Most real estate transactions are successfully concluded at the closing. Both the buyer and seller walk away from the deal with most of what they wanted. However, sometimes a real estate transaction doesn’t go smoothly. Sometimes there are disputes after the transaction has closed. Because real estate is a significant investment for individuals and businesses, any real estate dispute can have major consequences for both parties.
Below are seven of the most common reasons for real estate disputes.
1. Breach of Contract
A written contract governs every facet of a real estate deal. This includes everything from construction projects to the purchase of raw land to the agreement between a party and their real estate broker. When one side fails to live up to their duties under the contract, they are said to be in breach of contract, the other side may need to pursue litigation to protect their rights.
Depending on the type of real estate contract at issue, the damaged party could ask a court for monetary compensation or for an order of specific performance. Specific performance means the court orders one party to take an action. This remedy is only used to compel the completion of a real estate transaction and not to force someone to render a service. You can ask for specific performance to buy a piece of property, but not to order a construction company to finish a renovation.
2. Repair Issues
Often a buyer will request the seller of a piece of real estate to make some specific repairs before the real estate closing. Sometimes the buyer will later discover that the repairs were faulty, or that they were not completed.
In the case of faulty repairs, a seller will often argue that the buyer needs to seek compensation from the one who performed the repairs. These disputes can get complicated as the buyer, seller, and the company who completed repairs trade accusations and try to shift blame onto the other parties.
A buyer will need to consult with a real estate attorney to determine who is responsible for the faulty repairs and what remedies are available.
3. Undisclosed Defects
Sometimes a piece of real estate will have undisclosed defects. These are problems with the house or property that are not easily detected by a buyer, but that the seller knows about, or that the seller should have known about.
If the seller fails to disclose these defects, it can cause significant expenses for the buyer, sometimes long after the deal has closed.
State and federal law require some specific things to be disclosed to a potential buyer. Two of the most common examples of mandatory defect disclosures include lead-based paint and asbestos. However, the seller has a duty to disclose all known defects to the buyer.
If the seller fails to make the proper disclosures, the buyer may be entitled to monetary damages, or in some circumstances, can void the sale. Depending on the manner and scope of the undisclosed defect issues, they can often lead to real estate litigation.
4. Wire Fraud
Imagine trying to buy a house. You have finally made it to the closing and are working on electronically transferring money to escrow or title company. You get an email with payment instructions. You carefully follow these instructions, only to later find out the funds did not go where you thought they did.
Instead, a criminal pretending to be an authorized party has stolen your money.
The effects of real estate wire fraud can be devastating. Because real estate transactions involve significant amounts of money, victims often lose years of their savings in an instant.
Real estate wire fraud is increasing, but there are ways to protect yourself. You should always double-check all payment instructions by calling a known phone number first. Confirm everything with your real estate broker and bank.
If you are a victim of real estate wire fraud, you should seek out an experienced real estate attorney immediately.
5. Land Use/Zoning Issues
Not all real estate disputes are between buyers and sellers. Sometimes property owners want to use their property for a specific purpose that their neighbors or local government do not approve of. These issues range from backyard chicken coops to the placement of multifamily housing units.
Land use laws and zoning regulations are not always written clearly. Any ambiguity in the law will create disputes.
A property owner may find themselves having to deal with several layers of bureaucracy to secure the permits they need, while others in the community work to secure rulings or changes in the law to prevent the issuance of the permit.
Land use and zoning issues are often particularly complex because of the semi-public nature of the disputes.
6. Boundary Issues
The poet Robert Frost once famously said, “Good fences make good neighbors.” Unfortunately, it often takes much more than a fence to clear up property line and boundary disputes. Often boundary issues can be traced back to poorly drafted title documents or some other type of sloppy paperwork.
Once a boundary issue is resolved between adjacent property owners, there is often a secondary dispute over who should compensate the parties for their litigation costs. These secondary disputes may involve litigation against title companies and can be as complicated as the primary boundary dispute.
7. Title Disputes
Having clear title to a piece of property is key to securing its maximum market value. However, many plots of land have a murky title history. To prevent problems down the road and to increase the liquidity of a parcel of real estate, an owner may bring a lawsuit to quiet the title. This means they ask a court to clear up the title history.
Often multiple parties own some real estate, but they cannot agree on what to do with it. This can lead to protracted legal disputes where each party asks the court to order the other owners to agree to their proposed use or sale of the property.
Title disputes are not always about who the rightful owner of a piece of property is. Often, title disputes are about easements, mineral rights, water rights, and other issues about who has what rights to use the property.
Real estate disputes are complex because they often involve a combination of different legal issues such as contract law, property law, and land use law. The best way to protect your legal real estate rights is to consult with an experienced real estate attorney as soon as you discover a potential issue.