Got a Problem With Real Estate Counsel?

Beware Time Limits on Legal Actions and Other Rules to Live By

By Alisa Levin, Esq.

In the real estate world, and especially in the world of real estate attorneys, we hear stories from time to time about how issues with a real estate purchase have come up after closing. Common as this may be, what is not so common is the successful suit against an attorney when the homeowner wants someone to blame.  Why? Because. It’s not always the lawyer’s fault. From the trenches of the Windy City, here are some tried and true tips to remember when dealing with attorneys in relation to real estate, in no particular order:

1. Get it in writing.  This is a very important tip – and applies to many kinds of real estate transactions. To get a contract or agreement for legal services so that both parties are on the same page, it is wise to have a contract, engagement letter or retainer agreement that spells out what the lawyer will and will not be doing.  What many do not realize is that for the mere $500 or so fee that an attorney may earn for a real estate closing, they are most definitely not guaranteeing that your transaction will be smooth, that the opposing side will be honest, or that they will review every little piece of paper that goes across the table. Most lawyers are hired to review the contract and assist with reviewing the mortgage. If an attorney does not prepare a document, and has minimal time to review it at closing, it is likely that they cannot be held responsible for ensuring that everything goes in the client’s favor. Best to get it in writing so that parties are clear.  In real estate, agreements must be in writing to be enforceable (in most cases), so it is good form to use the same policy vis-à-vis your attorney.  Just do it.

2. Beware your time limits to initiate a claim against an attorney. In many states the claim would be called “malpractice” and there are often very sensitive time limits that must be strictly followed, often just one or two years.  Be sure of when you can initiate a claim. Also, it matters when you found out about the issue, and whether once you are aware of a claim, if there is any argument or evidence that you should have known sooner.  Time is always of the essence.  Do not sit on your rights and when in doubt, review the situation with a new attorney within a week of your issue.  Time matters.

3. Get and Pay for an Inspection – Always.  The money you spend to pay for an inspection is worth its weight in gold if you find something and to provide you peace of mind if you do not. So many times a client or prospective client wants to cheap out and not have extra expenses when it comes to a purchase, or they have a “friend” check things out.  It is always unwise to rely on friends and associates when dealing with such a matter, because the opinion is not unbiased, and often when you are dealing with a friend or “trusted colleague” you are not in reality getting the best service.  Ever heard of the saying “we hurt the ones we love?” Well it applies most conveniently when you do business with friends. Do not trust the largest purchase of your life (or your quarter) to your friends.  Hire an independent, licensed and insured inspector. Having knowledge is power, and knowing when to fold is very important.  You will never be able to make a wise decision in real estate if you do not have all the facts.  That applies EVEN WHEN you are a real estate professional.  Hire a third party to independently and in an unbiased manner, inspect your prospective purchase.  Not only that, but your lawyer doesn’t care what is wrong with the property and we will assume in most instances that you know what you are getting into. Since most closing attorneys do not get paid enough to put their bodies across the closing table to try to stop the deal, do your own homework and do not leave it to others to find what you should find yourself. 
   
   
4. Know Your Local Customs and Rules for the Jurisdiction You Buy In. I don’t know why or how this happened, but there are some states that do not use attorneys for real estate transactions, and the parties in those places rely on the representations and advice provided by realtors, title agents and lenders.  Although I think this is one of the most foolish things a person can do in real estate, it helps as an overall rule of thumb that you do not assume that what happens in California is what will happen in Illinois, or Arkansas. State customs in closing transactions vary by locale and some are requirements and others are just tradition.  It makes sense that you be aware of tax prorations, if closing means signing papers and paying money later, if everything is done at once, or if you have certain fees applied to your side of the transaction.  In most instances the fees are not negotiable so it is a good idea to familiarize yourself with typical closing costs, even on cash deals. There is always a fee you didn’t think of and at the closing table your lawyer will not likely be able to get you out of standard fees and costs.  Inform yourself.
   
   
5. Print Out All Papers and Correspondence.  I cannot tell you the number of times people to look back at something in a file and they could not readily find an email or document. It happens to the most professional of people, lawyers, clients or friends.  Whenever you are engaging in any kind of real estate transaction (be it a purchase, eviction, lease or other agreement) the circumstances surrounding how the parties came to reach a deal may be very important later if litigation arises.  Lawyers (and judges) hate making assumptions, and they know well that clients cannot be relied upon for their memories.  If it happened in writing, print it out.  Every time, every file. We know it’s a pain and trees are cut down.  As long as something is worth typing, it’s worth saving when it comes to real estate. However you keep it I promise you if the time comes to ask for it, you will be glad you did. 

All in all, most if not all problems can be avoided with good communication, investigation, documentation and patience.