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Law Educator, Esq.
Law Educator, Esq., Attorney
Category: Legal
Satisfied Customers: 116166
Experience:  JA Mentor -Attorney Labor/employment, corporate, sports law, admiralty/maritime and civil rights law
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Can a city permit issuing a CO for a specific business

Customer Question

Can a city permit issuing a CO for a specific business override a 1 sentence clause in the title from 1967? I own and operate a "Group 1" licensed assisted living facility and have been for 10 years in a residential house. I have the proper CO, Fire Marshal and State permits to do so. I'm trying to sell the business but the bank said that due to this sentence in the title that they will not fund the business, only the house because "even though it's highly unlikely" a third party could sue the buyer of the business having it shut down and they would not get their money.
Submitted: 11 months ago.
Category: Legal
Expert:  Law Educator, Esq. replied 11 months ago.
Thank you for your question. I look forward to working with you to provide you the information you are seeking for educational purposes only.
What is the sentence in the title that is causing the issue?
Customer: replied 11 months ago.
in the Plat record from 1965 there is a paragraph that says "All of the numbered lots as shown on the attached map and plat shall be residential lots and only one single-family residence may be erected, altered, placed or be permitted to remain on any lot. Unless otherwise specifically provided herein, the same protective restrictions and covenants as were heretofore adopted in the plat and dedication of what was designated as ..." The title company reads that as saying that it can only be used for single-family use. But that it not what it states. It is a single-family residence structure. We did not change or. It is still a single-family structure. There is no signage, parking lot or any other sign of what we use this house for. We went to the city have all the proper permits and licenses to operate as a "Group-1" home. The bank, which stepped out of line and without asking for correct information, contacted the city (not everyone you talk to in the city knows what they're talking about) regarding the zoning for this property. The city sent back a letter stating that "this zoning district allows the use of one-family residential (which the structure still is). The city stepped way out of line in stating "a group home is not allowed by right in one-family district zoning. Also the number of staff currently there exceeds what is allowed by our ordinance for both group homes and community homes, Which we are neither actually. In Texas group and community homes are regularly ran by government funded individuals and have different regulations. The bank would have had to give the city our permit # to be able to see that we do have the right and have a legally zoned Certificate of Occupancy from the city to have been able to give the bank a correct answer. Therefore, due to this letter and the misinformation given to the bank and the mistranslation of the plat statement,a sale that was about to close came to a halt.
Expert:  Law Educator, Esq. replied 11 months ago.
Thank you for your question. I look forward to working with you to provide you the information you are seeking for educational purposes only.
Here is the issue, a single family residence means just that, one family. A group home is not a single family and that is what the bank has an issue with and because it is in the plat grant that single family residences only are allowed, someone can still come in and sue to enforce that deed. However, the single family designation is based on USE and while your use as a group home may not be congruent with single family definitions, that is not to say a buyer intending to use it as their actual residence would not meet those restrictions.
The issuance of a CO the city does not typically read the actual deed restrictions, they are simply certifying the premises is fit to be occupied, single family or otherwise. Zoning is also not sometimes the same as deed restrictions which are put in place by the grantor of the deed.
So, the bank is right in that if it is being sold as a group home it puts the bank at risk in the loan because of that deed restriction and opens the new owner up to a lawsuit and you would need to either get an attorney to go to court and sue to try to change that deed restriction or get a ruling that use as a group home is still single family use within the restrictions or you have to consider selling it to a buyer for single family use.
Customer: replied 11 months ago.
Thank you for your reply. Unfortunately it was not anything we had not already heard. There are ways around it. The buyer should have bought the house as a rental property and then obtained a line of credit to make up the difference in the sale price. We will keep the business until a later date.
Expert:  Law Educator, Esq. replied 11 months ago.

Thank you for your reply.

Unfortunately, I do not know what people have been told or know unless they tell me. The problem is that you keep hearing these things because laws are written and pretty much are not going to change no matter who you ask.

I am afraid there is no law to force the bank to loan money to anyone, so they can refuse based on this deed language. Your buyer can go look for other banks, some of the smaller local banks or credit unions are not as strict on these issues and may not care about the deed restriction or not worry about it.