Ep 103: When Should You Hire A Real Estate Attorney?

When it comes to commercial or residential real estate, most people readily understand that a real estate agent’s services will be required, but in many cases it may also require those of a lawyer. When it comes to the basic building blocks of buying or selling a property as set forth by the Texas Real Estate Commission, agents are well positioned to care for clients. However, in the event that a unique circumstance should arise such as a dispute, title issue or easement, a real estate attorney can be an individual’s best bet.

Why People Need a Real Estate Attorney?

In many cases, a real estate agent will help a party look for property and communicate and negotiate an offer on that property. From there, on the buyer’s behalf, a title company will examine real property records to ensure the seller indeed does own the property and that there are no liens, judgments, or clouds to the title on the property lasting after the close of the transaction. A lender also normally becomes involved and will draft the appropriate documents.

With a realtor, title company and bank lined up, a real estate deal has most of the right players in place. Still, when what was thought to be a small, standard purchase develops a complication with the transaction or the base use of the property, a lawyer’s knowledge is needed to provide guidance for that real estate deal.

There are three main considerations of real estate that can account for a rather large percentage of real estate deals, including:

  1. Who is the owner? Who has title to the property? What rights do they have and what type of restrictions are there on those rights?
  2. Property use. Who uses the property? Is a tenant? Is it somebody who is in possession? Is it someone who has an easement in the property? Is it someone that has no authority to use it but is using it anyway and may have been using it for a long time and have acquired some rights by doing so?
  3. Are there mortgage liens? Are there tax liens? Are there judgment liens? What is it that would cloud the title and ultimately give someone else the right to foreclose upon the property by having a foreclosure sale?

 

The 7 Most Common Situations in Which a Real Estate Attorney Is Needed

The real estate industry is vast, and with it can come many issues that require the assistance of a knowledgeable attorney in the industry. The seven most common situations in which a real estate attorney is needed include:

  1. Title to real estate
  2. Borrowing of money
  3. Possession of property
  4. Border disputes
  5. Oil and gas issues
  6. Title/possession/ownership dispute
  7. Earnest money contract cases

Title to Real Estate

This area of real estate involves who owns the property. A title company can be instrumental in ensuring a buyer, lender, or borrower that is pledging a piece of property as collateral is indeed the right person signing the deed of trust and the note. It is critical to guarantee that the seller is the person who owns the property and has the ability to sell it. Unfortunately, this is not always as clear cut as one would think.

When a title company issues a title commitment or title report, it ensures that the title is claimed to the property in question and that the buyer is getting a good title and the lender is getting a good lien on the property. This is then generally followed by a list of exceptions that may concern city ordinances that could restrict the use of property. It may also include deed restrictions from homeowners’ associations. Sometimes it may be possible to find a lien or someone who has rights to a property because they had a lien on it or a fractional interest.

Without a lawyer to look at easement issues, there may be someone who buys a property who discovers an easement that keeps them from using the property the way they intended. In cases like these, navigating real estate title issues can be a challenge that requires a successful real estate attorney.

Borrowing Money

Real estate is pricey and is generally one of the most expensive things an individual will ever buy. Most people do not have enough money to buy real estate upfront, so then the property can be used as collateral to borrow money to purchase, improve upon, or build on the property.

As long as the property value is solid, the property can also be used to finance other things. This typically happens by a lender such as a bank or a mortgage company working together to determine a property’s value and then using a formula to establish what percentage of the value will be lent. From here, legal documents will be drafted, such as loan agreement, promissory note, deed of trust, etc.

In these documents, it is common for borrowers to make  promises about what they will do with the property and how they will make payments. This also typically includes an understanding about maintaining insurance and taxes as well as that the property can be foreclosed upon if payments are not made. Businesses may have additional requirements for loans.

A real estate attorney can be instrumental in reviewing and drafting paperwork as much of this will go well beyond the realm of general real estate but is still part of the transaction.

Possession of Property

Although tenants are expected to pay rent, sometimes they do not, and then demands are generally made of the tenant. If those demands are not met, they may eventually be evicted.

In many ways, the coronavirus pandemic put a spotlight on landlord and tenant issues related to possession of property issues. For example, even if a tenant is not forced to be evicted during an unprecedented event like a pandemic, landlords are still usually on the hook to pay the mortgage. This in turn strained families with rental houses or properties who had to then pay the mortgage without any help from their tenants.

While it may be possible in some standard cases to evict someone without the help of a lawyer, many find legal counsel necessary when it comes to the related court proceedings, filings, and notices.

Border Disputes

Border disputes are another area of real estate where an attorney’s help is welcome. The main issues in this particular area can be a dispute over something like determining who owns a fence or how to navigate properties with zero lot lines.

While most attorneys will advise against purchasing a property with a zero lot line because it can create a bevy of problems, if a party should find themselves in this exact situation, they will likely need a lawyer to help them successfully navigate it.

Oil and Gas Issues

Texas is an oil and gas state, so it is not uncommon to have issues with old pipeline easements that may or may not still be good. This can be an especially sensitive issue when it comes to properties as it is possible that a party that owns the surface of the ground is different from the party that owns the minerals below the surface.

In other words, if an individual owns several acres of land and has surface rights, they may have to allow people owning the mineral rights to be able to drill down and get oil or minerals.

Some good advice can be not to buy a property that someone can put a rig on and then drill for oil in your backyard. However, if this is a situation you are already currently in, finding help from a lawyer with real estate knowledge is essential.

Title, Possession, or Ownership Dispute

This type of dispute can be straightforward, but in other cases, it can be much more complex, such as situations with a trust or a recently passed property owner, an incapacitated owner, or heirs that are dealing (or not) with a will and probate.

These situations take quite a bit of legal work to definitively determine ownership, administrators, and work with lenders who want to foreclose upon the property. An experienced lawyer will know how to best streamline the process and have a title company to get the proper sign-offs on family agreements and court rulings.

Earnest Money Contract Cases

An earnest money contract is generally between a seller and a buyer for a property. The buyer will put down some earnest money and open up a title. The problem can come if both parties do not show up to closing because something has happened that caused one of them to change their mind.

Many people mistakenly consider an earnest money contract is a cocktail napkin type of agreement in that it is not serious. In reality, earnest money contracts are enforceable and can require an attorney to step in.

If one or more parties tries to break free of an earnest money contract, some in the industry may advise to simply release the property and sell it, allowing the buyer to move on to something else. However, in the case that a buyer wants the property and wants to enforce that earnest money contract, a lawyer’s assistance is needed. Although an agent or broker can assist with certain aspects of real estate, a dispute like this typically requires legal action and therefore the expertise of an attorney.

For more information about real estate law issues, consider going beyond the resources of a realtor to also include the proficiency of a high-quality real estate attorney.