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Laba v. Carey

    Brief Fact Summary.

    Plaintiff sued Defendant to recover his deposit, legal fees, and title examination fees when Plaintiff did not close on Defendant’s property. The trial court dismissed the complaint, but the appellate division reversed without awarding legal fees. Defendant appealed.

    Synopsis of Rule of Law.

    If a purchaser agrees to take title subject to easements and restrictive covenants of record, which are not violated, such easements and covenants do not render title unmarketable.

    Facts.

    Laba (Plaintiff) and Carey (Defendant) contracted for the sale of Carey’s property, which required Carey to deliver title free of all encumbrances except those noted in the contract.The contract was made subject to the “covenants, restrictions, utility agreement and easements of record,” provided they have not been violated.A title search revealed the existence of a recorded telephone easement and a “Waiver of Legal Grades” restrictive covenant, which required any successive owner of the property to install a sidewalk in accordance with the legal grade at any time the Commissioner of Highways directed. The sidewalk in front the subject property and all the surrounding property was below legal grade, but neither the easement nor the covenant had ever been violated. The title insurance company reported that the Defendant had good and marketable title, which it would insure, but excluded the easement and covenant from its coverage. Plaintiff informed Defendant that he was prepared to close provided that the existing tenant had vacated the premises. Defendant responded that their agreement only obligated him to serve the tenant a notice of termination. Plaintiff then refused to close, claiming a failure to deliver good, marketable and insurable title due to the easement and covenant.

    Issue.

    Whether easements and restrictive covenants of record, which are not violated, render title unmarketable if a purchaser agrees to take title subject tosuch easements and covenants. 

    Held.

    No. The trial court’s ruling is reinstated. If a purchaser agrees to take title subject to easements and restrictive covenants of record, which are not violated, such easements and covenants do not render title unmarketable.

    Discussion.

    Unless the parties agree otherwise, a seller is required to tender title, which is readily available for resale, and a purchaser has the right to a title that reasonably assures him that no flaw or doubt will arise to affect its marketability.The contract was specifically made subject to the “covenants, restrictions, utility agreements and easements of record,” provided they have not been violated. Neither the use of the property nor its title is affected by the grading covenant. That Plaintiff may have to raise the sidewalk in the future is irrelevant as that is only a normal incident to owning any real property in New York City. Therefore the sidewalk grade disparity does not render title unmarketable.


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