How to Successfully Develop a Real Estate Project

growth-Real-Estate-MarketTo receive a highly professional legal advice based on experience in Real Estate will be vital to make sure that the land you want to purchase for starting a real estate project (horizontal or vertical condominiums, houses, gated communities or commercial) is ideal and doesn’t have any kind of building restrictions.

With the ‘Due Diligence’ lawyers make ensure that the client’s investment is not at risk.

Before a person buys a land, it takes place a study related to legal and procedure aspects, that will allow to inform the person if the property he/she is considering to purchase for the real estate project is suitable for that business.

The ‘Due Diligence’ includes, among other aspects:

– Making a study of the property and checking if it has liens
– Examine if the land was legally purchased and, therefore, can be transferred without inconvenience
– Check whether it is located or not on a restricted area or a maritime zone, and if its use won´t be in conflict with the Ley de Aguas (Water Law) and the Ley Forestal (Forest Law)
– Consult with the respective municipality to verify if the taxes of the property are up to date
– Ask for a Certificate of Use of the land to determine which are the viable options for the development of the property
– Study the Regulatory Plan of the municipality where the land is located

Get in contact with real estate professionals

Once the ‘Due Diligence’ ensures us that the land is suitable for developing a real estate project, lawyers put the customers -especially when it comes to foreigners- in contact with professionals in Real Estate.

Pros and Cons of Forming an LLC for Real Estate Investments

Forming a limited liability company (LLC) for real estate investments has been a common practice in Florida for more than 30 years because an LLC can help investors protect their personal assets from any liabilities associated with their real estate investments.

Although some real estate investors may elect to rely solely on liability insurance to protect themselves from a potential lawsuit, there are some risks to this approach. Liability policies generally have exceptions and limits that do not wholly protect investors from litigation; an LLC’s protective power is typically broader and more beneficial.

Here are the advantages of forming an LLC for real estate investments:images (2)

Pros

Limits personal asset exposure to legal judgments relating to the LLC’s investment properties.

Offers pass-through taxation benefits. Although “S” corporations also offer this benefit, they are subject to other requirements and restrictions that may limit their usefulness to real estate investors.

Foreign ownership and investment in U.S. real estate is allowed through an LLC.

Transferring ownership in real estate holdings can easily be accomplished via gifting of membership interests. This can be done without having to execute and record a new deed, thus allowing property owners to avoid transfer and recording taxes and fees.

LLCs can be managed by an owner or third party manager, while corporations are required to have officers and directors.

Offers flexibility in profit distribution options. LLC owners can determine their own distribution structure, whereas “S” corporations require pro rata cash flow distributions.

Cons

Although there are many advantages, not every real estate investor will want to take on the responsibility of managing a company and may instead elect to protect personal assets by purchasing liability insurance.

In order to maintain personal liability protection, LLCs do require that owners observe the legally required corporate formalities such as maintaining separate bank accounts, maintaining a registered agent and maintaining sufficient company records to keep the LLC in good standing.

Real estate investors considering forming an LLC for their investments should do so prior to purchasing investment property since it is easier to purchase property through the LLC than to transfer it later when you may need your lender to consent to the transaction.

A single-member FL LLC may not offer the same level of liability protection as a corporation.

Claims Against Real Estate Agents

images (1)Real estate agents occupy a position of trust. Quite often, they are involved in transactions that represent the largest monetary value that their clients have ever encountered. As such, real estate agents may be subject to a number of legal claims.

Fraud

One common claim made in this context is that of fraud. In most cases,
fraud requires showing that the real estate agent had the intent to defraud, deceive or misrepresent facts to the detriment of the plaintiff. This may be affirmative action such as telling a lie, or it may be fraud by omitting certain information. Some states have laws or case law regarding a concept called constructive fraud, which is when the real estate agent gains an unfair advantage by using deceitful or unfair methods. Intent is not required in these cases.

Fraud may arise when the real estate agent knew that information in a listing was incorrect, such as the square footage of the home, but still maintained this information was true. Fraud can also result when the real estate agent new about damage to the property or a termite infestation and failed to disclose this information to his or her clients. Additionally, fraud may lie when the real estate agent knew about future development plans and failed to disclose this information to the plaintiff in order to only look out for his or her own interests.

Breach of Contract

Another claim that is common within this context is a breach of contract claim. This legal claim asserts that the real estate agent violated the contract between the agent and the plaintiff. Normally, a real estate agent would not be sued for breach of contract under the real estate contract because he or she is not usually a party to the contract. However, he or she may be sued for violating the broker’s agreement or other contract.

Breach of Duty

A breach of duty claim may arise in conjunction with a breach of contract claim. A real estate agent has a fiduciary duty to act in his or her clients’ best interests. This requires the agent to zealously represent the client even if doing so would result in a lower fee for himself or herself since the client’s needs are paramount to the agent’s own.

Additionally, maintaining this duty of care requires the agent to act with all of his or her skill, care and diligence in his or her representation of the client. A breach of duty claim may arise when the real estate agent fails to disclose important information to the client, such as an ongoing feud with a neighbor or a known encumbrance on the property.

Negligence

A common claim in civil cases in general is negligence. This legal claim asserts that the defendant owed a duty to the plaintiff but breached this duty. As a result, the breach caused the plaintiff to suffer some harm. In the real estate context, the duty may be expressly provided in the contract. In contrast, it can be a general duty of care that the real estate agent was expected to exhibit given his or her relationship with the plaintiff.

Negligence is a legal theory that is not based upon the intent of the defendant. Instead, it can rest on the theory that the real estate agent should have known that there was a defect and accidentally forgot to disclose it.

Identifying Defendant

When a plaintiff has suffered an injury or economic damage due to the acts or omissions of a real estate agent, he or she may begin identifying people or entities that share in the legal liability. The first named defendant is often the real estate agent. However, other parties may share legal responsibility, depending on the circumstances of the case.

For example, real estate agents may be hired by real estate firms or brokerage companies. Employers may be liable for the conduct of their employees. Additionally, employers or other parties may have the real estate broker act as their representative, which may subject them to liability.

Insurance

Due to the potential for expensive litigation, some insurance companies offer a type of insurance that is similar to malpractice insurance. This type of insurance is usually referred to as “Errors and Omissions” insurance and includes coverage for instances when real estate agents make contract errors, make mistakes related to the value of the property, make mistakes in the escrow process, make errors related to the structure, sewer, well, moisture or title issues. This type of insurance does not cover intentional conduct, such as fraud.

Why You Need a Real Estate Lawyer When You Buy or Sell a House

Whether you are buying or selling a home, your team of expert advisers should include a real estate closing attorney. Real estate closings are complicated matters and require a thorough knowledge of the law. With a decision as serious as buying and download (1)selling real estate, it is important that you are guided throughout every step of the closing process by an experienced and knowledgeable real estate lawyer.

How a Closing Lawyer Can Help

The real estate attorney performs many time consuming tasks preparing for a closing. A real estate closing involves a series of complex phases: contract drafting and negotiation, document review, examination of the title, completion and explanation of legal documents, and resolution of any possible title difficulties. An experienced real estate attorney oversees the entire process so that you are not overwhelmed by the paperwork involved, the disclosures that need to be made, inspections, loan documents, title insurance and affidavits, and unforeseen issues that can suddenly turn a sure sale into a disaster.
Drafting and Negotiating the Contract of Sale

Since real estate attorneys have sophisticated experience with many types of real estate transactions, it is prudent for a buyer or seller to ask their real estate lawyer to negotiate the terms and conditions of their real estate deal. Once the negotiations are complete, the real estate attorney drafts the real estate contract, also known as the Contract of Sale, which incorporates all the terms of the transaction as negotiated. There are also other numerous documents associated with a real estate closing. It can be hard to review and understand all of them. Missing even one clause can change an entire legal document so it is important to have a trained real estate attorney aid in the process so that no issue is overlooked and everything is done in your best interest.
Title Issues

A real estate attorney examines the title records for prior conveyances, unpaid mortgages, liens, judgments, easements, and other encumbrances and clouds on title. They verify that the seller has the authority to convey a good title to the property and that no errors exist in the deeds in the chain of title.
Closing Documents

A real estate attorney prepares all relevant information into one set of closing documents. A closing statement should be prepared prior to the closing indicating the debits and credits to the buyer and seller. An attorney is helpful in explaining the nature, amount, and fairness of closing costs. If the attorney is representing a seller, the attorney would also prepare the deed and state transfer tax documents. At the closing, the attorney provides detailed explanations of the documents to insure that the parties understand all issues involved in the transaction and the disbursement of the funds.
Attend the Closing

The actual closing day is the most important phase in the purchase and sale transaction and having a real estate attorney there to represent you is critical. Title passes from seller to buyer, who pays the balance of the purchase price. The deed and mortgage instruments are signed, and your attorney can assure you that these documents correctly reflect all the terms of the transaction and are appropriately executed. There may also be last minute disputes about issues arising during the final walk-through and delivering possession or the adjustment of various costs, such as fuel and water. If you are represented by an experienced real estate attorney you can rest assured that these issues will be properly addressed and your interests protected which might not necessarily be the case if you are not represented by an attorney.

Dealing with Real Property after a Divorce

Online-FREE-Real-Estate-Investing-SeriesFor many couples, real property represents the most valuable and expensive asset that they own. Since the couple will no longer be living together in the same house, they must often reach some sort of decision regarding which party will receive the house.

Options Regarding Real Property during Divorce

Prior to entering into a property settlement, the parties may consider a number of different options concerning their real property, especially the marital home. One common option is to sell the home. After the mortgage is paid off, the couple may equally or otherwise fairly split any proceeds from the sale. In other cases, the parties may agree to provide certain real property to one spouse and compensate the other spouse with assets of similar value. One spouse may keep the primary residence, and the other may keep the vacation home.

In some cases, the primary custodian keeps the house and the other spouse agrees to this because he or she wants the children to benefit from the use of the house. However, if one spouse will keep the home, the other spouse usually requests to be removed from any financial liability associated with the house.

Divorce Decree

The spouse who will not have possession of the house will want the divorce decree to stipulate that he or she will not be responsible for making any mortgage payments or otherwise being financially obligated to the house. This can help with enforcement issues. However, a divorce decree does not have any authority over a third party debtor. Until the mortgage is refinanced or the home is sold, both parties remain financially liable for the property if both of their names are on the mortgage. However, if a spouse refuses to comply with the divorce decree, the other spouse may choose to have the decree enforced as a contract or by asking for him or her to be held in contempt.

Refinancing the Mortgage

In order to remove one of the spouses from the financial obligation to the property, the other spouse must usually get the mortgage refinanced. This usually requires going through the loan process and naming only the spouse in possession as the prospective debtor. If the other spouse is not removed from the mortgage, the lender can pursue collection from both or either spouse.

Refinancing requires that the new named borrower be able to meet the eligibility requirements set out by the lender. This often requires the spouse to demonstrate income and that he or she has adequate resources to afford the mortgage. A cosignor may be necessary if the spouse cannot qualify on his or her own.

Deeding the House

Once the refinance is approved, the other spouse’s name can be removed from the deed to the property and the mortgage. This is often completed by filing a quitclaim deed in which the spouse forfeits any right to the property. If the spouse has his or her name removed from the deed without refinancing having been secured, he or she can lose rights to the house but still remain obligated to the debt.

Assuming the Loan

In some situations, a person may be able to remove the other spouse from the mortgage without refinancing through assuming the loan. This may be a preferred option for someone who has the ability to pay the mortgage but does not want the added expense of going through a refinance. If approved, the lender allows one spouse to assume the debt for the couple so that the other one is let off the hook.

Continuing with the Mortgage

If refinancing or assuming the loan is not an option, the spouses may reach an agreement in which they both remain liable for the mortgage. However, if the spouse in possession of the property does not make the mortgage payment or makes late payments, the other spouse’s credit can be adversely affected.

Future Purchases

In order to be approved for a new mortgage, the spouse who did not keep the property may be required to prove that the other spouse is responsible for the debt. This may include showing a court order to this effect, showing the refinance documents and/or submitting cancelled checks from the other spouse that shows that he or she is the one making the mortgage payments.

A divorce lawyer or real estate lawyer may be able to assist individuals who are concerned about how to treat their real property during or after the process of divorce.

Do I Need a Real Estate Lawyer to Purchase a Home?

In most cases, a person is not legally required to hire a real estate lawyer beforeReal-Estate-Image purchasing real property. However, real estate lawyers perform a variety of tasks that can help make the home buying process less complicated and that can tend to the buyer’s rights.

General Rule

Property ownership is usually dictated by state law. Most states do not require a homebuyer to hire a real estate lawyer or even a real estate agent. However, some states only allow a lawyer to prepare documents related to the home purchase, to perform a title search and to complete the closing.

Reasons to Use a Real Estate Lawyer

For many individuals, the purchase of a home is the most expensive purchase that they will make in their life. They may also live in the house for many years to come, making any decisions made during this process significant and enduring. Additionally, property law is an area of law that includes complex legal issues that may not be present in other areas of law. A real estate lawyer focuses his or her time on real estate transactions and likely has more experience in this matter than the buyer.

Tasks that a Real Estate Lawyer Assists With

Real estate lawyers can assist in a number of tasks related to the home purchase, including the following:

Offer

A real estate lawyer can help submit a written offer to the buyer. He or she discusses the options with the buyers and can include certain contingencies for the purchase of the home.

Negotiations

Many individuals may not be accustomed to negotiating on a routine basis. A real estate lawyer can offer suggestions related to counter-offers, as well as handle the communications between the buyer and the broker.

Purchase Agreement

The most important document that a real estate lawyer may draw up is the purchase agreement for the home. This is the formal contract for the purchase of the home that details the rights and responsibilities of each party. While many real estate agents use standard forms, a lawyer can provide a customized contract that takes into consideration any unique details or arrangements. Additionally, such standard forms may be written in a way that protects the seller more than a buyer, so having a real estate lawyer can ensure that the buyer’s rights are also being protected.

In particular, the lawyer may include provisions regarding the consequences of what will happen if the seller does not provide good and marketable title within a certain timeframe or fails to show up at closing. Additionally, he or she can include provisions regarding home inspections and the rights of the buyer if problems are discovered during this process. He or she should also include a provision that makes the purchase contingent on the buyer receiving appropriate financing for the purchase.

Even if using a standard form, a real estate lawyer can review it to ensure that it contains all of the pertinent provisions.

Other Contracts

A real estate lawyer may assist with additional contracts. For example, he or she may review or draft a contract with the broker. If the property is a rental property, he or she may draft a lease for future or existing tenants. He or she can also review other documents relevant to the transaction, including financing agreements.

Title Search

The real estate lawyer may also conduct a title search on the home to ensure that there are no clouds on the title. This information is also important to the lender, which has a financial stake in the transaction.

Legal Issues

Sometimes during the process of purchasing a home, buyers may run into legal issues. For example, they may discover that there was an unknown encumbrance on the property. They may find that there are existing tenants in the property. They may uncover unknown problems with the home or discover that certain areas of the home are not legally permitted. There may also be certain tax implications due to the transaction.

California Homeowner Bill of Rights Signed Into Law

!NEWSFLASH!

On July 11, 2012, Governor Brown signed the Homeowner Bill of Rights. This important bill extends reforms to help homeowners who are having trouble with their residential mortgage. The most significant aspects of the bill follow:

1. The bill prevents lenders from “dual-tracking” borrowers. This means that when a homeowner is negotiating new terms for a modification with a residential loan borrower, the lender is prohibited from pursuing a foreclosure simultaneously.

2. The bill imposes civil penalties of up to $7,500 for auto-signing foreclosure documents (this process is frequently referred to as “robo-signing”, meaning that lenders file testimony about their possession of original documents and their review of business records without checking the accuracy of their statements).

3. The bill also requires lenders and loan servicers to establish a simple point of contact for borrowers. If you contact the lender, you will be able to reach someone with knowledge of your residential loan who has direct access to a decision maker. This means no more runaround from the lender when you call to check on the status of your modification request.

This Bill is going to protect many Californian residents who are in default, as well as many more who are or will be in the modification process.

If you have questions about how this bill will impact you, or questions about real estate or mortgage law issues, you are welcome to contact The Mlnarik Law Group, Inc. at (408) 919-0088 or john@mlnariklaw.com

-The Mlnarik Law Group, Inc., Real Estate Litigation Attorneys

I’m buying a house – should I hire a real estate attorney?

A real estate attorney is your advocate when it comes to purchasing a home

For most people, their house is their biggest investment. It makes sense to hire a real estate attorney to ensure that you understand all aspects of your transaction with the seller and any regulations related to the purchase.

Homeowner Associations (HOAs)

Review of your covenants, conditions and restrictions (CC&Rs) by an attorney can alert you to items you might be unfamiliar with. More important, it can keep you from buying a property that is already violating a CC&R — thus avoiding liability toward the association or a neighbor later on. There may be restrictions (for example on flooring types, or pets, or turning your property into a rental unit) that you will wish you had known about!

Short Sales & Foreclosures

If you’re selling or buying a property as part of a short sale or foreclosure, additional assistance from an attorney may be beneficial in guiding you through the process. If you’re buying a property that was foreclosed on by the lender, you may need assistance with an unlawful detainer (eviction) action.

Litigation

Sometimes, real estate transactions just don’t work out. For instance, there may be title disputes, or a failure to disclose property defects, or problems with the transaction itself. You will need a real estate attorney to alert you to your rights, and help you enforce them.

Transaction Review

Sometimes you need a real estate attorney to assist with reviewing or drafting contracts. These can range from lease-to-own option agreements, rental documents, to documents memorializing agreements regarding property ownership to documents prepared by another party.

As always, if you have any questions regarding real estate law, please don’t hesitate to contact us.

The Mlnarik Law Group, Inc. at (408) 919-0088 or john@mlnariklaw.com

-The Mlnarik Law Group, Inc., Real Estate Litigation Attorneys

 

Can my HOA come after me personally for dues, even after I go through a foreclosure?

If you were a condo owner in a community governed by a homeowners association (HOA) and your condo was sold at a foreclosure auction, you might think you’re off the hook for any delinquent payments to your HOA. You’re not! You will be liable for any dues while you are on title.

Today, as the market value for many properties has fallen, there isn’t enough money “left over” to pay your HOA. Most associations have governing documents that allow them to collect from a property owner personally, after the home has been lost to a foreclosure.

Bottom line – don’t just ignore your association fees because you’re in active foreclosure. You could pay for it later.

The Mlnarik Law Group, Inc. at (408) 919-0088 or john@mlnariklaw.com

-The Mlnarik Law Group, Inc., Real Estate Litigation Attorneys

 

 

How to Reject a Potential Tenant (Without Getting Sued)

No one likes to say “no”, especially a landlord who is turning away a prospective renter in a tough market.  But the pain of choosing the wrong tenant will outweigh the costs of a vacancy.  Sometimes landlords have to be tough.

The trouble with rejecting a tenant, though, is the likelihood they will take their hurt feelings to their lawyer’s office or the housing authority.  Before the landlord realizes it, the next “prospect” who tours the rental is actually a “tester” conducting an investigation of their tenant screening practices. Fines and damages for lawsuits or housing disputes can range from the thousands to the hundreds of thousands, and even into the millions for widespread violations in large rental property businesses.

Here’s how to reject or deny an applicant without opening yourself up to legal liability

1. Honesty is the Best Policy

Often we want to say “No, no, it’s not you, it’s me.”  Get in the habit of saying “Well, actually it is you.”  Don’t try to sugar-coat a rejection, or you’ll talk yourself right into a legal tangle.  Tell the applicant the reason for the rejection.  This will offer them closure without the need for further legal action.

2 .Credit Reports

If the rejection is based on something in the tenant’s credit report, you have a legal duty to tell them so.  In addition, you must tell them which credit reporting agency gave you the information in the event they want to dispute the credit report.  Landlords can reject someone outright for credit problems.  You should, however, be prepared to justify how you made the decision. You must enforce the same credit threshold with every applicant.

3. Tenant Screening Questions

Discrimination occurs when a landlord refuses to rent to someone because of the impression they form about the person’s class, including race, color, religion, national origin, marital or familial status, gender, advanced age or disability.

The best way to avoid a discrimination claim is to avoid questions about the person’s class and focus on their behavior.  It is also advisable not to predetermine the “type” of tenant who they think would “fit in” to the property.

There are countless ways to run afoul of this rule, for instance, touting the proximity of your rental to a religious institution, describing the ethnicity of the neighborhood, or suggesting who might like the neighborhood.  Stating that a property is a good match for a young family or a single person are more examples of how a statement may be interpreted as discriminatory.

Do not reject a tenant because they are a member of a protected class.  Rejecting a prospective tenant because they are dressed in a certain way may also be considered discriminatory if you use pejorative words to describe it, for example, stating someone is dressed like a “gangbanger” can imply racial stereotyping and discrimination.  On the other hand, a landlord is not required to rent to the person because of their class status.  If there is a bona fide reason to reject them, like a poor credit report or a dubious reference from the previous landlord relating specifically to the payment of rent or behavior of that particular individual, you do have the right to reject them.

When making a determination about an applicant from a previous landlord or personal reference, be sure to stick to the same rules and only act on information that specifically relates to the person’s behavior, e.g. chronically late rent payments or disruptive behavior, and not concerns generated from that reference’s own personal biases.

4. Criminal Background Checks

Reject tenants with criminal history that could spell bad behavior as a renter – check fraud, disorderly conduct, for instance, and any violent or aggressive behavior that could place other tenants or neighbors at risk.  Some landlords are willing to let minor offenses slide, like parking tickets or traffic infractions. Wherever you decide to draw the line, apply it evenly to all applicants.

5. Eviction Reports

Tenants with a history of eviction can be rejected.  The cost of an eviction is significant, not just in legal fees, but in time lost without payment of rent.  A contested eviction can take months to resolve.  Once an eviction proceeding is filed, the tenant may be more likely to damage the rental property, and those costs can be enormous.

6. Rental Application 

Landlords can reject an applicant who did not complete the entire rental application.  Make certain that the applicant has signed the authorization for a tenant background check, including a credit report, and permission to contact the references listed.  Keep documentation of your contacts with the applicant to prove you did not violate the law when you rejected the applicant.  Most importantly, apply whatever criteria you use to reject or accept a prospective tenant evenly and objectively to all tenants.

Familiarize yourself with the Fair Housing/Equal Opportunity Laws to avoid litigation.

Are there any more points that I may have missed that you can share?

The Mlnarik Law Group, Inc. at (408) 919-0088 or john@mlnariklaw.com

-The Mlnarik Law Group, Inc., Civil Litigation Attorneys