The Title Search & the PCDS
A federal Magistrate Judge in upstate New
York recently explored the relationship between a title search report and the
Property Condition Disclosure Statement (“PCDS”) provided by the seller. Eagan v. Glassbrenner, No. 14-CV-507S (W. D. N. Y., June 10, 2015).
Sellers had answered “no” to PCDS Question
4, concerning whether anyone else had a lease, easement or any other right to
use or occupy the property "other than those stated in documents available
in the public record." Buyer
had ordered a title search that revealed five recorded oil and gas leases.
After closing, Buyer started receiving royalty checks from the lessee. Buyer
sued Sellers, contending that seller lied when answering Question 4.
The Court found “[t]he title search report
contained enough information to allow the [Buyer] to search the public record
for further information about those leases.” Hence, the plain language of
Question 4 precluded summary judgment for the Buyer.
Comment:
This case points up the
ramifications of the PCDS when complex commercial activities are carried out on
residential land. The other issue
the Court addressed concerned whether natural gas storage
"operations" in a natural rock formation beneath the land occur in a
way that would constitute a storage "facility." Sellers had
answered “yes” to PCDS Question 14 concerning storage “tanks,” but had given a
separate affidavit wherein they asserted “to the best of our knowledge … no
storage facilities exist under the premises.” Noting that Buyer had waived two
opportunities to inspect the premises prior to closing and that discovery about
Sellers' knowledge at the time the affidavit was given had not yet been completed, the Court declined
to grant summary judgment.