All Forum Posts by: Peter Walther

I think you're reading too much into my comment.  Of course a simple assertion of permission will not necessarily carry the day if it comes to a lawsuit, the facts will.

It appears that to establish adverse possession to a parcel of land in Washington, a claimant is required to demonstrate that the possession was (1) exclusive, (2) actual and uninterrupted, (3) open and notorious, and (4) hostile for a period of 10 years. Ofuasia v. Smurr, 198 Wn.App. 133, 143, 392 P.3d 1148 (2017). The party claiming adverse possession bears the burden of proving each element. Maier v. Giske, 154 Wn.App. 6, 18, 223 P.3d 1265 (2010). I believe that is intentionally a high bar to pass.

The case you cite is a Washington Supreme Court decision.  That indicates not only did the parties disagree on the facts, so did the trial court, the Appeals Court and the Supreme Court.

The Chaplin case is certainly the lead decision on the matter, a quick search found about 133 cases that cite it. I didn't look at all of them, only Rainwater v. Rainshadow Storage, LLC., No. 52757-0-11, an unpublished Washington Court of Appeals decision which I quoted above. That decision found that the trial court erred in granting Defendant Rainshadow's Motion For Summary Judgment which alleged that Plaintiff Rainwater had not established the elements of adverse possession as a matter of law. It would be interesting to see if the trial court changes its opinion after Rainwater puts on its case.

I'll take your word for it. 

I am aware it's done all the time and most time it doesn't ripen into a problem.  It's just like driving 55 MPH in a 35 MPH zone, most times you don't get caught, some times you do.  I think asking the bank if it's ok to do it and please put the approval in writing is a similar to asking a cop if it's ok to speed.

It sounds like the Assessor has what I would call an unrecorded plat.  A plat prepared for the builder but never submitted to or accepted by the County and therefore the lot number designations do not legally describe the lots.  In my experience conveyances based on an unrecorded plat should describe the property by metes & bounds A/K/A Lot "X" as shown on the unrecorded plat of ABC Subdivision.   One former underwriter in Florida advised:

B. The plat of a subdivision has never been filed for record and is held in the files of a local abstract company.

       If, in fact, the plat is not recorded in the public records, The Fund would not feel justified in authorizing a Fund policy covering the               title, since all of the descriptions in the chain of title which refer to the lot in the subdivision are insufficient without a plat of record             to show the location and boundaries of the property.

 I suspect the title underwriter who insured the Lender/Seller is the underwriter willing to authorize the issuance of a new policy to you without exception for the matter.  You can ask your attorney if this is the case.  This doesn't mean there isn't a defect, only that possibly the underwriter is trying to avoid having to retain counsel to represent the current owner in a suit to fix the problem.  See the story I wrote above.  If you buy the property and then try to sell or refinance and your buyer or their lender refuses to accept a new title policy from the current insurer, another underwriter may not be willing to accept the risk and you won't be able to get title insurance.  Then your deal falls apart.

I believe adverse possession requires the occupancy to be hostile to the owner.  I've found the easiest defense to an adverse possession claim is to assert the possession was permissive which permission was now being revoked.

I believe some states allow the issuance of a title policy that deletes the survey exception without a survey.  Many years back an attempt was made to allow it to be done in Florida but the Dept of Insurance opined that would be issuing coverage on a casualty basis which is prohibited and so refused to allow it.  In Florida, title companies may rely on a survey obtained for earlier transactions and an affidavit from the Seller that nothing had been changed on the property.  In addition, some policies in Florida have inadvertently been issued deleting the standard exception for survey matters, without having a survey.  In which case I believe coverage for survey matters has been provided to the Insured.

I suspect what may have happened is that the legal used on the mortgage was the same one they're proposing to use on the deed into you and that legal does not legally describe the property.  Instead the Assessor's parcel identification number (PIN) was used.  If the PIN was used on the mortgage that's what the foreclosure attorney probably used and that's what was used to convey title to your seller.  If that's what happened, I agree with your attorney, your Seller does not have good title to the property and you will probably have a problem selling or refinancing the property.  Worse yet, the original Borrower could come back and claim (s)he still owns the property and you don't.  (S)he might even be able to gain possession of the house if there is one on the property.

I worked on a title claim with similar facts.  The borrower owned two adjacent parcels, the first was about an acre in size and had a house on it.  The second was also about an acre but was vacant.  When the mortgage was given, the legal description only described the vacant parcel even though both parcels were intended to be encumbered.  When the loan went into default the foreclosure complaint used the same legal as on the mortgage as did the Sheriff's Deed.  The error was discovered when the lender tried to sell the property.  The lender's attorney brought a declaratory judgment action against the borrower and had the court reform the legal on the mortgage and Sheriff's deed.  Unfortunately this time the vacant land description was used again, but twice so there were two descriptions, just the same one twice.  The lender then sold the property to my company's insured and used the incorrect legal.  What can I say, mistakes happen in title insurance, a lot. Shortly after the closing the insured filed a claim because he had been served with a writ of possession by the borrower claiming the property with the house wasn't covered by the mortgage and hadn't been foreclosed.  I notified the lender and their attorney who went back to court and again asked the court to reform the legal.  The borrower argued the lender had accepted the legal on the mortgage, foreclosed on it and used the same legal in the reformed legal so should now be bound by it, and the court agreed.  The process took about four years and when the court issued the ruling we threw in the towel and paid the insured the amount of insurance under the policy, I think it was about $56k.  Of course the insured had made improvements to the property over the time, nothing extensive, just enough to make it livable since it had been vacant when he bought it and had paid for insurance.  In addition, the value of the property had gone up which also wasn't recoverable.

The moral of the story is, even if you get a title policy that doesn't except the problem from coverage, you probably don't want to buy yourself trouble.  I suggest you listen to your attorney.

Do you think there's a reason the interest rate is lower on a mortgage you take out individually versus one taken out in an LLC? If there is a reason, do you think a lender might think a borrower defrauded them for taking a loan out individually and then conveying it to an LLC?

While I agree a lender foreclosing because of the due on sales is rare, I'm not sure it can't happen.

Before deciding whether your loan can be called under a due on sale clause, you or your attorney might want to review 12 CFR 591 which I believe may provide in part:

§ 591.1 Authority, purpose, and scope.

(b) Purpose and scope. The purpose of this permanent preemption of state prohibitions on the exercise of due-on-sale clauses by all lenders, whether federally or state-chartered, is to reaffirm the authority of Federal savings associations to enforce due-on-sale clauses, and to confer on other lenders generally comparable authority with respect to the exercise of such clauses. This part applies to all real property loans, and all lenders making such loans, as those terms are defined in § 591.2 of this part.

§ 591.2 Definitions.

For the purposes of this part, the following definitions apply:

(b) Due-on-sale clause means a contract provision which authorizes the lender, at its option, to declare immediately due and payable sums secured by the lender's security instrument upon a sale of transfer of all or any part of the real property securing the loan without the lender's prior written consent. For purposes of this definition, a sale or transfer means the conveyance of real property of any right, title or interest therein, whether legal or equitable, whether voluntary or involuntary, by outright sale, deed, installment sale contract, land contract, contract for deed, leasehold interest with a term greater than three years, lease-option contract or any other method of conveyance of real property interests.

§ 591.3 Loans originated by Federal savings associations.

(a) With regard to any real property loan originated or to be originated by a Federal savings association, as a matter of contract between it and the borrower, a Federal savings association continues to have the power to include a due-on-sale clause in its loan instrument.

(b) Except as otherwise provided in § 591.5 of this part with respect to any such loan made on the security of a home occupied or to be occupied by the borrower, exercise by any lender of a due-on-sale clause in a loan originated by a Federal savings association shall be exclusively governed by the terms of the loan contract, and all rights and remedies of the lender and borrower shall at all times be fixed and governed by that contract.

§ 591.4 Loans originated by lenders other than Federal savings associations.

(a) With regard to any real property loan originated by a lender other than a Federal savings association, as a matter of contract between it and the borrower, the lender has the power to include a due on sale clause in its loan instrument.

(b) Except as otherwise provided in paragraph (c) of this section and § 591.5 of this part, the exercise of due-on-sale clauses in loans originated by lenders other than Federal savings associations shall be governed exclusively by the terms of the loan contract, and all rights and remedies of the lender and the borrower shall be fixed and governed by that contract.

While I agree a lender foreclosing because of the due on sale I'm not sure it can't happen.

In addition, assuming you received an Owner's Title Insurance policy when you purchased the properties, if you're going to convey the property to an LLC, make sure the Grantee meets the definition of Insured under the policy. If it does not it probably will not be considered an Insured under the policy.