The Five Most Common Causes of Real Estate Litigation

October 19, 2021

The Five Most Common Causes of Real Estate Litigation

Real estate disputes are increasingly common in today’s market. Whether you are a residential property owner, a condominium association, a property management company, or a commercial real estate developer, there is a good chance you will find yourself in a real estate dispute at some point in your career. Some real estate disputes can be resolved out of court, but real estate litigation becomes necessary when the parties cannot agree to a solution. We will review the most common causes of real estate litigation and some ways to avoid them.

Breach of Contract

Real estate sales agreements are contracts. When you sign a contract to buy or sell property, the sales contract will contain conditions and terms with which both parties to the contract must comply. The real estate contract will include provisions about the closing date, title clearance, financing, and which assets will be included with the purchase of the property. When either party fails to follow the terms laid out in the contract, the other party may have a right to sue for breach of contract.

It is important to read through your real estate sales contract carefully. We recommend hiring an attorney to review the contract. In many cases, real estate agents will use a boilerplate contract that is not unique to your real estate transaction. These boilerplate contracts may not protect your rights and help you achieve your goals with the property’s sale or purchase. An attorney can look for red flags that could hurt you financially in the long run. 

Should your attorney find any red flag issues in your real estate contract, he or she can negotiate with the other party to resolve the issue. It is better to take the time to carefully consider the contract before you sign it than to become legally trapped by a contract with provisions that are unfavorable to you.

Failure to Disclose a Defect on the Property

In most states, the seller must disclose any known defects that are not evident that could affect the property value. When the buyer discovers a previously undisclosed defect after closing on the property, the buyer may pursue legal action against the seller. The buyer has a right to file a lawsuit against a seller for failure to disclose a known and not evident defect. The buyer needs to prove that the defendant knew about the defect or reasonably should have known about it, yet purposefully concealed it. 

Common property defects can include holes in the roof, mold in the walls, leaks, and improvements that never received the proper permits. For example, suppose a buyer purchases a warehouse. The new owners discovered that there are massive electrical problems that need to be fixed. The seller refuses to disclose these defects, and now the buyer faces a $100,000 construction bill. In this case, the buyer may have the right to sue the seller for failure to disclose a defect on the property.

Breach of Duty or Negligence

Real estate agents can be sued for negligence or breach of duty. Real estate agents have a legal duty to act in their clients’ best interest and not in their interest or the interest of a third party. Real estate agents must keep sensitive information related to their clients, such as their financial situation, completely confidential.

Additionally, real estate agents must perform all of their services to the best of their abilities. When real estate agents negligently make a mistake that makes their clients lose money, they are responsible for any damage caused by their negligence. Real estate agents also must disclose any information that could benefit their clients. 

For example, suppose a real estate agent knows that the property has a defect and refuses to tell the client about the defect because he or she wants the commission associated with the sale. In that case, the client has a legal right to bring a lawsuit against the real estate agent.

Specific Performance Failure 

Real estate litigation often involves one party’s failure to perform the obligations required in the contract. When someone is a party to a residential or commercial real estate contract and does not perform a necessary action in the contract, the other party has a right to bring forth real estate litigation. The party who has been harmed can file a specific performance lawsuit to force the individual to comply with the contract terms. 

Suppose you are the buyer or seller in a real estate transaction, and the other party insists that you are not performing your obligations under the contract. In that case, you need to speak to an attorney as soon as possible. Depending on your case’s circumstances, you may need to fulfill all of the contract requirements.  

If you are unable to do so, your attorney may be able to recommend a course of action for you to avoid real estate litigation. Perhaps you can negotiate with the other party. In some cases, you may not be obligated to engage in the specific performance requested by the other party because the contract does not require it.

Boundary Dispute

When the parties in a real estate transaction have not correctly set forth the property lines, real estate litigation can result. In some cases, property boundaries are not correctly registered. And others, a practical property line used by the people who live at the property is not consistent with the legally registered property line. 

You can avoid real estate litigation involving boundary disputes by researching the legal boundaries of the property. After researching the boundaries, your lawyer will warn you about any potential lawsuits that could arise.

Contact a Real Estate Litigation Lawyer Today

Whether you need to bring a lawsuit against a buyer or seller, or you are defending against a lawsuit, we can help. Contact the real estate litigation lawyers at Bannon Law Group, LLC  today to schedule your initial consultation to learn how we can advocate for your rights.