Expert: liznarr - 8/6/2006

Question
We just purchased our first home, It's been two months and
we've just found out that the house does not have a Certificate
of Occupancy-- meaning we cannot legally live there until we
bring the house up to code. We had the house inspected and the
inspector seemed to think that since the house already had
utilities on, it had a current CO. The same week we found out
that the sewer company had a 20 ft easement in the backyard.
we bought the house with the hopes of subdiving the back lot.
The easement runs diagonally across the yard, so that option is
gone. One simple question, should our title search anf attorney
have caught these things? What should we do from here. Thanks
in advance for your help.

Answer
Hi Stephanie,

I am assuming you just purchased a NEW home.

A title search will not necessarily disclose easements if they are not recorded.  Surveys are the instrument that will disclose easements.  Since sewer easements are required to be recorded, they are public, recorded information and should have been discovered by your closing attorney during a routine title search.

If you have a mortgage on this property, you probably were required to purchase a title policy.  Hopefully, you also purchased an “Owners Title  Policy,” as basic title insurance only protects the lender.  Your closing attorney should have offered you the option to purchase owners coverage.   Check the title policy you were issued at closing and see if there is any “exception” listed regarding a survey.

Unless the builder paid cash for both the lot and his cost of construction (or had some type of private financing), he probably obtained a construction loan.  With a construction loan, he should have been required at some point by his lender to do a plot plan and a foundation survey prior to pouring the foundation – to make sure that the house would be constructed on the property and that it would not be built over any easements.  The plot plan (done by a surveyor) would have shown the 20-foot sewer easement in the back yard.

If the builder knew about the 20-foot diagonal sewer easement in the backyard, he most definitely should have disclosed this to you.  If the builder knew of your plan to divide this lot and did not disclose the easement (assuming there are no other subdivision or county restrictions forbidding this), he is guilty of fraud – which is INTENTIONAL misrepresentation.

The builder also should have had a Certificate of Occupancy in place before you closed.  Generally, permanent power cannot be turned on without a CO being provided to the power company to prove that all inspections have been passed.

Call your County Building Inspector’s office.  They can tell you if a CO was ever issued, and if so, the date.  You can also obtain from this office a list of any inspections that the builder failed.

When you say you had the house inspected, was this PRIOR to closing?  And was this YOUR inspector?  If so, he should NOT have made any assumptions regarding a CO.  He, too, could have some liability here, depending on what he presented to you in his written report.

Also, if you had a real estate agent representing YOU, your agent probably has liability.  If you did not have your own agent, but rather worked with an agent representing the builder, the builder’s agent STILL should have advised you of any sewer easements running diagonally across the property.

I would first find out about the CO and try to determine if a plot plan and foundation survey were done by the builder.  After getting as much information together as possible, I would suggest that you seek good legal advice on the numerous failures of disclosure regarding the sewer easement.

Good luck to you, and write again if you have additional questions.

Regards,
Elizabeth Narr