“Life, liberty, and the pursuit of happiness” is a well-known phrase in American history. For many people, homeownership is a part of that happiness mentioned to the point that it’s become synonymous with the “American Dream.” While Thomas Jefferson’s words were heavily influenced by those of prominent British philosopher John Locke, there is one important omission. In Locke’s Two Treatises of Government, he lists “natural rights” that included “life, liberty, and estate.” Estate, of course, meaning property.
So why the change from “estate” to “the pursuit of happiness?” It’s a mystery that many historians argue over, but one thing is clear: homeownership is not a guaranteed right in the United States constitution, and one case, in particular, demonstrates how protecting property rights isn’t the responsibility of the courts or local governments but up to the due diligence of each homebuyer.
Homeowner sues Pennsylvania Judge
In 2007, Xi El By Grace bought a property after visiting RCS Title A Agency with the prior owner and was given verbal confirmation that no delinquencies or encumbrances were recorded on the property. The title agent prepared a deed with Grace as the new owner, and Grace proceeded to file it with the Philadelphia Department of Records and Deeds. She did not purchase a homeowner’s title policy.
Three months later, Grace received notices of unpaid taxes and water bills, and foreclosure proceedings for the unpaid bills commenced shortly after.
In her civil complaint, Grace names several judges including Judge Idee Fox, who ruled against her, presumably, in the foreclosure proceeding and claims that the judges and the court of common pleas have failed a fiduciary obligation, but they failed to protect Grace’s constitutional right to “life, liberty, and property.” Additionally, she argues that the city is at fault for recording the deed if the deed was not free and clear and refers to the chairwoman of the tax revenue board without clarifying the offending action taken by that individual.
The claims against the judges, the Philadelphia County Court of Common Pleas, and the Philadelphia Tax Revenue Bureau were dismissed with prejudice.
According to a review of the case, Grace’s claim that the judges violated a constitutional oath to protect her life, liberty, and property was flawed and insufficient to reverse the foreclosure process. Also, the claims were barred by the Rooker-Feldman Doctrine, which establishes federal district courts have no jurisdiction over suits that are “essentially appeals from state-court judgments.” It goes on to say that this case had all the required elements to apply the doctrine including “ cases brought by state-court losers  complaining of injuries caused by state-court judgments  rendered before the district court proceedings commence and  inviting district court review and rejection of those judgments.”
Due Diligence is required by homebuyers
Although in Grace’s case she asked about liens and encumbrances on the property, she didn’t receive this information in writing, request a title search, or purchase title insurance to protect her interests in the property.
The fact is that while owning property may be part of many Americans’ pursuit of happiness, there is no constitutional guarantee to homeownership.
Grace’s claims that any city or county recorder is at fault for recording a deed on a property with encumbrances or errors is wrong. There is no law or regulation requiring clerks of the court to review a document they record for accuracy, veracity, or other issues that may create a cloud on the property. In fact, this lack of oversight in the recording process is exploited by criminals to steal people’s property with fake deeds.
If homebuyers want to protect themselves, they must do their homework on a property. Some ways that a homebuyer can exercise better due diligence include:
- Get information in writing. It’s not enough to rely on the word of a manager at a condo association, previous homeowner, or even a municipal worker. Get the proper paperwork to back up the verbal confirmations.
- Get the right waivers. Mechanic’s liens attached to the property like tax and utility bills whether you hired the contractor who did the work or not. If you think or know that work was recently done on the home you’re purchasing, ask about getting a lien waiver signed by the contractors involved.
- Get title insurance. It’s not the responsibility of the county recorder to verify any documents, including deeds. Errors in the public record is a common type of title defect that title agents help clear before someone purchases a home.
- Get a lawyer. While real estate agents can offer some valuable information, they can’t give you the same legal counsel that an attorney can. The closing agent, loan signing agent, and other professionals at the closing often act as neutral parties, so hiring an attorney will ensure that you have a professional with the legal knowledge to protect your interests.
Barriers to homeownership
In addition to the burden of due diligence placed on homebuyers, housing affordability is at an 18-month low due to lack of supply, stagnant wage growth, and now, the staggering unemployment rate. While the latest numbers from the Bureau of Labor Statistics show a decline to 10.2% from the initial spike brought on by the COVID-19 pandemic, it still means that 16.3 million people are out of work.
Without steady paychecks, the pathway to homeownership is more difficult. According to the National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI), 59.6% of new and existing homes sold between April and June of 2020 were affordable to families with a median income of $72,900, down from 61.3% of homes sold in the first quarter.
Even though mortgage rates have declined significantly, they can’t make up for the jump in purchase prices for the paltry number of homes available, pricing out millions of renters who can barely afford other necessities.
Underneath the steady housing market recovery, another national housing crisis is brewing. Renters are more likely to be one of the millions currently unemployed, and while the CARES Act has protected many of them from eviction during the pandemic, those protections run out on August 24th. Those unemployed renters have also lost the additional $600 a week in federal unemployment benefits from the CARES Act, and many are still waiting on state assistance. Unless the protections are extended, a new relief package is passed, or states step up, it’s estimated that 30-40 million people are at risk of being displaced by the end of the year.
The Department of Housing and Urban Development announced that they will extend a ban on eviction and foreclosures on homes insured by the Federal Housing Administration through the end of the year. However, Diane Yentel, president and CEO of the National Low Income Housing Coalition points out, the action is “practically meaningless” as the limited number of renters affected by the measure were already covered under an existing law that requires renters in FHA backed homes to be given a 90-day notice to vacate.
Even before COVID-19, the economics for renters were bad. Nearly 25% of renters were spending over 50% of their monthly income on rent (more than 30% is considered rent-burdened). For renters below the poverty line, one in four were spending over 70% of their income on housing.
While a legal argument can be made that homeownership isn’t a constitutional guarantee, the pandemic has exposed some harsh truths about who gets to pursue the American dream and who doesn’t.