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These tips arise from decades of experience with litigation flowing from my representation of buyers, sellers, and brokers in home sales. For most home buyers and sellers, the transaction will concern their largest asset. All properties are unique, so all deals are unique. Careful, practical attention to legal details will limit disputes and make conflicts less expensive to resolve.
10. Disclosures. The legal standard for required disclosure is very broad. Any “material” omission can lead to litigation even in an “as-is” sale. If you are a seller, be sure to get your facts right on your disclosures. Don’t rely on memory. Provide copies of the inspection reports created when you bought the house, and of the inspections made by anyone at any previous time you thought about selling or investigated your property. Take your time and do a very thorough job. A legally proper disclosure should include from 50 to 1,000 pages, depending on how long you have owned the property and its history. If you just have 20 pages, you are not done.
If you are the buyer, read between the lines and ask questions. If the sellers disclose they filled in the swimming pool with all proper permits, ask why they filled in the pool. Leaking pools are one of the most common causes of soils failure. (In fact, ask if any neighbor uphill has filled in a pool.) If the sellers disclose their driveway is on a recorded easement over a neighbor’s land, ask if there is a written maintenance agreement and ask how maintenance is handled. For every report of “remodeling,” ask if any repairs were undertaken during the remodeling. Ask how often the sewer line is cleaned. Make written notes of everything the seller or the seller’s agent tells you about the house that is not also on a written disclosure statement. Write down who made the statement and date your notes. Keep your notes.
11. Investigations. Be cautious in using home inspectors from the home inspector industry, unless you have a great rapport with your broker-owner and are satisfied of his/her honest view of a particular inspector. Try to use an actual contractor or other tradesperson. Home inspectors want to disclose everything, which is good, but they often minimize the significance of their findings. If a home inspector sours a deal, the broker may try a different inspector next time. At a minimum, if a home inspector recommends calling a soils engineer or any other expert for a further look -- call a soils engineer or expert for a further look.
12. Title companies and Escrow. In Northern California, the title company is also the escrow agent. This creates a tricky conflict of interest, because you need title insurance and you need your transaction to be handled correctly. Be as careful selecting the escrow agent as your broker. By custom, the buyer will pick the title company, but a seller should ask the buyer to designate an escrow agent, too, and check out that agent. The escrow agent will process the transaction for both buyer and seller, so sellers can object to the escrow agent proposed by the buyer.
13. Insist that the escrow officer does the officer’s job. Always insist on sufficient time to review documents before signing. Do not accept advice on the documents, such as on the language of the deed, from the escrow agent. Talk to your broker (if the broker will talk to you, but most will not for liability reasons) or talk to an attorney. Almost never will the escrow agent know enough about your personal situation to advise you accurately on how you should hold the title.
14. Follow up thoroughly after escrow closes. Make sure you promptly receive copies of all documents from the escrow officer and check them for proper recording. Verify that the escrow agent has properly dispensed all funds and recorded/mailed all documents. Either buyer or seller may be making payments to third parties (brokers, lienholders, creditors) through escrow. Make sure that the payments you directed are received. Make sure that all Iienholders formally release all liens. (Escrow agents are insulated by law from liability for failing to ensure that lien releases are recorded, so that critical job falls on you.) If you have an estate-planning revocable trust, you will probably need to move the deed into the trust; if the deed is to one spouse because the other has lousy credit and the house is purchased with community property, get the transfer deed recorded.
Sometimes clients bring me a form from the web or an on-line legal service, hoping the form will be “good enough” to protect their assets or document their deal. Unfortunately, my experience is that many times, the proposed form will instead cause legal harm by creating new liabilities unappreciated by the client. Just as unfortunate, in nearly all cases, the form fails to provide the legal protections, deal certainty, enforcement provisions, or statutory compliance that the client desires.
What is so different from my use of forms and adapting them to a business’ legal needs compared with the results when even experienced business people grab forms from the internet or a question-and-answer legal service?
In my opinion, success with business writings requires a thorough understanding of contract law combined with practical experience interpreting and enforcing business writings.
First, the common -- but false -- belief that a “standard form” exists leads some businesses to adopt a form based on the title and general context alone. Business contracts are not fungible commodities reusable from one situation to another.
Second, in my experience, most business people do not understand how particular contract terms benefit one party, disadvantage the other, or may create undesired tax liabilities.
Third, careful identification of business goals and needs is essential to successful development of effective business forms. All business writings must contain language that promotes and reinforces the needs of that specific business.
Fourth, unless a business has suffered from a previous bad contract, folks do not understand what types of contract terms are practical to implement and what terms make enforcement so burdensome that the contract is, effectively, illusory.
The take away: The precise words of a business contract must match that business’ objectives. Casual use of a form without legal insight can create a tax headache, expose the business to unnecessary liabilities, cause the loss of trade secrets, waive enforcement opportunities, and create an expensive legal challenge where a proper writing could have simplified resolution.
An attorney preparing standard business forms, employment policies, or transaction documents, should review with the client:
Quality business agreements and forms provide essential protections from liability and expense that cannot be obtained any other way. Remember, in business law, an ounce of legal protection is worth 16 tons of cure.
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