[Client Canceled] Iowa Dirt Lawyer : Iowa Real Estate Lawyer & Attorney : Pat Burk : Brick Gentry Law Firm : Des Moines, Central Iowa

Iowa does not currently permit the sale of title insurance in Iowa.  This is despite the fact nearly every other state in the union relies on title insurance every day to facilitate the transfer of real property.  That is not to say title insurance is not utilized in Iowa.  Dozens if not hundreds of Iowa transactions both very large and small rely on out-of-state title insurers every year to opine on and insure good title.  I have no specific numbers, but have been personally involved in dozens, including multi-million dollar transfers.  The traditional abstract and title opinion method in Iowa is dismissed and the monies associated with opining on title go out-of-state.

Paul McLaughlin, legal counsel for the Iowa Association of Realtors, breaks out the legalization argument very nicely in his Title Insurance Review.  The Iowa State Bar Association argues, among other things,  the long-standing abstract and title opinion method permits Iowa to enjoy some of the cleanest titles in the nation and has long held strong opposition to the legalization as outlined here. 

This debate takes me back to my freshman year of high school.  Determined to be the best marching band member ever, I diligently practiced and rehearsed the songs and the beats for each step. I even practiced stepping to the music. Then, band practice finally arrived.  Proudly relishing in my practiced perfection, I marched and played with confident exuberance only to be rudely awakened by Mr. Chamberlains's blaring bullhorn:  "BURK, if you're the only one in step....you're outta step!".

Iowa, we are out of step.  The abstract and title opinion method has served us well, but, the time has long since come to take on the industry and transfer title in the same manner as the rest of the country.  The process is streamlined and efficient in most cases. Closing procedures are coordinated with the issuance of the title policy and money transfers quickly and confidently. Current abstracters and their title plants are a necessary component.  It is were the title insurers will need to begin.  Legal counsel will still be required to review the initial commitments and final policies.  I firmly believe the real estate industry in Iowa would benefit rather than be harmed by such an undertaking.  Title Guarantee is simply not in a position to compete with the established processes of the largest and best title insurers.  Please join me in bringing Iowa back in step - legalize title insurance in Iowa.

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If you have bought or sold a home in Iowa, you are familiar with real estate disclosures:  those check-the-box forms which seller's must fill out disclosing problems with plumbing, roofing, heating and air-conditioning, and other matters.  The obligation for the disclosure arises under Iowa Code Section 558A.  In its ultimate wisdom and reflection of its knowledge of the industry, the legislature chose to dismiss with the chore of determining the particulars of such a disclosure and permit the Iowa Real Estate Commission to create the actual disclosure form.  As a result, seller's actually have the obligation to investigate into the zoning of the property they are selling:  an obligation the vast majority of seller's have no clue about.  This legislation also creates liability on a seller for a failure to exercise ordinary care in obtaining the information to make the disclosure. What? So what must a Seller do? How much investigation constitutes ordinary care?  How much must a buyer rely upon their own investigations?  None of these questions are clearly answered.

In Jensen v. Sattler (Iowa 2005), the Supreme Court addressed a claim that a seller could only be liable for an erroneous disclosure if there were proof of actual fraud.  Reviewing a statue clearly stating the seller could be responsible for the failure to exercise ordinary care, the Supreme Court rejected the fraud argument.  Neither party raised the issue of how the ordinary care standard is to be applied and the Supreme Court did not specifically address it; however, the Supreme Court suggests the failure to exercise ordinary care in this situation is akin to negligence.   In other words, if a buyer can prove mere negligence in the preparation of a disclosure and damages result, there is a good possibility the seller could be held responsible.

So....prepare those disclosures carefully and error on the side of disclosing too much.  In the meantime, talk to the Iowa Real Estate Commission about preparing a form with fewer traps.  Or, better yet, let's get the legislature to define a more reasonable standard -say willfulness, fraud or gross negligence.  Mere negligence simply creates an undue burden on sellers and unjustified ammunition for unscrupulous buyers. 

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Determining when and if a home builder is liable for a construction defect in Iowa has long haunted builders and owners alike.  To showcase quality, builders frequently offer limited warranties as part of the construction contract. These are often one-year warranties  The trouble for owner's is they may or may not have discovered a potential defect within this time period.  Primarily, a Builder just wants to know when claims can no longer be made.

In a blow to builders, a recent Iowa Supreme Court case suggests certain warranties may extend beyond those provided in the construction contract: Speight v. Walters Development Company, Ltd. (Iowa 2008). However, the issue of whether these warranties can be waived as part of the construction contract remains unclear.

To further a builder's worries, the Iowa Supreme Court ruled in Speight that the Implied Warranty of Workman-Like Construction applies to subsequent purchasers.  In other words, purchasing a used home does not necessarily bar an action against the original builder for a construction defect.  The claim must be raised within five-years of the date of discovery based upon Iowa Code Section 614.1(4).

The most troubling aspect of this opinion is not the ruling itself, but the apparent upholding of the application of a fifteen-year statute of repose, or fifteen-year right to bring a claim against the builder in this situation: See Iowa Code Section 614.1(11).  Coupled with the right of a subsequent purchaser to bring implied warranty claims, the application of this fifteen-year limitation is simply unfair to builders and unlikely to benefit a truly damaged owner.  The Iowa legislature should address this worrisome legistlation immediately.  This unrealistic statute of repose serves only to limit quality homebuilders in the market and force those in the market to raise prices to cover potential losses or, worse, operate under continually changing entities which may ultimately be bankrupt to avoid future and existing claims.  A seven year statute of repose in this situation would be more than sufficient.  This would provide a buyer five years to discover a legitimate defect with two years remaining to bring the claim.

In short, claims for legitimate construction defects in homes may be brought by original purchasers and subsequent purchasers alike provided they are brought within five years of discovery and fifteen years of the date the work creating the defect occurred.  However, outside of any contractual warranties, the defect must have violated the Implied Warranty of Workman-Like Construction. Proof of the time of discovery and violation of the implied warranty are not simple matters.  Whether owner or builder, contact a qualified attorney if these issues should fall into your lap.

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Much thanks to my partner Rush Nigut and the professionals at LexBlog for all of the great help in launching this site.  Rush has long written a successful Blawg titled Rush on Business.  In fact, Kevin O'Keefe, the president of LexBlog, Inc. told me Rush's Law Blog has now reached celebrity status.  His knowledge and expertise has been invaluable.  Special Kudos also to our associate Austin Kennedy and his willingness to be a sounding board while we both start our new Law Blogs.  Check out Austin's new Law Blog here:  Kennedy's immigration Law Report.  (The firm is rolling with additional blogs from Matthew Brick - Iowa Lawyer and a Tax Sale Blog by Jim Nervig.)

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