This one’s a bit of a long one but I’ll try to condense it. I bought a home just over two years ago as a conventional purchase. Everything went smoothly, even had the escrow time condensed at the seller’s request. Fast forward to a year later (2023), we get a letter from the city accusing us of breaching a low-income covenant. The seller was under a restrictive covenant that they failed to disclose to us, the title company, the lender, and my real estate agent (who was the selling agent). Now the city demands we return the home to a low-income status or sell it to them at that price. The city has sued all parties involved, and the seller has filed for bankruptcy. We are protected by title insurance and are represented by an attorney. I don’t know how this will end, but I expect to be compensated. I’m concerned about being lowballed and want constructive advice on what to expect from the attorneys representing us.
Why do you assume you’ll have to sell the home to the city? Did the title company or a lawyer tell you this? Why didn’t the title company catch this covenant? Was it recorded?
I doubt you’ll end up out of the house. If the house was sold under a low-income program, there should have been a covenant on the deed. The city seems to have failed to ensure that covenant was recorded, which isn’t your problem.
This is a title issue, and the key question is ‘whose fault is it?’ It sounds like it might not only be the seller’s fault. You have title insurance, and they’re responsible for resolving this.
Thanks for the detailed response! The covenant was vague on the title report, and I missed it. I just want to resolve this without losing my home.
In similar cases, the city usually doesn’t come after the buyer. They might pursue the seller or other parties involved. Keep us updated!
Your situation is unusual, but similar cases happen. Researching past cases might provide useful insights.
I believe a title claim will make everyone whole, and you won’t be forced to move. I’ve never seen that happen in my experience.
The seller filed for bankruptcy after selling for more than they paid? That’ll be interesting in court. Just get a lawyer to sort out the liability.