Real Estate Law
The area of real estate law is extensive in itself, but it often overlaps with other areas, such as business law, contract law, and even personal injury. Navigating this complex area requires not only a firm grasp of real estate law, but also how it interacts with other related laws.
Buying, Selling, and Transferring Real Estate
Without the proper knowledge and training, buying and selling real estate can be fraught with peril. There are complicated documents to read or draft, negotiations to conduct, and tax issues to worry about. Whether an investment property, business property, or personal residence is involved, the sooner you start educating yourself, the better off you'll be.
While investing in real estate can be profitable, it can also be risky, especially if you hold title in your own name. Real property can be a lawsuit waiting to happen. For instance, let's say you own a rental house and a tenant is living there. If that tenant is injured on the property and obtains a judgment against you, you're personally liable for the damage award. This means that not only the rental house, but anything else you own, could be at risk to satisfy the judgment.
If, on the other hand, you form a limited liability company (LLC) or other entity to own the property, it plays out a little differently. Now the injured tenant's recovery is limited to the business entity's assets. If it only owns the rental house, then only the rental house is at risk to satisfy the judgment. Of course, any other property owned by the entity is at risk as well. For this reason, many people choose to form a separate entity for each rental property.
Real estate deals
From buying a small condo to purchasing land for commercial development, each deal requires comprehensive research, negotiation skills, and the drafting of solid legal documents. Taking the time to do everything right helps avoid complications later. Problems with the deed need to be resolved, the sale or purchase agreement needs to be finalized, and the deed must be properly recorded after the transfer.
You should always be mindful of tax issues involving real estate. An important thing to remember in California is that real property is reassessed for property tax purposes at the time of sale or transfer. This can significantly increase the property taxes owed by the new owner. There are, however, certain exceptions to this. A common exception is the parent/child exclusion, which, under certain circumstances, can allow someone to avoid a reassessment when the property is transferred from parent to child.
Though there are many tax-related pitfalls related to real estate, some fairly generous benefits also exist as well. Here are 2 valuable options to know:
- 1031 Exchange: Section 1031 of the Internal Revenue Code (IRC) allows for deferral of capital gains taxes for the exchange of certain “like kind” business or investment properties. There are specific rules you must follow to take advantage of this benefit.
- Income tax exclusion for sale of home: IRC 121 allows you to exclude up to $250,000 ($500,000 if married) of capital gain altogether for the sale of your primary residence. This can save you thousands of dollars in taxes, and can be used multiple times during your life.
Many of the tax issues you will encounter will depend on your particular circumstances. To make sure you don't pay unnecessary taxes or miss any potential tax breaks, you should consult a real estate attorney or accountant to discuss your options.
Depending on the scale or complexity of your real estate deals, you may encounter additional issues, such as local zoning ordinances, the necessity of a subdivision or lot split, property line adjustments, etc. While many of these hurdles can be overcome, your chances of success are much better if you seek legal counsel from someone who is well versed in the potential challenges you might encounter.
Real Estate Disputes
Because the world of real estate has so many facets, it means that the potential areas of dispute are just as numerous. Sometimes these disputes can be worked out between the parties on their own, and sometimes they can't. When the issue is that bad, it may be time to go to court.
For as long as people have been renting property from others, there have been landlord/tenant disputes. Here are some very common disputes that may arise:
- Security deposit
- Uninhabitable conditions
- Failure to clean
- Failure to make repairs
- Failure to disclose defects
- Breaking the lease
These are just a few of the areas where the relationship between landlord and tenant can find conflict. For residential tenants, there are many legal protections available. For commercial tenants, however, the rights and responsibilities of each party and the remedies available are largely dependent on what is written in the lease. Commercial leases are less restrictive than residential leases and the document signed will largely be a result of the negotiations between the parties.
Having neighbors can be both a blessing and a curse. A good neighbor is worth his weight in gold, while a bad neighbor can make your life a nightmare. Disputes between neighbors are very common, and can arise from any numbers of issues, including noise, property access, blocking the view, trespassing, trees, boundary disagreements, etc.
If possible, you should first try to address the issue on your own, such as by talking or writing a letter to your neighbor. Sometimes, though, that is not practical, or it has no effect. Then you may have to take it to the next level to resolve the problem. It may involve going to mediation, getting a court order to prevent the offending conduct, or suing for damages.
Sale and purchase disputes
Disagreements often come up related to the sale or purchase of real estate. Sometimes the seller (or the buyer) refuses to go through with the sale because of changed circumstances (or a changed mind). Or if the seller failed to disclose information about the property required by law, the buyer may be entitled to sue for damages.
Other potential disputes can arise between co-owners of property. If one wants to sell, and the other does not, a partition action may be required (where the court divides up the ownership interests of the property).
Broker disputes are also common. This usually happens when the broker is denied her commission for some reason, or the buyer or seller feels she mismanaged the sale.
With a lot of money or a large piece of property on the line, a deal falling through can be disastrous. Dealing with this situation can be very frustrating, especially if you're not at fault. Many of these issues can be prevented by drafting a good written agreement. If you find yourself in this position, an attorney who is well versed in disputes of this type can help you put things right.
Disability access compliance
If you are a landlord or commercial tenant, it's crucial that your property is in compliance with disability access laws. The Americans with Disabilities Act (ADA) is most well-known, but this applies to state and local laws as well.
The ADA was designed to, among other things, remove barriers to access for people with disabilities. For qualified properties and businesses, new construction must be done according to ADA guidelines. But even old facilities must make necessary adjustments if “readily achievable.” Whether this means building a wheelchair access ramp, or providing more parking spaces, will depend on the nature and circumstances of the property.
If your business rents a commercial space, be aware that both landlord and tenant have responsibilities for ensuring the property is in compliance with the ADA.
In the world of real estate, especially as it relates to business and investments, there is a lot of paperwork. The more complex the deal, the more complex the documents will be. As discussed above, real estate transactions are entwined with contract law, where a typo or a missing comma can lead to a million dollar lawsuit. This means your legal documents need to be airtight to keep you out of trouble and allow you to enforce your rights in case of breach by the other party.
- Purchase and sale agreements: After the negotiation process is finished and you've agreed on a deal, it needs to be reduced to writing. It should cover everything in the agreement, and make sure that proper protections are in place to enforce your rights in a dispute.
- Commercial and residential leases: As a landlord, you should have leases that are handcrafted for your needs. They need to contain all required disclosures and should be up to date with the law. If you're using the same old lease you've been using for years, or something you found online, you might be inviting trouble from a tenant down the road.
- Joint ownership agreements: If you own property with another person, you should have your agreement in writing. This will help avoid conflict in case there is a disagreement about what to do with the property.
- Easements: A right of way over land should be in writing and promptly and properly recorded. This is the best way to make sure the scope is not exceeded and put future owners on notice of the easement.
Don't settle for out of date or boilerplate documents you find online. Getting all the benefits you are entitled to and ensuring your rights are protected depend on strong legal documents, drafted carefully with your needs in mind.
Helix Law Firm can help with real estate issues
The above issues are often complex and intersect with other areas of the law. At Helix Law Firm, we have both the legal and real estate experience necessary to help. We can help you buy or sell your house, structure investment deals, draft necessary documents, and handle real estate litigation and disputes, from the simple to the very complex.