Real Estate Transactions 1

An attorney should not be required to facilitate the real estate transaction.

However, the use of an attorney may be extremely useful when certain conditions exist. Especially when the transaction is commercial versus residential.

Commercial transactions may involve numerous people. As the number of people in the transaction increases, the chances of some error or misunderstanding occurring also increases. Commercial transactions may also hinge on complex issues such as business-partnerships, zoning, local-state-federal regulatory concerns, and intricate financing schemes. Understanding this, when engaging in a commercial transaction, those who are not very well versed in the real estate law associated with the particular transaction might benefit from obtaining the assistance that a licensed attorney can provide.

For instance, a small business owner (sole proprietor) might enter into a lease agreement with the owner of a small strip mall, or storefront location where the terms of the transaction can be stated by way of standardized forms. In this instance, if a party to the transaction is not familiar with the process and or language involved, it might seem more practical and cost effective to have a paralegal provide assistance.

Conversely, when we look at the residential real estate transaction, the roles traditionally attributed to the attorney may be handled by other parties. For example, traditionally, the attorney facilitated the negotiation of the sale. [1] Today, licensed real estate sales persons act on behalf of buyers and sellers to facilitate the exchange of offers and counter offers between their clients.

Standardized forms help non-attorney home buyers

In addition, residential home and land sale contracts are usually preprinted, standardized-forms which have been approved by the state (in Florida, the forms are approved by the Florida Supreme Court for use by non-Attorneys). Standardized forms help non-attorney home buyers. Thus, the need for the attorney to draft the sales contract and has been greatly diminished. Yet, be warned that when using the state approved forms, one must understand how to correctly utilize adjunct forms such as contract addendums.  Furthermore, tasks such as evaluating title documents and issuing a title opinion may have been something the attorney traditionally performed. [2] However, today, those tasks are performed by a title company.

Lastly, relative to financing, the loan package is usually a function of the buyer’s income, ability to pay and credit rating. Because of this, the flexibility of the buyer to negotiate a broad enough spectrum of the loan package is simply too small to require the expertise of a professional negotiator. Thus, the role of the attorney in negotiating the loan package is no longer essential. Considering these variables, my opinion as a Real Estate Broker is that in commercial real estate transactions, an attorney could be extremely useful. But, in an uncomplicated residential transaction, the buyer and seller (with assistance of a Real Estate Broker) could successfully close without utilizing the services of an attorney.

Definitions:

• A contract -  A contract is the outward manifestation of a meeting of the minds where each party evidences their mutual assent to an exchange. The assent can be either in written or verbal form. However, when real property is involved, this mutual assent must be reduced to a writing. [3]
• The statute of frauds – The purpose of the statute of frauds was to prevent fraud and perjury. [4] For the purposes of this discussion. The statute of frauds specifies that real property contracts be reduced to writing, or that some written memoranda exists which gives evidence of the intent of the parties to (K). Without a writing or memoranda, the contract is not enforceable. [5]
• Notice and race-notice jurisdictions – In notice jurisdictions, a bona-fide purchaser is one who “pays valuable consideration for an interest in real property and does so without any notice that a third party already holds an interest in the property.” [6] “Whether the buyer had notice is dependent on the knowledge the buyer had about any third-party interests at the time the deed or other instrument was delivered to the buyer.” [7] A race jurisdiction is one in which when there are multiple conveyances of a property, the party that is a subsequent purchaser, for value, without notice and records the deed first, is the owner. [8]
• The several types of deeds – The general warranty deed provides the greatest title protection. “It warrants against any defect in the grantor’s title.” [9] The special warranty deed warrants the title from defects due to the grantor’s acts or omissions, but it does not warrant the title from third party actions. The quit claim deed contains no title covenants. This deed does not affirm the grantor’s title to a property. This deed simply conveys any rights to title that the grantor of the deed may have held in the property. [10]

References

[1] John G. Sprankling, Understanding property law 303 (2000).

[2] Id.

[3] Restatement (Second) of Contracts § 1 (2013).

[4] Sprankling, supra, note 1, at 306.

[5] Id. at 307.

[6] Id. at 380.

[7] Id. at 383.

[8] Id. at 389.

[9] Id. at 361.

[10] Id. at 362.