In 2020, a father and daughter purchased, with borrowed funds, a home in Leicester, Massachusetts.
After the closing, it came to light that the prior owner owed the town nearly $24,000 for a betterment that was assessed in 2013.
(A “betterment” is a municipal improvement–sidewalk, sewer line, etc.–which increases the value of real estate. Cities and towns may make such improvements and then assess/charge their residents for the work. The municipality can, if necessary, collect delinquent betterments by seizing the debtor’s land.)
The closing attorney–who represented the mortgage lender–allegedly missed the betterment while doing his title search.
This happened because the attorney conducted his title search using only the property’s address instead of searching both the property’s address and the prior owners’ names.
Unfortunately for the lawyer, the betterment was indexed under only the owner’s name in 2013.
Additionally, the lawyer failed to recognize the betterment when it was mentioned on the municipal lien certificate. That document stated “Please call the assessor at 508-892-7001 for final betterment payoff. Uncommitted betterment balance is $23931.42.”
The homebuyers filed a lawsuit in superior court claiming that the lawyer failed to comply with M.G.L. c. 93, Section 70 which states
an attorney acting for or on behalf of the mortgagee shall render a certification of title to the mortgaged premises to the mortgagor and to the mortgagee…The certification shall include a statement that at the time of recording the said mortgage, the mortgagor holds good and sufficient record title to the mortgaged premises free from all encumbrances, and shall enumerate exceptions thereto. The certification shall further include a statement that the mortgagee holds a good and sufficient record first mortgage to the property, subject only to the matters excepted by said certification.
Although such a certificate was issued to the buyers and their lender, it contained no mention of the hefty betterment.
The closing attorney filed a motion for summary judgment claiming, among other things, that the betterment was improperly indexed and that his responsibility for professional competence was owed to the lender and not the buyers.
The superior court allowed the summary judgment motion and dismissed the case. The homebuyers appealed the decision. The Appeals Court sided with the homebuyers and reversed the summary judgment ruling.
First, regarding the property-only title search and the absence of the betterment on the title certificate, the Appeal Court wrote:
With respect to recording, G. L. c. 184, § 25, provides that “[n]o instrument shall be deemed recorded in due course unless so recorded . . . as to be indexed in the grantor index under the name of the owner of record of the real estate affected at the time of the recording.” In light of this, we cannot say, as a matter of law, that a title search limited to examining those record documents indexed by the property rather than by the names of the owners complies with the statute or is not negligent. And, because the certificate of title did not mention the betterment as an encumbrance on the title, or even exclude it from the certificate, even though it was an encumbrance on the title that was of record, the certificate of title in this case was in error and did not comply with the statute.
Next, the Appeals Court considered the lawyer’s contention that his duty was only to the lender and not to the buyer:
It is undisputed that [the lawyer] was not counsel for the [buyers]; he was the closing attorney, retained by [the lender], the lender. Nonetheless, G. L. c. 93, § 70, imposed an obligation on him with respect to the [buyers]. He was required under the statute, for the benefit of the mortgagor, to complete “a title examination,” and he owed a duty to certify only if it were true in light of “the records of the registry of deeds or registry district in which the mortgaged premises lie and relevant records of registries of probate,” that when the mortgage was recorded, the mortgagor would “hold[] good and sufficient record title to the mortgaged premises free from all encumbrances.” G. L. c. 93, § 70.
The summary judgment ruling was, therefore, reversed and the matter was sent back to superior court where it will likely proceed towards settlement or trial.
To read the opinion, in its entirety, click the document below: