The Common Causes of Real Estate Litigation
Even with careful planning and the guidance of a real estate attorney, you may face a legal dispute regarding a property transaction. Many US businesses use litigation to solve problems, and the real estate market is no exception. Each state has unique laws that apply to real estate lawsuits which require hiring an attorney who is knowledgeable in your area. Buyers and sellers, agents and brokers, contractors, property inspectors, tenants, and landlords will use litigation to pursue their legal rights if they perceive they have been wronged. The following are the most common causes of real estate litigation.
Breach of Contract
A real estate sales agreement is a contract signed when you settle on a property. Both parties to the contract must comply with its terms and conditions or face potential litigation if there is no way to resolve the dispute out of court. The contract provisions typically include title clearance, financing, the closing date, and any additional assets considered part of the property purchase. Failure to follow the terms of the contract may result in a lawsuit for breach of contract.
Reading your real estate contract carefully is crucial because additional contingencies and other wording may be required to protect you. A real estate lawyer will look beyond a boilerplate contract many real estate agents employ and identify any red flags that may hurt your transaction. Identifying and negotiating issues before the contract signature is infinitely better than being trapped in a contract with unfavorable provisions.
Failure to Disclose a Property Defect
In most US states, a seller must disclose all known defects that may not appear evident and can affect the property’s value. Should the buyer discover a previously undisclosed defect after closing on the property, they may pursue legal action against the seller.
This issue can be tricky to prosecute as the purchaser needs to prove the defendant (seller) was aware of the defect or should have known about it and yet purposefully concealed the information. Examples include:
- Mold in the walls
- Plumbing leaks
- Holes in the roof
- Rodents or insects
- Improperly or never permitted property improvements (through a homeowners association or local government)
Breach of Duty or Negligence
A real estate agent has a legal obligation to act in their client’s best interest, not personal interests or that of a third party. All sensitive information about their client’s finances and negotiating tactics must be confidential. Real estate agents must also serve their clients to the best of their abilities. The agent is responsible for negligence resulting in a client’s financial loss and any other damage.
The agent also must disclose any information that can benefit the client. For instance, a real estate agent who knowingly sells a property to a client with a defect without informing them to get a sales commission is in breach of duty or negligence. The buyer has the legal right to file a lawsuit against the real estate agent.
There are some cases where property boundaries are incorrectly registered. Real estate litigation will often result when the owner’s defined property line is inconsistent with the legally registered property line.
Classic examples of boundary disputes can include an inaccurate fenceline or a tree that may require removal. Knowing the legal boundaries ahead of the contract signature can prevent a potential lawsuit.
Specific Performance Failure
Real estate lawsuits often involve one party’s failure to perform the contract’s obligations. Whether it’s a commercial or residential real estate contract, if you neglect to perform a necessary obligation, the other party has a legal right to sue for specific performance failure. The lawsuit may force the individual to comply with the contract’s terms.
Suppose an individual is unable to comply with the obligations of the contract. In that case, they may have their real estate attorney propose another course of action to satisfy the claimant and avoid litigation — incidents of specific performance failure concern the contract’s language requiring compliance, including contingencies.
These subjects are some of the most common causes of real estate litigation. Still, litigation ranges from disputes relating to contracts for the purchase or sale of real property, brokerage/commission agreements, licensing and titling issues, eminent domain actions, commercial landlord-tenant disputes, and other types of title insurance disputes.
If you are planning on purchasing or selling real estate, it is wise to retain a real estate lawyer to protect you legally throughout the process and work with your real estate agent. If you are in a real estate dispute, your attorney will ensure your legal rights are conveyed and protect your interests in any ensuing litigation. If you’d like to discuss ways we can help, please contact our Chicagoland office at 630-568-6656.