The mortgage encumbers the cut-out.
Opposing counsels tend to be forthcoming with damaging information at the most inopportune moment. The trial was set and judgment was supported by the record, but a statement from opposing counsel threatens to undermine the entire foreclosure action – “The mortgage encumbers the cut-out.” It is not unusual for a grantor who owns a large parcel of land to divide the land into smaller parcels and mortgage the parcels separately. Furthermore, the property appraiser’s website had a parcel ID, property address, building, and the legal description on the mortgage. The subject property seemed to be a typical single family residential parcel.
A discussion with the county’s planning and zoning department revealed the issue. The mortgagor’s large parcel was not legally split. The various parcel numbers were merely assigned to the property for tax purposes only. Thus, even with the completion of the foreclosure, the new owner would not be able to build on the subject property without the cooperation of the foreclosed mortgagor. Prior to issuing the mortgage, the mortgagee should have ensured that the property was legally split.
A lot split is a common procedure which subdivides one piece of property into pieces of property. These “splits” are accomplished through approval from the planning department by submitting a current survey and an application with necessary data. The surveyor draws a map of the “parent parcel” using the present legal description and prepares another drawing showing the proposed division for the new “lots” including the appropriate new legal descriptions and proposed access to the lots. Undergoing the lot splitting process ensures that newly created parcels are compliant with the current laws and meet the requirements to allow issuance of building permits. The department must make many technical considerations prior to authorizing the lot split. There are guidelines pertaining to the allowed uses, density (number of homes per acre), and intensities (concentration of the use as related to the area) of the property. The land uses prescribe maximum allowed number of homes per acre and the lot splits are subject to those requirements (i.e. Rural Village has a maximum allowed “density” of 2 units per acre, so a person must have a minimum of 1 acre before they can subdivide into 2 half-acre lots). Further complications may arise with onsite wetlands, the property being within a Flood Zone established by FEMA, lack of public or private streets to the property, and so on. If the application and survey meet the established criteria, then the documents are signed by the appropriate parties and recorded with the Clerk of Court. Thereafter, the lots may be sold or deeded as planned.
Opposing counsel’s damaging information may not impact the foreclosure, but it may certainly impact the marketability of the property once the foreclosure is completed. Unless there is an exception on the title policy, a title claim should be filed to protect the mortgagee from any potential loss due to the issue. After all, the origination survey revealed the layout of the property and the appropriate lot splitting documents were not recorded in public records. The mortgage should not have been issued for the cut-out because the property was not legally split.