34.1 Title Opinion

(a) A title examiner must be careful to disclaim in his/her opinion any coverage as to the applicability or effect of zoning, subdivision, or building codes or regulations, whether state, county or municipal, which govern the use and occupancy of real property, since it is settled in Georgia that such matters do not implicate the locus or quality of title. Comment: Title insurance companies operating in Georgia are not permitted currently to issue insurance as to such “zoning matters,” broadly conceived. Hence, title opinions should not refer to “zoning matters” as exceptions, just as, properly speaking, “zoning matters” do not constitute “exceptions” to the coverage of title insurance in Georgia.

(b) By reason of the confusing similarity between “title matters” and “zoning matters,” any attorney representing a purchaser or lender in connection with a real estate transaction, including, where applicable, the examining attorney, should point out that notwithstanding the absence of restrictive covenant or easements or other private “title matters” imposing use limitations on property or set-back requirements, such limitations may still exist as a result of public “zoning matters.”

Comment: Even if a survey relied upon by an examiner ostensibly reveals that a building violates a “zoning” set-back line, the examiner may currently ignore the conflict on the theory that “zoning matters” are not title matters, and, besides, the structure may be a “grandfathered” nonconforming use or the beneficiary of an official “variance,” etc. Examiners may continue to certify such titles as marketable provided that the foregoing disclaimer is clearly made.

The complexities of zoning law, including state and local procedural requirements and “standing” limitations on who may challenge substantive and procedural defects in zoning enactments, mean that any effort by the Bar to lower the theoretical barrier between “title matters” and “zoning matters” will open Pandora’s Box. Even so simple a step as requiring a zoning status report on the property from local officials may be very difficult and timeconsuming, especially in smaller jurisdictions, and unreliable, even when readily available.

Cf. Corey Outdoor Advertising, Inc. v. Atlanta Board of Zoning Adjustment, 254 Ga. 221, 327 S.E.2d 178 (1985). The universal doctrine of “grandfathered” nonconforming uses would assure a predictable number of false “positives.”

One of the best protections may be an express warranty in the purchase contract as to zoning status, coupled with common sense and careful inquiry with local zoning, planning and building department officials.

As a “legislative enactment,” local zoning and subdivision laws import notice to all the world, so that both the buyer and seller of land are “presumed to know what zoning regulations do or do not permit.” Sachs v. Swartz, 233 Ga. 99, 102-103, 209 S.E.2d 642 (1974); Gignilliat v. Borg, 131 Ga. App. 182, 183, 203 .E.2d 479 (1974); Maloof v. Gwinnett County, 231 Ga. 164, 200 S.E.2d 749 (1973); Flannigan v. Clark, 207 Ga. 345, 61 S.E.2d 485 (1950).

Moreover, a general warranty of title in deeds in Georgia, as codified by O.C.G.A. Section 44-5-62, which otherwise encompasses the grantor’s right to convey and the absence of encumbrances, does not extend to “zoning matters.” Barnett v. Decatur, 261 Ga. 205, 403 S.E. 2d 46 (1991), reversing Decatur v. Barnett, 197 Ga. App. 459, 398 S.E.2d 706 (1990). By “zoning matters,” the courts refer not only to traditional zoning regulations, but also subdivision regulations and analogous land use and building restrictions. And neither zoning, subdivision, or building restrictions that theoretically limit future activity on property, nor active and on-going zoning or subdivision violations that prohibit the current use, existence, or conveyance of a parcel of land constitute a title “encumbrance” that triggers a breach of the warranty of title. Id.

By the same token, however, such “zoning matters” do not constitute a title defect requiring written notice under the standard “title examination” paragraph in purchase contracts. Accordingly, where a seller expressly warrants that property will be zoned in a certain fashion, that warranty (Which is equivalent to a guarantee that the property either is appropriately zoned now or will be appropriately zoned by the time of the closing) will support a subsequent rescission of the sale, notwithstanding a failure to list such “zoning matters” as title defect.. See Sachs v. Swartz, supra, 233 Ga. at 102-103.

Of course, the presumed knowledge of the contents of the zoning and subdivision regulations has generally involved facial issues, such as the zoning classification of property, e.g., whether it is residential or commercial, rather than more discrete administrative issues, involving application of the finer points of a zoning or subdivision regulation to a particular property. Where a broad issue (like that of the applicable zoning classification) is in dispute, the courts find that, notwithstanding the seller’s representations and assurances as to the zoning classification, the buyer may not justifiably rely thereon because the means of knowledge are readily at hand and equally available to both parties. See, Hill v. Century 21 Max Stanzel Realty, Inc., 187 Ga. App. 754, 371 S.E.2d 217 (1988). But where a seller has some “special knowledge,” which pertains to how the local zoning, subdivision, or building regulations apply to his property, then passive concealment thereof may well constitute actionable fraud. Wiederhold v. Smith, 203 Ga. App. 877, 418 S.E.2d 141 (1992).

In Wiederhold v. Smith, the Court of Appeals found that there was sufficient evidence to support a jury verdict of fraud, where a seller sold a home within a subdivision knowing that the local Public Works Department had placed a hold on the lot because of subdivision problems which necessitated an expenditure of roughly $34,000.00 before a home could be constructed. In short, there is “an exception to the general rule of caveat emptor in cases involving passive concealment by the seller of defective reality.” 203 Ga. App. 879. As a result, a seller has a duty to disclose regulatory defects here he or she has “special knowledge” not apparent to the buyer and where the buyer is acting under a misapprehension as to the facts which would be important to the buyer and would probably affect his decision to buy— even where the information is located “in a file that is open to the public,” since such regulatory problems are not disclosed by the deed records, and it is “not common for potential buyers of lots to ask to see the files maintained in subdivisions . . . before purchasing property.” Id.