Avoid this Easily Overlooked Mistake in Real Estate Contracts

Chelsea Reinhard

Most Colorado county assessor websites include a warning against using assessor legal descriptions in property conveyance documents. The Jefferson County Assessor’s site warns in bold red font: “The legal description displayed is incomplete and for internal purposes only. DO NOT USE THE LEGAL DESCRIPTION FOR DEEDS and other legal conveyances.” Similarly, the Pueblo County Assessor’s site states, “Legal description as represented below may NOT be sufficient for transfer of property.” These warnings extend to property identifiers, such as tax parcel ID numbers.

Although parcel numbers are not to be used to convey property, Colorado law recognizes the use of parcel numbers “as an aid to identification,” much like a street address, in title documents and certain types of liens. But can they be used in a real estate contract?

In a recent real property dispute, the parties to a contract to buy and sell real estate described the property to be sold in two exhibits: Exhibit A was a list of tax assessor parcel numbers, and Exhibit B was a boundary map of the property depicting land lying solely to the west of an interstate. The two exhibits were generated using mapping software that defines the boundaries of land to be sold and populates the tax parcel numbers believed to fall within the boundary.

But there was a problem. Unbeknownst to anyone at the time of contracting, several of the parcel numbers overlapped with the interstate and included land not subject to sale. Although the contract called for a boundary survey, neither the survey nor the title commitments resolved the conflict.

Instead, using the contract exhibits as a starting point, the surveyor returned a land survey plat matching the map in the contract’s Exhibit B, which also contained the overinclusive legal descriptions for the parcel numbers listed in the contract’s Exhibit A. Both the title commitments and the deeds used at closing contained the overinclusive legal descriptions, although the survey shown to the parties depicted the correct land for sale. A lawsuit ensued when the buyer, pleased with the mistake, refused to return the mis-deeded property and claimed that it was entitled to all the land in both contract exhibits, regardless of any conflict.  This costly result could have been avoided through more careful attention to the property descriptions before the contract was executed.

It is not uncommon for real estate contracts to include property identifiers in the place of legal descriptions, particularly when the sale involves large swaths of rural land. Although Colorado law makes clear that the legal description always controls when an identifier, such as a parcel number or street address, conflicts with or creates an ambiguity as to the land conveyed, C.R.S. § 38-35-122(3), when no legal description is available, an ambiguity can be costly and lead to mistakes. Given the complexity of real estate transactions and legal descriptions, precision is key.

Taking care to identify the property with reference to indisputable boundaries, such as the land “west of the interstate,” can clarify the parties’ intent and avoid mistakes and ensuing disputes. If identifiers are used, including statutory language noting that the identifier is being used “as an aid to identification” only and the legal description is to be determined by survey, title commitment, or both is a best practice that we recommend to further clarify intent.

If you have any questions about real estate matters, please contact your Sherman & Howard attorney.