Does a Deed Incorporate All Terms of a Sales Contract?

When closing a Florida real estate sale, both parties need to be aware of the legal doctrine of “merger by deed.” This doctrine basically holds that once a property is transferred by deed, any prior contracts or agreements related to the sale are no longer enforceable. In other words, all prior agreements disappear and merge into the deed.

Tampa Appeals Court Weighs in on Cell Tower Lease Dispute

The merger by deed rule can be critical when it comes to certain rights reserved by a seller. An ongoing Florida court case offers a helpful illustration. The plaintiff in this case owned a piece of land in DeSoto County. In April 2011, he sold the land to a third party, who in turn resold the property in July 2011 to the defendants.

Three years before the first sale, the plaintiff leased a 100-square-foot piece of the property to Verizon Wireless, which wanted to build a cellphone tower. Under the lease, Verizon pays the plaintiff $13,800 per year in rent.

The plaintiff and the third party agreed that he would retain the rights to the 100-square foot easement and thus continue receiving rental payments from Verizon. But the April 2011 deed–which conveyed the property from the plaintiff to the third party–made no mention of this. Nor did the subsequent sales contract (or deed) between the third party and the defendants three months later address the subject. Both deeds, however, did state they were “subject to” Verizon’s easement.

Verizon did not actually begin construction of its cell tower until 2012. Shortly before then, the plaintiff wanted to sell his lease rights to another company for $175,000. The defendants maintained they owned the land, including the leased portion, “free and clear” of any rights purportedly held by the plaintiff.

The plaintiff then sued the defendants to enforce his lease rights. A trial court granted summary judgment to the defendants, noting that neither deed reserved the plaintiff’s right to continue receiving rent under the Verizon lease. The plaintiff appealed.

The Florida Second District Court of Appeal reversed the grant of summary judgment. First, the Second District held the plaintiff did in fact reserve his right to continue receiving the lease payments. Indeed, the defendants did not dispute the plaintiffs and the original third-party purchasers agreed that was the case. More to the point, this reservation did not merge into the April 2011 deed.

That said, the appeals court said there was evidence the defendants had no knowledge of the plaintiff’s reservation of rights when they purchased the property from the third party. The defendants assumed they were acquiring all of the rights associated with the property. The defendants may therefore still be able to claim a common-law right to the lease rights, but the Second District said additional proceedings before the trial court were necessary to make that determination.

Need Help With a St. Petersburg Real Estate Transaction?

Cases like this illustrate the importance of establishing clean title to any property before a deed transfers the property from a buyer to a seller. It is far preferable to clear up any disputes over property rights before a sale is final. If you need assistance from an experienced St. Petersburg real estate attorney with any type of property transaction, contact the offices of Carnal & Mansfield, P.A., today.

Source:

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