A seller signed the contract, then leased the timber rights to a logging company the next day before the assignment closed.
The parcel was 47 acres in a county where timber rights run with the land unless severed by a recorded instrument, and no severance was recorded, so the lease was binding on any buyer. The end buyer's attorney caught it four days before the assignment was set to close and called to say the deal was dead unless the timber lease was extinguished. The seller's position was that nothing in the purchase contract prohibited him from encumbering the property between signing and closing, and technically, on the face of that contract, he was right, because nobody had written a clause preventing it. The clause that would have controlled the outcome is a covenant against further encumbrances between the effective date and closing, sometimes called an interim covenant or a no-further-encumbrance provision, and it is standard in residential purchase contracts because title companies pushed for it, but land wholesale contracts written by investors frequently omit it. The assignment fee was 11,400 dollars. The end buyer walked. The seller was not wrong that the contract did not forbid it, and that is the entire problem. The logging company had a five-year lease, so the parcel was not worthless, but the buyer pool for a 47-acre tract already under a timber lease is a fraction of the general rural land buyer pool, and repricing to move it meant giving up most of the fee. What the contract needed was one sentence: seller shall not execute any lease, license, easement, lien or other encumbrance affecting the property between the effective date of this agreement and closing without buyer's written consent. Does your current land contract have that sentence, and if so, does it specify what remedy the buyer has if the seller violates it before you can assign?
