Real estate issues that require litigation differ as to the stakeholders vary and the interactions involve various policies and laws. The most common point of dispute is a real estate contract. A real estate contract guides the parties involved in the sale of property and transfer of title to the property. In some cases, the contract is unclear, which leads to a dispute. A real estate lawsuit generally results in an award being issued for damages caused by one party.
Common Real Estate Litigation Disputes
Other examples of real estate litigation include:
- Property defects that a seller failed to disclose.
- Mortgage issues.
- Real estate agents.
- House foreclosure disputes.
- Real estate contract penalties.
Real Estate Contract
When parties come together in a binding contract, the terms of the contracts are to be adhered to without fail. In common cases, these terms may seem unfavorable to one party, leading to a breach of contract. This forms the leading issue in real estate litigation. A real estate contract includes details such as property sale, title clearance, and other specifics. In the case of a breached contract, the offended party or plaintiff has the burden to prove that they have fully adhered to their contractual obligations whereas the other party failed to fulfill their obligation.
Having succeeded in proving that failure, the offended party is then eligible for compensation for losses incurred, resulting in the breach of contract.
It is advisable to have an attorney review a contract before entering into an agreement. This enables both parties to better understand all provisions of the contract and avoiding a breach of contract later.
Failing to Reveal Property Defects
Real estate sellers/brokers have an obligation to make clients/buyers aware of any defects that exist or affect the value of the property. Upon discovering an undisclosed defect in a property, a buyer may be entitled to sue the seller for failing to reveal defects in the property during the selling stage.
A case of failure to disclose defect requires the offended buyer/plaintiff to prove that the defects were known or should have been known to the seller/defendant prior to sale and that the seller intentionally failed to disclose them to the buyer. It is advisable to have a property maintenance or surveying consultant accompany a buyer to view a property before purchase as this helps buyers identify defects in a property that a buyer, who lacks the expertise, can identify.
Real Estate Agents
Buying or selling a home is often the biggest financial decision people make. Whether you are a first-time homebuyer, looking for a second home, or need to sell property, you will likely hire a real estate agent. When you hire a real estate agent, he or she enters into a kind of legal relationship known as a principal-agent relationship or the “agency relationship.” This relationship imposes on real estate agents a legal duty to act on behalf of the client (known as a “principal”), requiring the agent to act in specific ways.
The agent must act with your best interests in mind and cannot use their position to better their interests, nor the interests of their friends, co-agents, or business partners. This legal obligation is known as a “fiduciary duty.” The agent typically learns sensitive information about the principal, such as personal financial details. Agents have an obligation to keep such information confidential, not revealing any potentially damaging details.
Agents work on the principal’s behalf and are obligated to follow all instructions or wishes. In general, your agent has to do what you say unless your instructions violate the terms of a contractual relationship you have with the agent (or otherwise violate the law). For example, the Fair Housing Act is a federal law that prohibits certain types of discrimination when people buy or sell homes. Under this law, homeowners are not allowed to refuse to sell a home to someone based solely on specific factors, such as race, religion, family status, or disability. So, if you hire an agent to sell your home and tell that agent not to sell to people with children, your agent does not have to follow your instructions, and the refusal to follow those instructions does not violate the agent’s duty of obedience. Otherwise, agents have to follow your instructions during the course of the relationship.
Agents must be candid and disclose to you – information that furthers your interests. Also, agents cannot use their experience, knowledge, or insights to your detriment. For example, agents cannot keep secret the identity of potential buyers, nor can they keep negative information about the property from buyers in an attempt to make a sale and earn a commission.
Agents have to be competent and must act with care and diligence when representing their interests.
Real estate agents that fail to fulfill these and more of their duties as expected find themselves on the wrong side of the law.
House Foreclosure Dispute
In real estate, foreclosure of a house by an agent or the owner may be required. House foreclosure is protected by law and in most cases, filing a case to delay or prevent foreclosure is not advised.
Real Estate Litigation Legal Aid
The law applies to all, and stakeholders in real estate are no exception. Any person that finds themselves in a real estate dispute requires professional legal aid and a trusted attorney to ensure the dispute is resolved according to the law.
A real estate attorney is best equipped to handle real estate documents and understand them in relation to the law. The documents include the transfer of title and property documents as well as purchase agreements. The real estate attorney offers the client legal guidance and equips the clients with legal knowledge when in real estate engagement.
Legal knowledge in real estate is essential in making key decisions for real estate stakeholders.
Purchasing of a Home
When one decides to buy a home, they deal with an intermediary broker who conducts negotiations between the buyer and the owner before reaching an agreement. The buyer, in this case, is advised to have legal advice while engaging in negotiations to ascertain that what they hear and what they say is clear and not legally binding in a negative manner.
The buyer is served with a contract and agreement to review and sign before the purchase of the house. The contract is a binding agreement and requires the buyer to fully understand the terms and provisions of the agreement. As this is a legally binding document, some terms and provisions are best explained by an attorney. Taking for granted the need for legal aid in this stage may put you, the buyer or the seller, at great risk.
In the case where the broker does not offer a contract, they tie themselves as liable to cater to their commission in case the sale does not happen. There also are agents that use standard forms with provisions that they hardly understand and this, for a buyer, costs more than not having a legal review of a contract before signing it.
One does not have to hire a full-time lawyer as this is costly to some. Real estate attorneys are available on a consultation basis.
Upon agreeing to purchase property, the buyer enters into an agreement with the seller. That agreement is a reflection of the buyer and seller’s desires and may include:
- If changes to the property are lawfully made.
- If the buyer is legally allowed to make changes to the property.
- If the buyer finds the property contains harmful material, action to be taken.
- Liabilities in case the buyer fails to purchase the property.
If you are purchasing property, it is advisable to establish the position of the seller’s title (i.e. whether or not the seller actually owns the property, whether any liens on the property exist). This search called a “title search” is ordered by an abstract or insurance firm.
Once the title search is provided, the attorney reviews and provides advice in line with the title policy. Title insurance is not mandatory in all jurisdictions and, therefore, the title search should be reviewed.
Having completed the title search, the buyer then decides whether he or she wants to purchase the property.
The buyer completes payment for the property. This closing of the sale process is complex for most buyers as well as sellers and may require the assistance, at closing, of an attorney.