It is possible, for any number of reasons, for the actual quantity of land purchased by a buyer to be considerably less than stated on a deed. Often, a deed will give a survey description which includes a statement of a specific number of acres, only to be followed by the caveat: “more or less.” If the buyer who receives a deed with such a description later obtains a survey where he or she discovers the number of acres was less than stated, is there anything the buyer can do?
The answer is, of course, it depends. To determine if the buyer in this situation has any recourse from the seller, several factors need to be considered. What follows is a brief discussion of these factors and other information such a buyer may find helpful.
Was the sale per unit or in whole? Most real estate contracts describe the land being purchased as a single tract, parcel, or unit, instead of specific number of acres. And, sometimes its unclear. Where it is unclear, it may be useful to look at how the price of the land is described, is it a lump sum price for the entire tract being purchased or is it a unit price per acre. A sale of a single unit, in whole or “in gross,” means that the seller is not selling you a specific number of acres but, rather, is selling you a tract which may contain the number of acres described in the description of the land. The difference is slight, but it is a difference that matters. Where the purchase-sale agreement is per acre, the buyer who finds out after the fact that the land is smaller than described has a much stronger chance of recovering. Beware, however, most real estate contract are in gross rather than per acre.
Was the buyer able to survey the land prior to purchase? Where a buyer is afforded a due diligence period which permits a survey of the land to be made, and the buyer declines to have such a survey performed, a buyer has reduced its chance of recovering where the land ends up containing fewer acres than described. The reason is because since the days of Henry the IIX, the rule recited simply as “caveat emptor” has generally been applied to real estate transactions. Caveat emptor literally means buyer beware. In the context of land transactions, it stands for the proposition that buyers are responsible for checking out what they buy before consummating the transaction. Of course, with all rules, the exceptions are often as important as the rule. When it comes to caveat emptor, there are many exceptions. For example, exceptions include, fraud or warranties provided by the seller which expressly survive closing. Unfortunately for the aggrieved buyer, most standard form real estate contracts provided by brokers and sellers contain few warranties that survive closing, especially outside of the context of residential real estate. And, I have personally never seen a standard form contract that warranties the quantity of land. Therefore, most buyers are forced to look for fraud (i.e., active concealment) or other rarely seen exceptions to caveat emptor. Bottomline, buyers should carefully consider whether to employ a surveyor when purchasing significant tracts of land.
Tennessee law does offer some relief for buyers. There are several Tennessee cases dealing with land transactions where a survey conducted after closing revealed a large discrepancy in the actual quantity of land when compared with what was described in the deed. The cases generally turn on two factors: (1) the size of the discrepancy and (2) the seller's knowledge and/or representations made to the buyer. While it would oversimplify the law to say only these factors are relevant, for purposes of a general discussion, these factors tend to be the most prominent.
The size of the discrepancy matters. In cases before Tennessee courts where a deed given to a buyer describes a significantly larger tract of land than is actually there, our courts have tended to favor the aggrieved buyer. However, most of these cases tend to have discrepancies so large that the court inferred fraud on the part of the seller. Essentially, the courts appear to hold that where the discrepancy is large enough, it is all most unbelievable that the seller did not know that the description in the deed was false.
The knowledge of the seller matters. Relatedly, in cases where the seller has actual knowledge that the deed given at closing describes a tract significantly larger than actually exists has tended to favor the buyers as well. Here, it appears that the court is again relying on the fraud exception to the rule of caveat emptor.
Real Estate litigation is not for the faint of heart. Litigation is almost always messy. The best way to avoid litigation is to ensure the buyer is aware of the nuances involved in the transaction before closing. Typically, where a deal is closed by a title agent rather than an attorney, the buyer executes a standard form real estate contract, or where the buyer is not represented by an attorney in the transaction, a buyer (and seller for that matter) tend to get the “standard” treatment. The reason has nothing to do with the competency of title agents or real estate brokers, it simply has to do with what has become “standard practice” in real estate transactions. For example, most standard title insurance commitments prepared by title agents contain an exception for defects which would have been discovered by a survey. The buyer's attorney may be able to negotiate with the title insurer underwriter to have this exception removed from the commitment. With this exception removed, if a defect in quantity is later discovered, the owner's title policy may provide some relief to the buyer who later discovers a defect in the deed's description of the land. Where the survey exception cannot be negotiated out of the commitment, a real estate attorney would typically advise his buyer-client to obtain a survey.
Jones Law has experience representing buyers, sellers, and lenders in real estate transactions. We also have experience closing real estate transactions and negotiating title policies and secured lending facilities. If you are in need of an experienced real estate attorney, call Jones Law to see if we may be able to assist you. You may reach us by phone at (931) 532-0665 or by email at [email protected].