Is a neighbor fraudulent when they do not disclose their easement rights to a buyer purchasing an adjacent property?

Facts: A buyer enters into a purchase agreement for a commercial property for their business. Before closing escrow, the buyer discovers an existing neighbor using an easement over the property for service vehicles. The buyer demands the neighbor cease using the easement. The neighbor agrees, but does not discontinue their use of the easement. The buyer observes the neighbor’s continued use and does not discuss it further with the seller of the property or the neighbor. After escrow closes, the neighbor informs the buyer they hold prescriptive easement rights over the buyer’s property for ingress and egress due to their long-term use of the area and seek to prevent the buyer from interfering with their use of the easement.

Claim: The buyer seeks to quiet title to the easement, claiming the neighbor committed fraud since they concealed information and misrepresented facts to the buyer when they agreed to discontinue their use of the easement area, implying they did not hold any easement rights.

Counter claim: The neighbor claims their conduct was not fraudulent since they had no duty to disclose their easement rights to the buyer.

Holding: A California court of appeals denied the buyer’s quiet title action and held the neighbor’s conduct was not fraudulent since the neighbor did not have any obligation or duty to disclose their prescriptive easement rights to the buyer and the buyer did not have justifiable reason to rely on the neighbor’s statement as the buyer witnessed the neighbor’s continued use of the easement despite their previous conversation. [Hoffman v. 162 North Wolfe LLC (July 15, 2014)_CA4th_]

Reprinted from first tuesday Journal Online — P.O. Box 5707, Riverside, CA 92517

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