. The competitor's examiner apparently
thought that both tracts covered by the $1.8 million deed of trust
had been re-surveyed to become the Cottonwoods condominium plan.
Since all lots in Cottonwoods had been released, he or she would
naturally conclude the old deed of trust was satisfied and released.
Somehow, our competitor issued a title policy for the land which
would later become the Rendezvous subdivision without any exception
for the $1.8 million deed of trust.
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Our examiner relied on the competitor's work and
searched back only to the date of the competitor's last policy.
This is a shortcut frequently taken by title companies and their
examiners. We had no inkling the old deed of trust remained
as an encumbrance with an unpaid balance. |
Having inherited this misunderstanding, First American paid $427,500
for full release of the deed of trust, and incurred $21,000 in legal
expenses.
New homes with clouded titles.
MORAL: Following legal descriptions, the formats
of which may change over time, can be a daunting task.
Sometimes it's important to plot out metes-and-bounds legal descriptions
and compare them with more recent survey or subdivision maps, to
best understand which interests, encumbrances or easements continue
to affect property involved in a pending transaction.
And, of course, when you make a practice of relying on someone
else's work you may earn your reputation by paying for theirs.
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