Colehower
Real Estate Transactions
Spring 2015
I. The Lawyer’s Role
· Intro-
o Lawyers used to have a large role, asked to go where records where kept and research to make sure title was good and if other no possessory rights were present. Now local practices differ.
o England still makes attorney role integral, but those transactions are more efficient than the US and cheaper. (Difference is how we do title and inefficiencies where attorneys involved here)
o Seller’s Counsel- should oversee negotiations to modify broker form for listing agreement, consider status of personal prop, draft K of sale
o Buyers Counsel- inform buyer of any limits that may impair title, draft closing statement, make arrangements for taxes and other incidents of ownership, record instruments double check title.
o Malpractice- must show atty failed to exercise reasonable degree of care and skill possessed by ordinary member of the legal community and that the negligence was the proximate cause of the injury.
o Unauthorized Practice- Buyers and seller can go without counsel as long as the brokers conflict of interest was disclosed to both and they are warned of potential danger of not using an atty. Broker can practice in a closing where only one party or neither had been repped by counsel, title companies can clear minor title issues without attorney, but giving advice or drafting instruments that affect legal rights may not be allowed varied by state.
§ Incidental test- nonlawyer can do some legal tasks if minor, and only incidental to main service being offered
§ Simple-complex test- nonlawyers can do simple tasks, only lawyers can do complex.
§ Personal rep- nonlawyer cant give legal advice to others but can do for themselves
· Canon 5-
o Must maintain independent of professional judgment ; decline where employment will adversely affect his judgment on behalf of his client or dilute his loyalty to the client. Possibility present when asked to rep 2 or more cleints who may have different interests.
o If you are asked to do multiple clients, weigh possibility judgment will be impaired, and resolve against concurrent rep. If lawyer accepts and thing later become adverse, would have to WD rep from both. But can rep where interest vary only slightly, likely can retain independent judgment.
o If you do rep both, each client must be given the opp to elavuate their need for representation that is free from conflict (chance to get another lawyer). Must explain the implications of the concurrent rep to each and can only proceed if they give consent.
o Discipline Rules
§ Lawyer shall decline employment if his independent professional judgemt will be adversely affected by accepting, or if he would have to rep differing interests.
§ Can rep multiple cleints if ibvios he can adequately rep the interests of each and if each consent after full disclosure.
· In Re Lanza-Atty repped both buyer and seller. Initially repped seller, but then repped buyer without consulting seller. Buyer unable to pay at closing, Atty said it would be OK for them to post date check. Buyer then refused to pay saying there was a problem in the basement that the seller said was not a problem. Court held he was unprofessional because 1) he failed to consult the seller before accepting a client with adverse interests or exlain the conflict to the seller; 2) he should have advised green to insist on the full purchase price or a mortgage for the 1000, and if neither accepted, he should have WD from rep both parties.
II. Broker’s Role
· Traditional Model- Seller K with broker to list, seller usually gives exclusivity and broker owes seller duty of loyalty and good faith, broker places it on MLS, agents who show to buyer are selling brokers, usually sub agent of seller. Broker who interacts with buyer owes seller not buyer fiduciary duty.
o Subagent owes duty to seller, not buyer so if buyer says max is X and they don’t tell seller, seller can sue for difference
· New Model- Unbundled services, lower commission, exclusive buyer agent
o Down side of lower commissions- buyers will be steered elsewhere
· Forms of listing agreements
o Exclusive right to sale- broker gets commission if sold by anyone
o Exclusive agency- broker gets commission if them or any other broker sells prop but not if seller sells on their own
o Open or nonex
y wont work, still doesn’t give buyers what they need)
§ Dual Agency- (wont work inherent conlficts { still owe dut of care as if separate, must act in good faith, openly and fully disclose all facts known to them, must get consent, must wd when they become materially adverse])
§ Purchasers agent- make seller broker purchasing agent
· Brokers Fiducary Duty
o Daubman v DBS- Broker pushed sale despite credit problmes and contacted seller apartment complex so sellers had to pay higher rent. Court held broker breached fiduciary duty of loyalty to seller by pushing sale despite buyer credit problems, in breach of fiduciary duty so seller entitled to retain brokers commission even if they suffered no damages.
o Hoffman v Connall- Boundary issues, seller said it was OK, then broker told buyer it was ok. Later found not to be ok. Broker not liable, owes buyer a limited duty to not disseminate false info but no reason to hold them to higher standard.
o Usual remedy is to deprive broker of the entire sales commission
o Self-dealing- not allow without informed consent; must disclose any preexisting family or biz relationship with buyer
o Buyer suits against broker
§ Usually court hold no fiduciary duty to buyer
§ Can claim under- fraud doc, constructive trust
III. Contract Terms-
· Risk of Loss
o Majority- From time of Agreement of sale, risk on buyer even though seller still has possession
§ Equitable Conversion- at time of signing of sales agreement, 1) seller hold legal title of property in trust for buyer, and 2) seller holds lien for purchase price (Buyer owns prop, seller owed sales price)
ú If nothing else is said in K, buyer can mortgage or assign his interest.
ú EXCEPTIONS- unfulfilled conditions
