Title Company misdeeds???

[IndianaOwner]

What is the name of your state? Indiana

I deeded a partial parcel (not the entire lot) to a builder to build residence on since the builder required an interest in the land for his construction loan. I then had a recorded mortgage on that partial parcel that prohibited the transfer of the partial parcel without my permission since the partial parcel was to be deeded back to me. The mortgage also listed a base amount to satisfy the mortgage and referenced a contract to determine the full amount. Moreover, the mortgage imposed a duty on the builder to build the structure according to plans. The parcel was to be deeded back to me as part of a larger project (condo) once the units were created. Well, the builder messed up the construction and refused to correct the structure. The builder then secretly sold the parcel with improvements to another party (not a builder but someone who would live there) --- I had no knowledge of what he was doing behind the scenes whatsoever. After the closing, I got a call from the title company saying they had money in escrow and asked me to sign the mortgage release --- no one called me ahead of the sale for the payoff requirements, etc. When I asked about what occurred, the title company was evasive. Well, the escrow does not satisfy the mortgage both in terms of the amount owed (per the referenced contract) and the requirement to build according to plans. Needless to say, attorneys are involved now. I talked with the title company attorney and all he says is he wasn't the one who handled the details of the transaction and he hopes we can work it out. The deed the builder executed was recorded by the title company a week after closing and after I sent the builder a notice of default of the mortgage. The new owner has now been notified by the building commissioner that he is in violation of the zoning ordinances and that they created an illegal lot by not transferring the partial parcel back into the project like they were supposed to do. That partial parcel is landlocked in the middle of the rest of my property and they do not have a permanent access easement nor a utility easement over my property. The building also encroaches onto the rest of my property --- verified by a survey. I think the new buyer and the builder were in cahoots since the buyer paid cash without a mortgage.

Needless to say, I would think the new buyer would be sorta screwed here but he is trying to bully his way to have access. I am told by land use planning experts that I could put a fence up around that partial parcel.

Isn't it very very unusual for the title company to not contact a mortgage holder for the payoff requirements before the closing??? The mortgage clearly indicated that the payoff amount was not limited to the base amount and restricted the transfer.

Bizarre eh?

 

[danno6925]

Happens more often than you might think...

Wow .

The title company DEFINITELY should have seen that the mortgage covered other lots unless they waited until closing to obtain payoff figures. Even then, they should have halted settlement right then and there - though it sounds like they didn't. Scary stuff.

If you want to stick it to them, you might find out who is their underwriter and notify the actual title company of these irregularities in writing, and inform them you will never again use one of their agents for any of your settlement needs (the local escrow company simply acts as an agent for the larger title insurance company). Even huge corporations don't like to hear they'r elosing marketshare...

For the future, (should you ever be willing to endure this again) you might look into the Transfer of Declarant Rights when building a condo community. It keeps your name on the title, but also allows the builder to come in and build the dwellings to the specs set forth in your Plan. When the time comes for outsale (sale to the person who will occupy) the deed must be signed off on by you and the builder. This helps to avoid the very situation you're embroiled in right now.

BTW: Situations like this are avoided by having an attorney draft all agreements in the first place.

 

[IndianaOwner]

Thanks for the insight. There were plenty of attorneys involved with everything but no one thought the builder would pull such a stunt and act in such bad faith. I think the builder thought they were pulling one over on me but in reality shot themselves in the foot. The title company is in a bind no doubt ... the builder uses that title company almost exclusively. I haven't seen the title policy yet so I'll eventually find out what was covered. It really really is a bizzarre situation and it violated the terms of the mortgage so I declared them in default. Needless to say the builder gave a full frontal assault to try and intimidate me into releasing the mortgage once the sneak attach didn't work. Now the builder wants to go to mediation... But it still leaves me with a mess right now. They have caused a lot of harm by doing this. Unbelievable!

 

[IndianaOwner]

Also, the title company reviewed all documents before the project started, including advising on drafts of the Declaration, etc. I don't know what then went on behind the scenes but I know why know they have a situation on their hands...

Also, could you expand on the Transfer of Declarant Rights that you mentioned when you get a chance? Thanks.

The sticking point was the time from when they first dig until the framing is completed for an "as built" filing to create the description for the individual units. That is why the partial parcel was created to secure their construction loan during that gap period...