Buyers' Remedies When the Acreage Purchased is Less than Represented
In Tennessee, it is not highly unusual for a buyer to discover, after buying a piece of property, that it contains less acreage than was represented in the deed. For example, a buyer’s deed might state the property contains 22 acres “more or less” or 22 acres “approximately” after giving a legal description of the land. After buying the property, our hypothetical buyer might have a survey done which reveals that the property actually consists of only 18 acres.
Under Tennessee law, what are the chances that this buyer can recover part of the purchase price or rescind the contract altogether and recover the entire purchase price? In most cases, the answer is that the chances are not very good. This is not to say that a buyer cannot ever be successful in receiving a partial refund or rescission. Rather, that pessimistic opinion applies primarily to transactions in which property was sold “in gross” and not by the acre.
In simple terms, a sale in gross occurs when the purchase price is based on a lump sum for land, the location and boundaries of which are described, rather than a price per acre. Sales in gross account for most real estate transactions.
Where a sale is in gross, a seller is not liable for any deficiency in acreage unless the buyer can show that the seller acted fraudulently or made such a substantial mistake that fraud should be inferred. The rationale is that when a seller provides the property boundaries, the buyer is free to have their own survey done to verify the acreage.
This rule is both sensible and fair. It is, therefore, critical for buyers to obtain surveys before closing a sale of real estate, especially for larger tracts in less urban areas. In fact, I would recommend a survey even for a small, improved tract in an urban setting. From experience, I can say a survey is well worth the money. In many ways, it is like an insurance policy.
The modern seminal case on this issue was decided by the Supreme Court of Tennessee in 1980 in Vaughn v. Ray. In that case, the buyers’ deed described the property and represented it to be “25 acres more or less.” After closing, a survey revealed the land was only 13.63 acres — a deficiency of more than 45%.
The Court of Appeals found that the buyers were not entitled to any relief. However, the Supreme Court reversed, holding that two facts established fraud by the seller. First, the deficiency was so large that fraud could be inferred. Second, there was evidence that the seller knew the county tax rolls listed the property as 14.6 acres.
The outcome in Vaughn is the exception, not the rule. Three cases decided since support this conclusion. In Gottschall v. Fenn (Tenn. Ct. App. 1986), relief was denied to a buyer where property described as 16 acres “more or less” consisted of only 11 acres. In Goolsby v. Stephenson (Tenn. Ct. App. 1988), relief was denied where the deficiency was 15.86%. In Bridgewater v. Adamczyk (Tenn. Ct. App. 2013), buyers were denied relief where the deficiency was 20%.
Even in a pre-Vaughn case, Evins v. Price (Tenn. Ct. App. 1971), relief was denied where the deficiency was 37%. Importantly, in Evins, Goolsby, and Bridgewater, the courts noted that the buyers had not obtained surveys before closing.
Two final points are worth noting for real estate litigation practitioners dealing with acreage deficiency cases. First, it is doubtful that title insurance will cover such a loss, as most policies exclude defects that could have been discovered by a survey. Second, the outcomes of all cases — particularly fraud cases — depend heavily on their unique facts.
Despite the general trend against recovery in these situations, it is still possible for a buyer to obtain relief, even when the deficiency in acreage is relatively small.