Real estate transactions are time-consuming and often stressful, so we want them to go as smoothly as possible. Sometimes things go wrong, however, and litigation may be necessary due to the value and importance of the transaction. Here are buyers’ and sellers’ most common causes of real estate litigation.
Breach of Contract
Real estate transactions are primarily about contracts, so it shouldn’t be surprising that one of the most common reasons for litigation is a breach of contract. Setting obligations for everything from title clearance to closing dates, so both parties understand their respective responsibilities can minimize confusion. One of the more common types of a breach is when one of the parties backs out of the sale before it is complete. If the buyer backs out, this will usually mean losing their earnest money. On the other hand, if the seller backs out, for example, to sell to someone else at a higher price, the buyer can sue for breach of contract and sometimes even compel the seller to complete the transaction.
Breach of Duty
Real estate agents have a fiduciary duty to their clients, meaning they must act in their client’s best interest. It may breach their fiduciary duty if they have a conflict of interest and don’t disclose this. For example, suppose a real estate agent represents the buyer and doesn’t disclose that they are friends with the seller or have a personal financial stake in the property. In this case, the buyer suspects that the agent’s interest is divided and costing them money.
Failure to Disclose Defects on the Property
If a seller knows or should know about a defect on the property that affects its value, they must disclose that defect to the buyer. There are many such defects, from roof leaks to mold to electrical problems. However, the problem must not have been evident to the buyer. For instance, if there is a five-foot-wide hole in the roof, the buyer probably should have noticed that on their own. Buyers who litigate over failure to disclose defects usually seek to recover the difference in property value.
Real estate’s legal boundaries should be registered with a government office, typically the county commissioner. However, sometimes those boundaries are registered incorrectly. Other times, the “practical” boundary line doesn’t match the registered boundary lines. For example, an owner may build a fence or even a building on their neighbor’s property, believing it to be their property. These mistakes come to light during the sale of one of the properties. Therefore, verifying the parcel’s boundaries is important to the buyer’s due diligence.
California Real Estate Specialists
The best strategy for real estate litigation is to avoid it entirely. However, consulting with one of our real estate attorneys during the buying or selling process can help bring potential problems to light so they can be dealt with in advance. If you are already in a situation where litigation is necessary, our team can help you resolve the matter fairly. Contact us today to schedule a meeting.