Have you represented a property with a verbal easement? If so, did the buyer or seller get an Improvement Location Certificate (ILC)? If not, you could end up with a headache – or a lawsuit. We’ll share an agent’s actual experience and show you the best way to handle past and future sales.
Recently, CRES Risk Management got a call from an agent who represented the seller in a transaction where the seller had a verbal easement. In this case, it was a verbal agreement with their neighbor that the updated driveway placement was allowed and was not unlawfully encroaching on the neighbor’s property.
At the time of sale, neither the seller nor the buyer got an ILC. The Certificate would have provided a legal record that the driveway on the property was not unlawfully encroaching in the neighbor’s property (in legal terms, that it was not in violation of easement encroachment). Because there was no ILC, the only record was the seller’s disclosure to the buyer that they had a verbal easement agreement with the current neighbor for the driveway.
Could a Verbal Easement Turn into a Lawsuit?
The previous “buyer,” who now owns the home, wants to sell the property. They have come back to the former seller’s agent because they want to:
Make sure the next buyer understands the verbal easement
Assure that they don’t put themselves at risk of a claim down the road
The former seller’s agent is a CRES client, who wisely contacted Risk Management Legal Services about this situation. Because they brokered the original sale, the agent was concerned that they or their former seller client could be liable in a claim situation with the new owner or any future buyer, based on not obtaining an ILC during the original sale.
ILC and Other Documentation You Need
CRES legal counsel advised the agent to recommend that the current owner obtain an ILC to provide to new buyers, with disclosures of the driveway verbal easement agreement with the neighbor. The current owner would commission a surveyor to survey the property and provide the Improvement Location Certificate. (For your own clients, if you wish to provide a list of local surveyors, always provide several names the client can choose from.)
Additionally, counsel noted that the agent should keep a written record of communication from the original sale they brokered and new communication with the buyer regarding the verbal easement situation. The documentation of the seller’s and buyer’s decline to obtain an ILC at the time of original sale is particularly important.
Counsel advised that in similar situations in the future, the agent should have a seller obtain an ILC, at the time of sale, along with a written and signed agreement between both a seller and neighbor to protect themselves from claim liability.
At CRES, this is just the kind of issue we want to hear about. The agent can take steps in this particular case to avoid a potential lawsuit—and they know what they can do in future situations to reduce risk. That’s the benefit our CRES Real Estate E&O + ClaimPrevent® clients gain — a real estate legal advice team included with your policy to help with potential claim issues and risks. We’re here to help before issues become lawsuits.
What questions or concerns do you have about verbal easements?
This blog/website is made available by CRES Insurance Services for educational purposes to give you general information and understanding of legal risks and insurance options, not to provide specific legal advice. This blog/website should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. Claims examples are for illustrative purposes only. Read your policy for a complete description of what is covered and excluded.
Arizona Realtors®: Even if your real estate firm has E&O, you can still be responsible for attorney fees and damage… https://t.co/hnxoEUZx0PReal Estate Pros - Are you looking for a way to sell your listings faster, at a higher price, and reduce out-of-poc… https://t.co/AVTQRjRcGq