Idaho Real Estate & Development Law Update: Recent Idaho Case Highlights Risks of Dealing with Warranty Deeds and Unsurveyed Land

The recent Idaho Supreme Court case of Nielson v. Talbot, Docket No. 44864 (Idaho 2018), highlights some risks of dealing in land that has not been surveyed and of using warranty deeds.

To understand the case, some background is needed. Decades prior to the lawsuit, a couple named Shaffer bought a large tract of land, a portion of which was fenced pasture and the remainder of which was unfenced. Later, the Shaffers tried to sell the fenced pasture to a couple named Murdock. The Shaffers and the Murdocks orally agreed that the fence line would be the boundary between the two parcels, but the legal description they used actually described a boundary line that was almost 15 feet off the fence line.

Decades went by, with both parcels changing hands multiple times, using the same bad legal description, but with everyone treating the fence line as the property line. Eventually the fence was taken down, but a carport, a shed, and a row of lilac bushes remained in place, still reflecting everyone’s understanding that the former fence line was the property line.

By 2013, one parcel was owned by a couple we will call “the Sellers” and the other parcel was owned by a couple we will call “the Neighbors.” The Sellers sold their property to a couple we will call “the Buyers” again using the same bad legal description in a warranty deed.

After the purchase, the Buyers measured their property and discovered, for the first time, that the Neighbors’ carport encroached onto the property described in the Buyers’ deed by about 13 feet. The Buyers sued the Neighbors seeking to clear up the ownership of the land in dispute. The Buyers also sued the Sellers alleging breach of the warranties in the deed.

Long story short: Neighbors win. Sellers lose.

The Neighbors win because decades earlier the Shaffers and the Murdocks orally agreed that the fence line would be the property line and because the monuments on the ground (i.e., the carport, shed, and lilac bushes) provided the Buyers with notice of the altered property line. The Court quoted the following rulings from two of its earlier decisions:

Idaho law provides that when two parties orally establish boundaries of property to be transferred from one to the other, and the subsequent written deed does not match those boundaries, the orally agreed upon boundaries will prevail. This oral agreement is binding upon all subsequent purchasers who have notice of the agreement, or who are put on notice at the time of purchase that the property as described by the inaccurate deed is claimed by someone other than the seller.

One buying property in the possession of a third party is put on notice of any claim of title or right of possession by such third party, which a reasonable investigation would reveal.

The Buyers should have measured the property before their purchase. If they had, they would have realized that there was a boundary problem. As the Court noted, it would be unreasonable for the Buyers to assume they were purchasing part of the Neighbors’ carport and shed. This is why careful buyers get surveys and investigate encroachments when they can still get out of the deal.

On the other hand, the Sellers lose because they gave the Buyers a warranty deed, warranting against all title problems no matter who created them. Because of the prior oral agreement between earlier owners and the bad legal description, however, the Sellers did not have title to all the land described in the deed. As a result, the Sellers breached their warranty to the Buyers. The Court said: “By this holding we reiterate it is imperative that sellers take adequate measures to ensure the accuracy of the legal description contained in a deed before they sell that property to another and make associated warranties.”

Actually, there is an even easier way for sellers to protect themselves: don’t give warranty deeds that warrant against all title problems no matter who created them. A savvy seller will insist upon using a more limited warranty deed, such as one that only warrants against title problems created by the seller. If the Sellers in Nielson had done that, they would not have warranted against a title problem created by other people decades earlier. The onus then would have been even more on the Buyers to make sure the description was correct or suffer the consequences.