May 6, 2014
by Ron Scott & Reggie Corley
Scott Law Firm, P.A. – USFN Member (South Carolina)
In a recent South Carolina Court of Appeals decision, the court held that a real estate closing attorney could not be held liable, as a matter of law, simply because he relied on a title search performed by another attorney that failed to discover unpaid real estate taxes and a subsequent tax sale. [Johnson v. Alexander, App. Case No. 2011-196007 (S.C. Ct. App. Mar. 19, 2014)].
In the Johnson case, the purchaser hired Attorney A to close a purchase transaction. In turn, Attorney A hired Attorney B to perform a title search of the subject property. The court of appeals said that the standard of care for an attorney conducting a title search on property is different than the standard of care for a closing attorney who relies on the title search performed by another attorney. The court held that the past-due real estate taxes and the subsequent tax sale — all of which were available to the attorney searching title in the county records — would be the correct focus for determining the liability of the attorney who performed the title search. However, the court felt that in order for the closing attorney to be liable, his reliance on the second attorney’s title search results or his decision not to perform the title search himself must be shown to have been negligent.
In reversing the circuit court’s decision and remanding the case for trial, the appellate court specifically declined to address the issue of whether or not, and under what circumstances, an agency relationship exists, as a matter of law, between a real estate closing attorney and a person performing a title search under the real estate closing attorney’s direct supervision.
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