As of March 16, 2020, it is clear America is in the fight of its life against an invisible foe known as Covid-19 aka the coronavirus. This foreign invader grows faster than compound interest. It is a true monster with exponential superpowers. In the course of 55 days (the number of days since the first American was confirmed to have this virus to now), this virus caused one of the strongest bull markets in stock market history to lose three years of gains and send a thriving economy into a recession.
With no cure or vaccine to fight it, self-imposed quarantining is the only way to slow its spread. Scientists do not even talk in terms of “stopping it”, their best hope is to merely slow it down while an under prepared healthcare system struggles to catch up. This is what has been described as flattening the curve. While older citizens with chronic health problems are believed to be the most vulnerable, young healthy people can spread the virus and that makes this a battle that everyone must join. It requires nearly complete cooperation.
The businesses most immediately impacted by this pandemic are those that rely on crowds to gather in their restaurants, gyms, and theaters, or at their stadiums, convention halls, or theme parks. If not now, sometime soon, even businesses who don’t depend upon crowds will feel the pressure of this pandemic as they depend on other businesses or those businesses employees to sustain their cash flow.
Some businesses will continue to operate as their employees work from home or work in isolation zones within the business itself. In the end, everyone will be negatively impacted. “What should we do”, you ask? There are certainly some very fundamental things all Americans must do now.
1. Get informed and stay informed. Listen to credible sources of news and information. Avoid unreliable sources. Currently, the Centers for Disease Control (CDC) is deemed a reliable source.
2. Honor the Federal, State, and local governments mandates on travel restrictions, business closures, and self-quarantine.
3. Be prepared, if necessary, to reinvent yourself. It may turn out that unemployed workers, such as waitresses and bar tenders or even out-of-work lawyers (for example), will need to be trained to work in special coronavirus wards to help fight this pandemic.
4. Prioritize your spending, if you have limited resources.
5. Be part of the solution by thinking of ways you can help keep businesses moving while protecting patrons. (I have a vision of a movie theater full of movie goers in hazmat suits).
6. Help those who need help. Give of yourself.
BUT WHAT ABOUT MY CASE?
Yes, indeed, you have legal issues and you may be wondering what all this means for your particular case. Most law offices are prepared with a continuity plan for emergencies like this. Lawyers can do much of what they do from home. They can continue to work on your case, generally, without the need to meet with you in person or to leave home, as long as they have a computer and a link to the internet.
For cases that are transactional in nature, such as preparing a Will or a Trust or a contract or forming a new business, lawyers are will suited to accomplish this work from their couch or home office. If your case is a matter pending before a court of law, then some work can be done outside of court by your lawyer working from home, but where hearings or trial are concerned, courts around the country are continuing trials and postponing everything on their calendars for the foreseeable future. This may be good, if you are a reluctant participant desiring to postpone the inevitable, but it may be bad, if you want your day in court so justice can prevail.
Some legal disputes avoid court all together where the parties agree to submit their dispute to an arbitrator or arbitration panel. These arrangements are typically worked out in advance by inserting these agreements into a contract. However, sometimes litigants make the decision to have an arbitrator decide their case after the dispute arises. This might be the case where they desire to have the matter decided quickly and avoid the long delays often forced upon traditional litigants in the trial courts.
The pandemic is changing the dynamics of everyday life in so many ways it is difficult to anticipate everything that will impact us. However, it is reasonable to expect many litigants who desire a quick resolution to their dispute to agree to submit their case to an arbitrator and therefore the demand for arbitration services is very likely to explode over the next few weeks and months. Where litigants are cash starved, they may actually benefit from these delays as it will permit them to modulate their cash flow with the circumstances impacting the court’s calendar. Being cash starved may also compel those who are desperate for cash to settle for less than they might otherwise accept under normal circumstances.
All litigants must take care to at least file their claims timely in order to avoid statutes of limitation and for that reason, even where cash or the lack of it is a concern, talking this point through with an attorney could enable them to anchor their claim now while delaying the progression of the procedural process. Some things just can’t wait.
If you are not impacted by cash flow and you have the means to bring or defend a case, you should know that most every lawyer in practice today will be able to assist you, provided they can work from home and have access to the internet. Hopefully, the coronavirus will not alter that in the future.
The term “land locked” refers to a parcel of real estate that has no direct access to a public road or highway due to being surrounded by parcels owned by other landowners. This situation is not common but does occur within the State of Indiana as well as all other states within the Union. Since the laws regarding property are specific to each state, this brief article will focus on the solutions to such problems under Indiana law.
In a perfect world every conveyance of land would result in a parcel to a new owner with access to a public road. However, that most generally occurs when the conveyance is intentional, voluntary, and accommodating to the necessity for ingress and egress. When a parcel is conveyed by other means, such as a tax sale deed, sheriff’s deed, or executor’s deed, access to public roads may not be assured.
Imagine owning a parcel of land that you cannot walk to or drive to. The only way to get to or from the land-locked parcel is by air. Such a limitation would render the property virtually useless to most people. Fortunately, Indiana law does have a solution in many cases.
The owner of a land-locked property should contact the owners of the neighboring properties and attempt to negotiate an easement over their land that will allow access to the land-locked property. This might be handled directly, or with the aid of a real estate agent or real estate attorney. A formal document drawn up describing an easement in terms of scope of use, location and dimensions can be negotiated to accomplish this. The party seeking an easement over the neighbor’s land generally pays for that right, just as if they were buying a parcel of real estate. If successful, the easement would be recorded in the county recorder’s office and referenced in all future deeds thereby giving notice to the world that a right of one landowner to cross the other landowners property in a designated spot is now permanent and will be conveyed to subsequent owners of both properties.
Neighboring landowners are not always willing to agree to such an arrangement, which almost always necessitates a lawsuit seeking the help of a Judge. Indiana law has given land-locked property owners the assistance they need for access to public roads by either declaring the existence of a public highway or an implied easement over the lands of a neighboring landowner.
Indiana courts have given a broad definition to the term “public highway” in limited circumstances. Where evidence is produced to demonstrate a path of common travel has been used for a period of twenty years prior to 1988 (when Indiana codified a more restrictive definition of public highway) Indiana courts have declared such a path to be a public highway. So, the use of the path must be shown to have been in use by 1968 or earlier. This use has few if any restrictions. Evidence of this use need not show any number of users. It need not show the frequency of the travel or its particular use. It need not be defined by structures or gravel, pavement or any other material. It also does not matter that the path terminates on the land-locked property or that the only people who used it were the people who either lived on the land-locked parcel or their guests. This remedy will be more difficult to prove as the years roll on, because much of the evidence necessary to demonstrate this use will die off with the people who would have personal knowledge of it.
More frequently, owners of land locked parcels seek to establish an implied easement, either by necessity or prior use. An easement by necessity can only be granted where the land-locked landowner can show that his or her access to a public road was cut off by a severance of a servant parcel. There must be evidence of “unity of title” showing the severed parcel was owned by the same owner immediately prior to severance. There can be no gap in that ownership. A parcel is servant to another parcel where it must permit the other landowner to cross its property. The servant property must bow to the dominant parcel to allow for such ingress and egress.
A similar remedy to the land-locked property owner is accomplished by establishing an easement by prior use. However, proof of the prior use relieves the plaintiff of the need to prove absolute necessity in the need to access a public road. A recent appeal by an Indiana court described the difference between easement by necessity and prior use as “An easement of necessity will be implied only when there has been a severance of the unity of ownership of a tract of land in such a way as to leave one part without any access to a public road. On the other hand, an easement of prior use will be implied where, during the unity of title, an owner imposes an apparently permanent and obvious servitude on one part of the land in favor of another part and the servitude is in use when the parts are severed . . . if the servitude is reasonably necessary for the fair enjoyment of the part benefited. Unlike a landowner requesting an easement by necessity, a landowner requesting an easement by prior use does not need to show absolute necessity. The focus of a claim for an easement by prior use is the intention for continuous use, while the focus of a claim for an easement by necessity is the fact of absolute necessity.” Collins v. Metro Real Estate Services LLC, 72 N.E.3d 1007, (Ind.App. 2017).
If you have land-locked property and unsympathetic neighbors, you are going to need to hire a real estate attorney and seek the court’s assistance in securing a court ordered access.
Marshall Welton, and Indianapolis businessman and real estate investor, along with eight other defendants (all companies owned by Welton), was recently named a defendant by the Fair Housing Center of Central Indiana as advocate for 12 individual Plaintiffs in a lawsuit filed in June of 2018 in the United States District Court for the Southern District of Indiana. The lawsuit alleged numerous violations of federal consumer protection laws, including the Fair Housing Act, Equal Credit Opportunity Act, Civil Rights Acts of 1866 and 1871, and the Truth in Lending Act. The lawsuit also alleged numerous violations of the Indiana’s consumer protection laws, including the Indiana Residential Real Estate Sales Disclosure Statute; the Indiana Landlord – Tenant Relations Statute, and the Indiana First Lien Mortgage Lending Act, the Indiana Consumer Credit Disclosures Act, the Indiana Consumer Sales Act, and the Indiana Home Loan Practices Act. The lawsuit reached settlement that produced the entry of a mutually agreed upon Consent Decree where no party admitted fault, but that will require the defendants to re-tool their operating procedures to insure strict compliance with the federal and state civil rights and consumer protection laws Defendants were alleged to have violated to begin with.
According to the Complaint, the Defendants were engaged in the sale and rental of central Indiana real estate to low income consumers who were largely members of the local Hispanic community which exploited their language limitations and need for housing. The Complaint describes how the Defendants engaged in a scheme designed to reap all the advantages of a landlord when it was expedient and advantageous and as a real estate seller, when circumstances were otherwise. Defendants allegedly skirted every relevant civil rights protection they were obligated to adhere to, as well as Indiana consumer protection laws. The Complaint also alleges Defendants mortgaged properties it sold to its unsuspecting clients without their knowledge or consent and without any subordination agreements with the lenders, making it virtually impossible for Defendants to deliver good title to Plaintiffs. Despite these allegations, the Defendants entered into a Consent Decree where they basically agreed to pay damages to the twelve plaintiffs, pay attorney fees to plaintiff’s attorneys, and amend their practices to comply with the various federal and state laws they were alleged to have violated in the first place. However, since the matter settled, there are no findings by the Court, nor precedent to be cited, enforced, or followed. At most, this arrangement serves as a warning that similar real estate investors plying the same tactics might find themselves named in similar lawsuits in the future.
The impact of this arrangement might be significant to the extent this group of defendants controls a substantial share of the market and their competitors are watching to see the outcome of this lawsuit. Certainly, anyone who would turn a blind eye to this lawsuit and continue to ignore the many federal and state statutes designed to ensure the civil rights of all Americans as well as their consumer rights must proceed at great peril to their financial interests. Undoubtedly, many will do just that, because consumers will rarely recognize how these investors are violating the law and how their rights are being violated. Opportunists will fill in the gaps.
For those would be landlords and/or sellers of real estate, and the professionals who assist them, great care should be given to insure they do not violate any of these statutes while attempting to sell or lease their real estate. Leasing or selling a residential home to anyone individual who intends to live in the home as their primary personal residence, triggers a whole host of obligations that mandate prudent action and carefully worded disclosures in order to avoid running afoul of the Fair Housing Act, the Equal Credit Opportunity Act, the Truth in Lending Act, the Indiana Residential Real Estate Sales Act, the Indiana Landlord – Tenant Relations statute, the Indiana First Lien Mortgage Act, the Consumer Credit Disclosure Act, and the Deceptive Consumer Sales Act. Equal Protection, the Civil Rights Act of 1968, the Americans with Disability Act may also relate to a lease or sale of real estate. When a real estate transaction turns bad, parties on both sides of the deal would be well advised to seek the assistance of an Indiana real estate attorney.
So if you think the statement Have You Been Discriminated Against applies to you, contact us. We can help you. While exemptions exist regarding some of these Acts no individual can be exempt as to all these applicable laws and consequently, investors and real estate professionals should be vigilant in their efforts to play fair and follow the law. The next defendant may not be so fortunate to secure a settlement where no legal findings and judgments are rendered against them. They may end up carrying that judgment like a bad tattoo forever tainting their name in local real estate markets.
No matter what your “rent to buy” contract might say, if it quack’s like a lease, and walks like a lease, then it must be a lease. If it’s a lease, then you’re either a landlord or a tenant.
Many people are attracted to ads that offer to sell them a home on a “rent to buy” basis. These arrangements have become more popular as the requirements necessary to secure conventional mortgage financing became more difficult to satisfy. Recently the Indiana Supreme Court addressed the enforceability of one particular buyer/seller agreement, and its decision will no doubt go a long way toward protecting buyers who might otherwise enter into such oppressive contracts. In the Rainbow Realty vs. Carter case, the Indiana Supreme Court held “the parties’ “rent to buy” agreement is not a land-sale contract, but a rental agreement subject to Indiana’s residential landlord tenant statute.
The “buyers” in the Rainbow Realty case entered into a “rent to buy” agreement which contained contractual features that appeared similar to a land-sale contract, but which also included features similar to a lease. The general concept of the agreement was to allow the “buyers” to make payments toward the purchase of the property, while granting the Seller all the controls of a Landlord. When tenants fail to pay rent, landlords simply sue for eviction and recover possession, unlike sellers in a land-contract, who must go through the long and expensive process of a foreclosure action. In a foreclosure action the seller sues to foreclose on the land-contract just like it was a mortgage. The Seller must secure a judgment against the buyer(s), have the Judge send the real estate to a sheriff’s sale, where it will be sold to the highest bidder. Rainbow Realty wanted have its cake and eat it too. If the “buyer” defaulted, they wanted to take back the real estate as though they were the landlord. The trial court refused to enforce that contractual option and the Supreme Court ultimately affirmed that ruling.
The Supreme Court found the contract was essentially a lease, because it did not give the buyers equitable title while at the same time the seller retained the right to evict and recover possession. With those features written into the agreement, the seller was exerting too much control over the buyers. The fact the home had no running water, or heat, and was essentially a bug and rodent infested shell of a house convinced the Court the sellers were actually landlords who had violated Indiana’s residential landlord tenant statute.
For sellers of real estate in Indiana, this decision serves as a warning to avoid the pitfalls of a written agreement that looks like a lease while including terms similar to a land-contract. For buyers, this decision serves as a measure of protection for them against sellers wishing to engage them in oppressive real estate transactions.
Rob McNevin is a real estate attorney located in Indianapolis who has been practicing since 1995. He is a partner with McNevin & McInnes, LLP with years of experience in real estate and construction related matters.
Is there anything more exhilarating than selling your house without paying a big commission? In 2017 thirteen percent of all home sales in the United States were transacted without a realtor, according to the National Association of Realtors. That equates to approximately 716,300 homes sold without paying a real estate agent, nationwide.
Most real estate sales end happily ever after, including the For Sale By Owner Indianapolis (FSBO) transactions. That is most, but not all. Because the seller is typically in receipt of the net sale proceeds at closing, sellers rarely find themselves with any complaints. The overwhelming majority of real estate lawsuits are initiated by disgruntled buyers, who sue their sellers. The buyer takes the risk that they won’t have problems with their home, and the seller takes the risk they won’t be sued. Capeesh?
So, buyers and sellers are both at risk in the real estate game. Since buyers almost never pay their realtor to help find them a home, they should have few reservations about hiring a qualified, experienced real estate broker to help them. However, many realtors won’t waste their time negotiating with a FSBO, because it is too easy to find a home with an advertised commission split right on their multiple listing service. Where the buyer desires to buy a home from a FSBO, then hiring a real estate attorney is very much advised.
Sellers, on the other hand, must weigh the high cost of a commission against the value of the services provided. It is hard to argue that those commissions aren’t worth paying, when you don’t already have a buyer, just as it is hard to justify paying a large commission when you do have your own buyer. That is because the value of having a professional listing on a multiple listing service is quite significant. A seller can’t sell, if he or she doesn’t have a buyer.
Real Estate brokers vs. Real Estate attorneys, what’s the difference?
They offer very different services, designed to facilitate a clean real estate closing. Real estate brokers / agents cannot give legal advice and they cannot practice law. Yet most every document from the listing agreement to the deed of sale is a legal document. These real estate professionals work with pre-drafted forms that merely require them to fill in the blanks. The forms are by and large very well drafted, and time tested. These real estate professionals also offer access to a net based multiple listing service that broadcasts your listing to everyone who has access to that system, including buyers without real estate agents. They put signs in your yard; hold open houses and make your home available for viewing to potential buyers. Of course, this comes at a cost of 6 or 7% of the purchase price. It’s not exactly cheap.
The real estate lawyer, on the other hand, prepares the documents and agreements that make up the real estate transaction and help insure their client is protected whether they represent the buyer or the seller. The fees for these legal services are typically much less than a real estate commission, but the attorney typically is paid whether the sale closes or not. Many attorneys will provide continued support for a subsequent transaction at a reduced fee if the original purchaser fails to close, since much of the work necessary to transact the closing has already been done. Real estate lawyers understand the law as it relates to your sale or purchase and are the only real estate professionals who can advise you as to your rights and risk of liabilities.
The FSBO desiring to avoid the high cost of a sales commission may find hiring a real estate attorney to be a very affordable alternative to hiring a real estate broker, particularly, if they already have a buyer. Expending some effort to guard against potential disputes is key to any “sound business plan” and while selling a house may not necessarily be business, guarding against risk is “good business” for everyone.
The risks inherent in a real estate transaction are substantial. If buying a house is the largest single purchase most Americans will ever make, then the potential for financial loss may likewise be the biggest risk they ever take. Common disputes include breach of the purchase agreement (breach of contract), earnest money refunds, fraud – actual and constructive, easement rights, undisclosed special assessments, defective construction, mold, closing cost apportionment, title problems, zoning issues, restrictive covenants, flooded basements, defective septic tank systems, encroachments, insect infestation, radon gas, taxes, mechanic liens, tax liens, judgment liens, claims for specific performance, and more. While the risk is inherent, it can be substantially minimized with the assistance of a real estate professional, whether that is a real estate broker or a real estate attorney. The point is perhaps best summed it with the old adage that an ounce of prevention is worth a pound of cure. There are few if any transactions where this advice would be more warranted. Go it alone at your own substantial risk.
Rob McNevin is a real estate attorney located in Indianapolis who has been practicing since 1995. He is a partner with McNevin & McInnes, LLP with years of experience in real estate and construction related matters.
For most Americans, the purchase of a new home is the fulfillment of the American Dream. It’s an opportunity to own a piece of the Earth, an opportunity to build wealth and financial security. But all too often that opportunity turns into a nightmare. Even when you hire real estate professionals to guide you through the maze of potential issues, it’s easy to come out on the short end of the stick.
“What could go wrong,” you ask? This article will discuss some of the more common problems that arise when purchasing residential real estate in the State of Indiana. While some of the issues described in this article might be a concern in any state, this discussion will focus on Indiana real estate and Indiana law as it applies to these concerns.
Problems most commonly suffered by purchasers of residential real estate in Indiana include:
1. Purchase
agreement disputes;
2. Title
issues;
2. Hidden
defects within the building structure;
3. Boundary
encroachments;
4. Zoning
problems;
5. Easement
issues;
6. Insect
infestation;
7. Hazardous
materials;
8. Neighborhood
covenant issues;
9. Predatory
lending;
10. Real
Estate Settlement Procedures Act;
11. Fraud;
12. Warranty
issues;
13. Mold
problems.
PURCHASE
AGREEMENT DISPUTES
A contract for the sale of real estate is not enforceable in the State of Indiana, unless it is in writing and signed by both parties to the sale. Therefore, a written contract is the generally accepted means of purchasing and selling real estate. When you think about the myriad of issues that give rise to conflicts during a real estate transaction, there should be no doubt about the importance of a written agreement. Real estate professionals typically use boilerplate forms, which are tried and proven in their ability to address most of the contingencies that might arise between the time the offer is made and the time the closing is concluded. However, despite the best laid plans of the drafters and the real estate professionals who fill in the blanks, things often go wrong.
Buyers and sellers need to be concerned about such things as deadlines for submission of earnest money, deadlines for closing, insurance coverage up to the transfer of ownership and thereafter, right to inspect the property, right to withdraw the offer, right to make repairs, right to possession, responsibility for property taxes, express and implied warranties, what appliances and other personal property stay with the real estate, and more. By reaching agreement on these issues at the inception of the contract, the parties can expect to avoid problems later. When contingencies arise, some parties find themselves inextricably shackled to a legal problem and those legal problems are often complex enough to require the assistance of an experienced real estate attorney.
WHAT
YOU SHOULD DO TO PROTECT YOURSELF.
There is not much the seller needs to do to guard against contract disputes other than to play fair and hire experienced real estate professionals to assist with the sale. The buyer should do the same, but keep in mind there are so many unknowns from the buyer side of the transaction, a buyer cannot afford to be anything less than vigilant. “Let the buyer beware. A simple checklist may go a long way toward guarding the unsuspecting buyer from a disastrous transaction.
BUYER’S
CHECK LIST
1. Consider
making your purchase subject to financing, even if you are not
dependent upon financing. This may give you an escape option you
might not otherwise have.
2. Require
a Warranty Deed and an insured closing through a reputable title
company, whenever possible.
3. Make
your offer subject to inspection, and then hire an inspector to
inspect the home. Don’t sign a contract with an inspector, if he
limits his liability in any substantial way. It is not
unreasonable, however, to limit their liability to matters which can
be seen by a visual inspection.
4. Be
sure to have a pest inspection. This type of inspection is usually
not included within the scope of a standard home inspection.
5. Have
a survey performed by a licensed surveyor and then review the survey
and the property by personal inspection to rule out the possibility
that structures on the real estate or neighboring real estate are
encroaching and to insure the existing structure does not violate
any city or neighborhood set-backs.
6. Review the Indiana Seller’s Real Estate Sales Disclosure Form carefully, and ask about matters that might not be disclosed on the form, such as prior illegal drug dealing activity at the location, and other psychologically related history. (No such form is required for new construction or for sellers who never owned or lived in the home, such as the County Sheriff, or the Executor of an estate).
7. Ask
for a copy of the covenants. Under Indiana law, a buyer of
residential real estate can withdraw the purchase offer, if they
make a timely objection to the covenants. So be sure
to obtain a copy, review it carefully, and prepare to object timely,
if you can’t abide by the restrictions and obligations set forth
within the covenants.
8. Require
licensed contractors to perform all work required by any inspection
response and always, always, always have the inspector re-inspect
the property after the work has been completed to insure the work
was performed properly and according to code. You won’t get
another bite of this apple after the deed transfers into your name.
9. Have a radon test performed, and if radon is discovery, make sure remediation is confirmed prior to closing. The EPA recommends remedial action be taken, if radon is discovered above 0.4 pCi/L.
10. If you are buying from a builder or developer, require a written warranty and a signed vendor’s affidavit at closing.
11. Never close without a title search.
12. Insure access to the property is either directly connected to a county or state road, and if it is not, insure a proper easement is in place to insure you won’t be held hostage by a neighbor on whose property the driveway may traverse.
13. When purchasing a home with new appliances demand all owner’s manuals and product warranty information, where applicable.
14. Never waive the walk-through prior to closing.
Ownership of real estate is evidenced by a deed of conveyance. Conveyance requires a document containing a legal description indicating the Seller is granting to the Buyer the real estate described therein. It also requires the deed be delivered by the Seller to the Buyer. It does not require the deed be recorded. However, recording your deed is the best way to insure your deed is valid and superior to any subsequent deeds of conveyance from the same Seller.
Common problems with title to real estate include errors in the deed, liens, encumbrances, restrictive covenants, easements, survivorship rights, incompetency of grantor, bankruptcy, divorce, encroachments, judgment liens, tenants, and Lis Pendens notices. When your purchase is closed through a title company, a title search is expected to reveal problems that might interfere with a buyer’s interest. When problems are discovered, they are either resolved, waived, or unable to be resolved, in which case the closing will almost always be halted. However, some problems don’t get discovered until after closing, and sometimes closings occur without a title search, as might be the case when closing a cash sale or land sale contract.
Where the buyer is purchasing without an insured closing or without the benefits of title insurance, the following checklist should be helpful to avoid the more common problems clouding title.
1. Order
a title search prior to closing. (A title search does not give you
title insurance).
2. Order
a survey. You may not need a staked survey, unless there are
structures that appear to be situated close to the presumed property
lines.
3. Search
the public records for Lis Pendens notices, which are typically filed
with the clerk of the Courts in the county where the real estate is
situated.
4. While
at the clerk’s office, do a search for the Sellers’ names to make
sure there are no active lawsuits or unsatisfied judgments against
them. Buying real estate from a Seller who has an unsatisfied
judgment could subject your property to the judgment lien.
(Information found at the clerk’s office will typically appear on
a title search).
5. Review
any covenants for limitations on the use of the property.
6. If
there is any reason to suspect the Seller is not of sound mind or
incapacitated in any way, then hire a lawyer to help you find out
and look for ways of avoiding a void or voidable real estate
transaction.
7. Search
the federal bankruptcy records to make sure the Seller is not
currently in bankruptcy. Once a Chapter 7 or 13 bankruptcy
proceeding is filed the Bankruptcy Trustee usually takes over legal
control of the property making a conveyance without the Trustee’s
consent void. (This information will typically appear in a title
search).
8. A
search that reveals your seller is a party to a pending divorce could
signal problems as well. Indiana law treats all real estate owned
by a married individual as marital property, which may give the
spouse rights to the property even if his or her name is not on the
deed.
9. If
you are purchasing on contract, make sure the Deed is signed and will
be held in escrow by an institution independent from the seller that
can be expected to be in existence when the payoff is anticipated.
10. Purchasers
in a land sale contract should also require their payments be sent
directly to the Seller’s mortgage company, if possible, to guard
against foreclosure. This is a common problem for purchasers in
these types of sales.
11. The
same issues regarding mortgage payments should apply to the payment
of property taxes and casualty insurance.
HIDDEN
DEFECTS WITHIN THE BUILDING STRUCTURE
It is nearly impossible to build a perfect home or building. Problems occur due to poor quality workmanship or materials. Sometimes external forces can cause construction systems and appliances to fail. The list of problems that commonly occur are too numerous to mention here, but there are some fundamental things even the most inexperienced buyer can look for.
The roof and the foundation are two fundamental components that should never be overlooked. Shingled roofing which shows signs of aging, such as missing shingles or discoloration, may be due for a replacement. Foundations with noticeable cracks may indicate serious structural problems exist elsewhere within the structure. Highwater marks in the basement evidence flooding problems. Uneven floors, doors that do not close properly and cracks in drywall or plaster are also indications of foundation problems. If you see any of these issues, think twice about making an offer, unless you are prepared to live with problems that will almost certainly result, even if repairs are made prior to closing.
It may surprise you to learn that once you make an offer to purchase subject to inspection, that you are bound to follow through with the purchase even if your inspection reveals problems, provided the Seller agrees to fix those problems. The only exception under Indiana law is typically that you may rescind the agreement, if you find major structural problems.
Frequently, a buyer asks for the problems noted in the inspection to be repaired prior to closing, and the Seller agrees to repair, but the Buyer learns all too late the problems are not properly repaired. This is often due to the Seller attempting to do the repairs himself rather than hiring it out to licensed contractors, and the Buyer failing to have a follow up inspection conducted.
While this article is not intended to address common problems associated with the purchase of commercial properties, it is not uncommon for properties which once served as a commercial property to become residential. Where that is the case, an environmental survey should also be performed, especially if there is any reason to believe the prior commercial use was related to any type of enterprise where toxic or hazardous chemicals were used. Underground tanks can become a huge headache for unsuspecting buyers, because they will eventually breakdown and leak and the residual contents in those tanks will leach into the soil and contaminate everything it comes into contact with, including drinking water from nearby wells.
BOUNDARY
ENCROACHMENTS
Boundary lines are determined by the legal description. They are not determined by fence lines and other physical structures. In other words, you can’t tell where the property line is simply by looking at structures built upon it. Therefore, it is important to know where the property lines are before you purchase.
Garages, driveways, fences, and utility lines are among the most common structures found to encroach upon another land owner’s property. Resolving encroachment problems can be very expensive, especially where a structure must be moved or torn down.
Having a survey performed prior to closing is the easiest way to shift responsibility for these problems back to the Seller prior to closing. Failing to catch an encroachment problem after you close may leave you with no recourse against the seller, unless you can prove they defrauded you in the Seller’s Residential Real Estate Disclosure Form.
ZONING
PROBLEMS
Buying a home in a platted subdivision is not likely to lead to zoning problems, provided your intended use of the property is simply residential, but many homes don’t exist in these residential developments. For properties that are not located in a residential subdivision, be sure to do your homework.
Zoning dictates the way a property can be used and where and how structures can be built. Almost all properties in Indiana have setback requirements for building purposes. It is good to know what those setbacks are before you buy. It is also helpful to know how other properties near the property you are interested are zoned.
When zoning conflicts arise, property owners typically seek out the assistance of a real estate attorney to help them either petition the local zoning board for a rezoning order, or a variance, which is like a temporary re-zoning and it typically expires upon the sale of the property to another seller or change of use.
Be sure to carefully review the seller’s statements on the Indiana Residential Real Estate Sales Disclosure form as they pertain to zoning, and everything else on that form for that matter. If zoning issues arise later, this may be your only port in the storm.
EASEMENT
ISSUES
When a utility company or neighboring property owner desire the right to use a portion of another property owner’s real estate, they typically secure that right by means of an agreement, called an easement, which is recorded in the county Recorder’s Office. These easements are called appurtenant easements and they run with the land. This means the easement will remain and pass with the property when the property is sold. The property owned by those granted the right to use the other property is considered the dominant parcel. The property granting the use is the subservient parcel.
One common problem occurs where a new property owner discovers his driveway passes over a neighbor’s property, but no easement was ever created. This might happen, for example, where the one property owner granted the neighbor a license to use the property. Since the license expires upon the sale of the property, the new owners may find themselves cut off from the use of the driveway to their home.
It is imperative to know before purchasing whether the property has direct unfettered access to a public thoroughfare. If not, stop the presses! Secure an easement with the aid of the Seller before closing.
INSECT
ISSUES
Insects are everywhere and usually in places you can’t see with a casual inspection. Some insects, such as cockroaches and bedbugs pose a serious health concern. Others, such as Carpenter Bees, Carpenter Ants, and Termites pose a threat to the building structure itself.
Experts say termite damage costs homeowners billions of dollars every year in the United States. They work fast and silently and, if unchecked, they can do sever damage to the structure of any building or home.
Have a Wood Destroying Insect Infestation Inspection done at the same time as the Property Inspection. Remember the best time to have the problem addressed is before you close. If you ask the Seller to treat the problem and he/she refuses, you may have the right to terminate your contract under Indiana law.
HAZARDOUS
AND TOXIC MATERIALS
Much has been done in the last several decades to clean up hazardous waste. The Environmental Protection Agency is the federal enforcement agency in charge of sites where problems of hazardous waste and toxic materials contaminate the land. While they are aggressive administrators of the agency and its goals, they cannot be everywhere. Contamination continues to be a big problem, both in industrialized urban areas as well as rural areas where farming is the most prevalent industry.
Factories, whether they are actively manufacturing or not, may have a long-term contaminating impact on surrounding land. Farming operations may have a similar impact on surrounding real estate. For this reason, it is important to do your homework before you buy.
Rural areas tend to experience more problems with contaminated drinking water than urban areas because rural areas rely so much on wells as a water source. Some of the more common sources of this contamination come from farmland runoff containing animal feces, fertilizer, herbicides, and insecticides. Another common contributor is the poorly serviced or inadequate septic systems on site or from neighboring properties.
Environmental surveys can be expensive, but not as expensive as unknowingly purchasing a property with environmental problems. Ask the seller for copies of any prior environmental surveys. Consider having your own survey done. Commonly a Phase I environmental study can determine whether there is evidence of contamination on the site or surrounding properties without the expense of core sampling. If a phase I assessment reveals cause for concern, then a Phase II might be required to conduct core samples, and when contaminants found, a phase III may be required to assess the full scope of the problem. For commercial and industrial real estate purchases, banks typically require some environmental assessment. Purchasers of residential real estate near farms or other commercial or industrial sites may find it prudent to follow the same course of action.
NEIGHBORHOOD
COVENANT ISSUES
Real estate which is developed as part of a residential plat plan or industrial or commercial park, frequently comes with private land use and development restrictions attached to it. These private restrictions are placed on the land when the owner or developer of the larger development places restrictions on the use of the individual parcels sold to individual buyers. These restrictions are generally intended to harmonize the use of the real estate with neighboring parcels, and help insure minimum standards with the hope subsequent owners will refrain from activity that would harm the value of the development.
Covenants may specify the set-back lines for buildings, the size and style of structures, the materials which must be used to erect the structures, even the type of flowers you are permitted to plant in the front yard. Covenants may affect a great many aspects of a property owner’s use.
Amending or vacating the covenants typically requires a unanimous consent of all property owners within the development. Alternatively, the purchase by one buyer of all parcels within the development would also vacate the easements by the doctrine of merger. Consequently, covenants are generally scene as permanent restrictions. Given the rigidity of such restrictions, it is crucial for purchasers to become acquainted with these covenants before purchasing.
For residential purchasers who submit written purchase offers, they are entitled to withdraw their offer to purchase, if they timely object to any provision found within such covenants. The timeline for raising such an objection is ten days from the date the covenants are submitted to the purchaser. This is one of the few “escape hatches” to a purchase agreement under Indiana law.
PREDATORY
LENDING
The term “Predatory Lending” is a catchall phrase referring to abuses lenders sometimes employ unfairly and deceptively to the disadvantage of unsuspecting borrowers. These abuses typically occur in the “sub-prime” end of the residential mortgage industry and include the following:
Inadequate
disclosures in the loan process;
Risk-Based
interest rates (pricing);
Inflated
or unwarranted closing fees associated with the loan;
Requiring
or urging borrowers to buy loan insurance (Loan Packing);
Use
of balloon payments to trigger future refinancing fees;
Negative
amortization;
Unusually
high pre-payment penalties.
Borrowers who suspect they are victims of predatory lending should consult a real estate attorney. One option a borrower has through the Truth In Lending Act (TILA) is the right of rescission. They may also sue for actual damages.
REAL
ESTATE SETTLEMENT PROCEDURES ACT (RESPA)
The Real Estate Settlement Procedures Act (RESPA) was enacted by the United States Congress in 1974 to protect home buyers from being cheated by unscrupulous real estate professionals. The Act applies to all real estate closings that deal with government insured loans. Commercial and construction loans are generally exempt from these regulations. The Act is designed to tightly control the procedures used to close a residential real estate transaction and insure the consumer is given timely, relevant, and accurate information about their loan and the closing process. The Act also made the common practice of paying out “undisclosed kick-backs and referral fees” illegal.
Borrowers have three (3) days in which to rescind their loan and this information must be made known to them during the closing of the loan, as required by RESPA. Rescission may also be an appropriate remedy where the lender otherwise violated RESPA requirements. Alternatively, violations of RESPA can lead to the recovery of actual damages plus attorney fees, and is most often used in defense of a mortgage foreclosure action. Borrowers, who believe they may have been victimized by someone during the closing can send a Qualified Written Request (QWR) to their lender requesting information pertaining to their loan and associated closing documents. Upon receipt, the lender must provide the requested information within 30 days. The information obtained as a result of the QWR may help document a RESPA violation. This can be a game changer for homeowners facing foreclosure.
FRAUD
For disgruntled real estate purchasers, fraud is the key that opens the lock to a lawsuit they would not otherwise be able to maintain. This is because Indiana permits sellers to use the “Merger by Deed” defense to lawsuits against them by buyers who believe the real estate somehow fails to exhibit the qualities they expected when they agreed to purchase. The rule provides absent fraud or mutual mistake of fact, all prior and contemporaneous negotiations, or executory agreements, oral or written, leading up to the execution of the deed are merged into the deed and are thereby satisfied. That leaves fraud and mutual mistake, and of the two, fraud is generally most supportable.
Fraud is generally defined as the making of an intentionally false statement of past or present fact, to another party, who justifiably relies upon the statement and suffers some form of detriment or injury. Note that “future facts”, such as “I’ll gladly pay you Tuesday for a hamburger today” must be distinguished from past or present facts, because future facts that turn out to be false are merely broken promises. They are broken contracts, while false statements of past or present facts make the claim that some fact exists now or existed in the past.
Fraud is criminal in nature and forms the basis for many lawsuits filed by dissatisfied purchasers, when their newly purchased home turns out to be a lemon or not as represented by the seller. The two primary documents that provide the evidence are the listing itself, and more importantly the Indiana Residential Real Estate Seller’s Disclosure Form (“Seller’s Disclosure”). The Seller’s Disclosure is signed under oath by the seller when the real estate is first listed for sale, and again at closing.
Because the standard of proof for a fraud claim is clear and convincing evidence, a purchaser must have very strong evidence to demonstrate the seller knowingly made false statements on the disclosure form. Absent clear and convincing evidence, a purchaser will find it difficult to succeed with any type of claim against the seller.
WARRANTY
ISSUES
A warranty is like an insurance policy that gives the holder the right to have an item of property, real or personal, replaced or repaired, by the party extending the warranty. The warranty is a benefit paid for with bargained for consideration, and where the consumer has not fully paid the seller, the requisite consideration may not trigger the benefits of the warranty.
Warranties related to real estate transactions generally include builders’ warranties, contractors’ warranties, third-party home-buyer warranties, appliance warranties, and implied warranties. Under Indiana law, builders who sell new homes must provide a written (10-4-2) warranty which warrants against major structural problems for ten (10) years from the purchase date, roof shingles and structure for four (4) years from the purchase date, and all other workmanship and materials for two (2) years from the purchase date. Implied warranties of habitability, good workmanship, and fitness for a particular purpose may also apply, unless specifically excluded by appropriate language placed within the purchase agreement that meets Indiana’s construction warranty statutes.
Sellers and buyers of existing homes may also incorporate a limited warranty for used homes into the sale. Such a warranty is sometimes paid for by the seller as an incentive to the purchaser. It is sometimes obtained by the purchaser at their own expense to help insure against the unknown.
Warranties issued by appliance manufacturers become binding contracts between the manufacturer and the home buyer once the products are registered with the manufacturer. Claims that arise under these arrangements must be resolved by the owner and manufacturer, typically without the involvement of the builder or seller.
One important thing to know about any warranty is that they usually expire after a certain amount of time, and they are almost always triggered only when the consumer follows the specific directions found within the warranty itself about notice to the party obligated to back the warranty.
MOLD
PROBLEMS
There are over 100,000 types of mold. Mold, in general, is not particularly dangerous, except when individuals with hypersensitivity to allergens encounter its spores. Those with hypersensitivity to mold may suffer asthma, lung infections, or sinus attacks. Sometimes mold can become toxic, which can cause those who come in to contact with it to become very sick, even if they don’t have any hypersensitivity to mold. Some toxic mold spores have been blamed as the cause of death to infants and pets.
It is difficult to pin liability for the growth of mold on any individual person or entity, because mold is known to grow anywhere there is moisture. All homes have moisture. Therefore, proving the seller or builder is somehow responsible for the growth or existence of mold may be difficult. It may be a bit easier for a tenant to hold a landlord liable, particularly where the landlord is responsible for the maintenance of the home.
SUMMARY
The issues described above represent common real estate problems affecting the sale of real estate. They are by no means an exhaustive list. What is obvious from this brief survey of real estate related issues, is that there are a great number of legal issues that affect real estate and the people who buy and sell it. When things go wrong, consult with a qualified experienced real estate lawyer, and take steps to protect your rights and your investment.
Each year thousands of Hoosier homeowners fall victim to unscrupulous home improvement contractors. Homeowners frequently report shabby workmanship, unfinished work, over billing, building code violations, high pressure sales, and disappearance upon receipt of down payment money. In a culture where so many have grown accustomed to doing business on a handshake, the unsuspecting homeowner is ripe for the picking, thus the beginning of the nightmare of home owners vs bad contractors.
The Indiana legislature became aware of these complaints in the 1980s and developed several statutes with the specific intention of protecting consumers. These statutes are generally regarded as consumer protection statutes and they impose an obligation on the merchants and/or contractors to deal fairly with their customers or expect to pay for your transgressions. In the realm of home improvement contracts, Indiana law has developed a general deceptive sales act and a more specific home improvement contract act, with work together for the benefit of the consumer. The more general Deceptive Consumer Sales Act lists among its many prohibited acts, any violation of the Indiana Home Improvement Contract Act (HICA). The latter mandates the minimum requirements of an Indiana home improvement contract, and the former sets forth the sanctions for such violations.
(a) A real property improvement supplier shall provide a completed contract to the consumer before it is signed by the consumer. Except as provided in subsection (c) below, and subject to subsection € and section 10.6 of this chapter for contracts entered into after June 30, 2017, the following minimum requirements must be incorporated:
The Name of the consumer(s), and the address of the property where the work will be performed.
The name and address of the contractor, and for contracts entered from July 1, 2017 and thereafter, an e-mail address where the consumer can communicate with the contractor by electronic mail. If a separate person, address, phone, or e-mail is designated for consumers to report problems or make inquiries, then the name, telephone number, and e-mail address for the individual to whom problems or inquiries may be directed.
The date the contract was submitted to the consumer, and any time limitations for the consumer’s acceptance. [Where a contract was procured by either door-to-door or telephone cold calling, the consumer has three days in which to rescind the contract].
A reasonable detailed description of the home improvements to be completed, or a statement that the specifications of the home improvement project will be supplied to the homeowner at a later date, but prior to the commencement of any work, and notice to the consumer that their separate written approval shall be required before the commencement of any work. If the home improvement project is entered into for damage, loss, or expense that is to be paid, in whole or in part, from insurance proceeds or for which a third party is liable, the description must set forth the specifications to the extent that the damage, loss, or expense is reasonably known by the home improvement supplier. Alternatively, if the home improvement project is entered into for damage, loss, or expense that is to be paid, in whole or in part, from insurance proceeds or for which a third party is liable the description may be satisfied with a statement that the real estate will be restored to the same condition in which the real estate existed before the damage, loss, or expense occurred or a comparable condition.
If the description required by subdivision (4) does not include the specifications for the real property improvement, a statement that the specifications will be provided to the consumer before any work begins and that the contract is subject to the consumer’s separate written and dated approval of those specifications, before the work will commence.
The approximate starting and completion date for the project. If the home improvement project is entered into for damage, loss, or expense that is to be paid, in whole or in part, from insurance proceeds or for which a third party is liable, the approximate start and completion dates must be stated to the extent that the damage, loss, or expense is reasonably known by the home improvement supplier. Alternatively, if the home improvement project is entered into for damage, loss, or expense that is to be paid, in whole or in part, from insurance proceeds or for which a third party is liable then the completion date may be expressed in terms of the number of days elapsed from the date when sufficient approval of the insurance carrier authorizes adequate repair or restoration of the property.
A statement of any contingencies that might delay the start or completion dates. If the home improvement project is entered into for damage, loss, or expense that is to be paid, in whole or in part, from insurance proceeds or for which a third party is liable, the statement of contingencies that might delay the start or completion of the project must be stated to the extent that the damage, loss, or expense is reasonably known by the home improvement supplier.
The price of the home improvement project. If the home improvement project is entered into for damage, loss, or expense that is to be paid, in whole or in part, from insurance proceeds or for which a third party is liable the contract may express the price in terms of the consumer’s liability for payment after the application of the insurance proceeds or payments from a liable third party.
Subject to subsections (b) and (c)(8), a statement as to whether any third party, including subcontractors, vendors, or other persons, who are not a party to the contract, will be furnishing or leasing any labor, services, materials, equipment, or machinery to or on behalf of the home improvement contractor in conjunction with the home improvement project. If the home improvement project is entered into for damage, loss, or expense that is to be paid, in whole or in part, from insurance proceeds or for which a third party is liable, the contract must contain a statement that neither the supplier nor any third parties not a member to the home improvement contract, but who otherwise lease or furnish labor, services, materials, equipment, or machinery may initiate or pursue any claim with the insured consumer’s insurance company.
Signature lines for the home improvement supplier or its agent and each homeowner to sign and a space for each name to be printed either directly below or after the signature.
(b) The contract must be in a form that each consumer who is a party can reasonably read and understand.
(c) If the home improvement project is entered into for damage, loss, or expense that is to be paid, in whole or in part, from insurance proceeds or for which a third party is liable the contract may permit the commencement of work prior to the approval by the insurance carrier, but such election must be in writing, signed by the consumer, and specify the consumer shall only be liable to the extent the contract contains written specifications, and if applicable is approved by the insurance carrier.
(1)If the home improvement project is entered into for damage, loss, or expense that is to be paid, in whole or in part, from insurance proceeds or for which a third party is liable and the project includes one (1) or more exterior improvements, the contract must inform the insured consumer of the insured consumer’s rights under section 10.5(b) of this chapter (I.C. 24-5-11-10.5) by furnishing the consumer with a typed statement in duplicate easily detachable from the home improvement contract that in the event the consumer’s insurance carrier that all or any part of the claim is not covered under the loss provisions of the insurance policy, then the consumer may use the attached form to send notice to the home improvement supplier of their intention to terminate the home improvement contract within three (3) days of the insurance carrier’s notice.
For contracts signed after June 30, 2017 which contain one or more exterior improvements, the following notice must also be included:
[ “You may cancel this contract at any time before midnight on the third business day after you have received written notification from your insurance company that all or any part of the claim or contract is not a covered loss under the insurance policy. See attached notice of cancellation form for any explanation of this right.”]
A boldface “NOTICE OF CANCELLATION” for in duplicate must also be attached to the contract, which is easily detachable, containing the following notice in 10 point type or larger:
“If you are notified by your insurance company that all or any part of the claim or contract is not a covered loss under the insurance policy, you may cancel the contract by mailing or delivering a signed and dated copy of this cancellation notice or any other written notice to (the home improvement supplier, with the address provided thereon) at any time before midnight on the third business day after you have received such notice from your insurance company.
If you cancel the contract, any payments made by you under the contract will be returned to you within ten (10) business days following receipt by (real property improvement supplier) of your cancellation notice, minus any amounts you may owe for work already done by (real property improvement supplier).
I HEREBY CANCEL THIS TRANSACTION
_____________________________________
(DATE)
_____________________________________
(INSURED CONSUMER’S SIGNATURE)]
(2)If the home improvement project is entered into for damage, loss, or expense that is to be paid, in whole or in part, from insurance proceeds or for which a third party is liable, and the home improvement supplier and consumer DO NOT HAVE A PRIOR BUSINESS RELATIONSHIP, then the home improvement supplier may not enter into a contract with an Indiana consumer, unless one of the following apply:
The supplier resides, is domiciled, or is authorized to do business in Indiana.
The supplier maintains one (1) or more fixed physical locations within the state of Indiana where the supplier engages in or solicits home improvement contracts with consumers; or
The supplier has appointed a resident agent in Indiana to receive service of legal process.
(3) For real property improvement contracts executed after June 30, 2017 the contract must inform the consumer that neither the real property improvement supplier nor any third party subcontractor, material man, or equipment lessor, may initiate or pursue a claim with the insured consumer’s insurance company.
(d) The act, while not requiring any particular language be inserted into the real property improvement contract, strictly bars the real property improvement supplier from enforcing any modification to the original contract, unless it is in writing and signed by the consumer.
(e) The act appears to reiterate the requirement that the contract contain a notice to the consumer that neither the real property improvement supplier nor any third-party subcontractor, material man, or equipment lessor, may initiate or pursue a claim with the insured consumer’s insurance company.
(f) A real property improvement contract may not assign any rights of the consumer to any supplier or third parties.
(g) A real property improvement contract must reflect the full amount of the contract price less any discounts offered.
(h) Finally, a real property improvement supplier or third party who recklessly, knowingly, or intentionally impersonates a consumer commits a Class A misdemeanor.
HICA also prohibits the supplier from assigning any rights of the consumer to any supplier or third parties.
HICA requires the home improvement price be stated in the contract complete with any offered discounts.
HICA makes it unlawful for any supplier to impersonate a consumer for any purpose, including making contact with the consumer’s insurance company.
These contractual requirements apply to home improvement contracts, rather than commercial contracts. The Indiana legislature has imposed a code of conduct and imposed it upon home improvement suppliers with the aim of leveling the playing field. Law makers reasoned that by imposing these minimum requirements on the home improvement suppliers, the consumer would have better odds of securing a contract with reasonable terms.
The prospect of enforcement is somewhat burdensome on the consumer, and that fact may be by design. When a consumer finds themselves in trouble with a home improvement contract gone bad, their right to sue the home improvement supplier is regulated by a number of legal hurdles. For this reason, it is crucial for the home owner to seek legal representation by an experienced construction law attorney, who has experience with HICA and the Indiana Deceptive Consumer Sales Act in order to insure they secure the protections afforded them by these consumer protection statutes.
The consumer, at the very least, must provide written notice to the home improvement supplier of its violations of the statutes, with proper citations to the statute, and permit a thirty (30) day period within which the supplier may be permitted to submit an offer to cure. Great care must be taken by the consumer, or their counsel, to insure the notice is provided exactly as required under the Indiana Deceptive Consumer Sales Act.
OTHER SUPPLIER VIOLATIONS
While the HICA is listed within the list of potential violations under the Deceptive Consumer Sales Act, it is certainly not the only act proscribed by that body of law. The list is broad, because it is intended to apply to virtually all consumer related sales within the State of Indiana, even those that do not fall into the category of home improvement contracts. Among those acts that often relate to a home improvement act, the Deceptive Consumer Sales Act lists the following as “Deceptive Acts”:
Failure to obtain a license or permit to conduct the work or service engaged in with a consumer, when the law requires the supplier to hold a license;
That the supplier claims a repair or replacement of any item is necessitated, when it is not;
That the supplier claims to have sponsorship, approval, or affiliation, which the supplier does not have;
That the supplier can complete the project or repair within a period of time, if the supplier knows that it could not reasonably meet the promised completion date;
Engaging in a replacement or repair that is not authorized.
Perhaps most importantly, it is extremely important for the consumer to take action quickly, as the enforcement provisions within the Deceptive Consumer Sales Act bar the filing of an action for any consumer action where the consumer fails to give written notice to the supplier within the sooner of six (6) months of initial discovery of the deceptive act, or one (1) year following such consumer transaction, or not less than thirty (30) days of any warranty period applicable to the consumer transaction. Then, in addition to the notice requirements described above, the consumer is barred from filing any action more than two (2) years after the occurrence of the deceptive act. With these restrictions sewn into the statute, consumers must take care to act quickly, or they may lose their right to sue under this consumer protection statute.
The consumer’s golden nugget is found in this paragraph, as the importance of these two consumer protection statutes is brought to light. In most consumer contracts, the supplier controls the terms. The print up the standard contracts and submit them to the consumer for inspection and review and the consumer is expected to sign the contract with little or no wrangling over the terms. It is quite common for these contracts to be written in such a way that the home improvement supplier provides a right to recover attorney fees, in the event they are forced to sue the consumer to recover the balance on their contract, while leaving the consumer without any recourse for attorney fees. However, the Deceptive Consumer Sales Act, provides for an award of attorney fees to the prevailing party. While it is a double-edged sword, it does provide the consumer with an opportunity to recover attorney fees, where no such right exists in the contract.
If you are the victim of a home owners vs bad contractors nightmare and you need counsel to assist you in preserving your rights, give us a call today at 317-939-3000 and someone from our staff will be happy to discuss your matter right over the phone with you at no cost.
HOW TO TERMINATE AN INDIANA RESIDENTIAL PURCHASE AGREEMENT
Buyers who find themselves shackled to a contract or purchase agreement for the purchase of a new home sometimes wish they could rescind the whole deal. When they tell their Realtor, they want to surrender their earnest money and back out of the purchase agreement, they are often told it’s too late. They are told they will be liable to the sellers for any losses they incur in trying to sell the house to another buyer and may also be obligated to pay their real estate agent’s commission to boot. However, the discovery of significant conditions effecting the use and enjoyment of the property after signing, can serve as the buyer’s basis for terminating the agreement.
Significant conditions typically include such things as deed restrictions and covenants, special tax assessments, or plans to alter neighboring infrastructure or zoning. There is no established list of conditions that would fit this category, but certainly any number of conditions might materially impact the use and enjoyment of real estate. Of course, the trigger for escape arises only when the condition is discovered after signatures bind the buyer to the agreement. Certainly, raising such concerns over conditions known to the buyer before signing, would not typically give rise to the right to terminate.
In central Indiana, most Realtors use standard purchase agreement forms provided to them through the Metropolitan Indianapolis Board of Realtors (“MIBOR”). MIBOR purchase agreements currently in use (as of 1/1/17) contain a paragraph that deals with the parties’ obligations concerning homeowner associations and covenants. The form is designed to allow the parties to negotiate the number of days in which the seller is required to disclose the HOA info and covenants, and the number of days in which the buyer has to object and rescind the entire agreement. Failure of the buyer to raise a timely objection will generally result in the buyer’s right to terminate. Similar provisions may be found in purchase agreements used throughout the state of Indiana whether they are boilerplate or uniquely drafted.
The language used in the standard MIBOR form is intentionally designed to close the loophole that would otherwise give buyers an out. Had such a provision not been included into the terms of the parties’ agreement, it would remain for the buyer to raise the issue any time prior to closing, provided the substantial condition(s) was or were discovered after signing the agreement.
It is important to note Indiana law requires the seller to provide information regarding the homeowner’s association, their contact information, assessments, and copies of the covenants. This is required pursuant to I.C. 32-21-5-8.5. However, failure on the part of the seller to provide this information does not limit the enforceability of the covenants. It may, however, open the door for the buyer after closing to sue the seller for a rescission of the sale based on a theory of “fraud”, since failing to disclose such information would be a failure to speak where the law imposes an obligation to disclose such information.
The great advantage of using the objection provided for in the standard MIBOR form, is that by using the escape clause built into the agreement, the buyer is more likely to terminate the agreement without incurring liability to the seller or any of the real estate agents, recover their earnest money, and avoid costs associated with defending a lawsuit.
Robert McNevin, Jr. is a partner with the Indianapolis law firm at Indy Advocate. His practice is primarily focused on construction and real estate law.
For one Indiana consumer, doing business with one of Indiana’s largest custom home builders was an absolute nightmare. At the conclusion of the construction process, the builder, Hallmark Homes, Inc., persuaded her to sign a “zero punch list” based on the builder’s promise to remediate all problems under the builder’s “bumper to bumper home warranty”. Then when she asked the builder to make good on their promise, the builder told her those issues weren’t covered under the warranty.
Among the issues Hallmark refused to remediate was a perpetually wet crawlspace that lead to a massive breakout of mold, and warped vinyl siding. Adding to her frustration was the realization that she had signed a contract drafted by the builder that required her to use the builder’s pre-selected arbitrator to arbitrate the dispute. The contract and home warranty were perfectly legal documents designed to essentially protect the builder at every turn. That’s when she hired a construction attorney and began the arduous task of turning the tables on her builder. Shari Obermeyer stated, “
How did you come to select this builder?
What did you do to investigate the builder prior to signing a contract with them?
What did your attorney do that turned this thing around for you?
Did you get a good result in your arbitration award?
What advise would you give someone who was preparing to hire a builder to build their new home?
Indianapolis attorney, Rob McNevin, a partner with Kreider McNevin Schiff, LLP, said there are a number of things you should know before contracting with a builder. Among the most important things a consumer should know are:
Hire a real estate or construction attorney to look over the contract before you sign it.
Don’t depend on the warranty to address pre-closing issues. Force the seller to complete all issues prior to closing, while you can rely on contract principals to enforce your rights.
It is fundamental that sellers are motivated to get the highest price whenever a sale takes place. This is true for almost everything, including real estate. Conversely, buyers want to purchase for the lowest price. Everyone engaged in a real estate purchase wants to buy low and sell high. This fact of human nature sometimes causes people who are generally law abiding citizens to engage in conduct that is intended to deceive, especially sellers who need to sell their home.
Real Estate Fraud
Indiana has attempted to do away with this problem by requiring every seller to fill out and sign under oath a disclosure form stating the status of various components of the real estate. This form is called the Indiana Seller’s Disclosure Form and it is intended to eliminate fraud from the residential real estate sales market. All licensed real estate brokers in the State of Indiana as well as sellers who sell their own real estate (For Sale by Owners) are required to make that form available to any prospective buyer who expresses and interest in purchasing residential real estate. That form must be updated at the time of closing to demonstrate any changes to the original information and to confirm everything on the original disclosure remains unchanged.
Despite the requirement for the form, some sellers put false information on the form and buyers who rely on that form often become the victims. Where deceptive acts are intentional, such actions are fraudulent. They may also be fraudulent where they are merely accidental, as might be the case when someone declares something with careless disregard for the truth. In either case the victims of fraud now have a written sworn statement by the home seller, which they can use as compelling objective evidence to help prove the seller committed fraud. For the victim, this often times proves to be very helpful, especially when they end up in court seeking damages from the seller.
Unlike a simple breach of contract claim, real estate fraud gives way to punitive damages, which can total up to three times the actual damages suffered by the victim and also allows the Judge to award attorney fees. This makes the would-be advantages of committing a fraud much less attractive. Another remedy a victim may seek is rescission of contract. A rescission is a return of the home to the seller and a return of the money to the buyer. This may be more complicated where the buyer relies on mortgage financing and a bank or other financial party are involved.
Buyers should take great care to submit purchase offers that make the sale subject to inspection. They should also take care to secure the services of a reputable home inspector. Since most home inspectors limit their liability by contract, it is crucial to employ a home inspector who will conduct an extremely thorough inspection of the whole house. If problems are discovered and the parties reach agreement through the inspection response phase, buyers should have the home re-inspected to insure the problems the seller agreed to fix were completed satisfactorily. Realtors should bring this to their client’s attention and either insist that they do so or have their client sign a waiver releasing the realtor from liability for the buyer’s failure to have follow up inspections completed.
Real estate fraud is rampant in the real estate world and even law abiding citizens sometimes engage in deceptive practices to achieve their goals. Whether you are purchasing from a complete stranger or your best friend, be sure to review the Seller’s Disclosure form and hire a reputable home inspector. Following these tips will help insure you buy a problem free home. You can find more information on real estate and our attorneys that can help you in your unique case.
Yes, indeed, you have legal issues and you may be wondering what all this means for your particular case. Most law offices are prepared with a continuity plan for emergencies like this. Lawyers can do much of what they do from home. They can continue to work on your case, generally, without the need to meet with you in person or to leave home, as long as they have a computer and a link to the internet.
Indiana courts have given a broad definition to the term “public highway” in limited circumstances. Where evidence is produced to demonstrate a path of common travel has been used for a period of twenty years prior to 1988 (when Indiana codified a more restrictive definition of public highway) Indiana courts have declared such a path to be a public highway. So, the use of the path must be shown to have been in use by 1968 or earlier. This use has few if any restrictions. Evidence of this use need not show any number of users. It need not show the frequency of the travel or its particular use. It need not be defined by structures or gravel, pavement or any other material. It also does not matter that the path terminates on the land-locked property or that the only people who used it were the people who either lived on the land-locked parcel or their guests. This remedy will be more difficult to prove as the years roll on, because much of the evidence necessary to demonstrate this use will die off with the people who would have personal knowledge of it. 
Many people are attracted to ads that offer to sell them a home on a “rent to buy” basis. These arrangements have become more popular as the requirements necessary to secure conventional mortgage financing became more difficult to satisfy. Recently the Indiana Supreme Court addressed the enforceability of one particular buyer/seller agreement, and its decision will no doubt go a long way toward protecting buyers who might otherwise enter into such oppressive contracts. In the Rainbow Realty vs. Carter case, the Indiana Supreme Court held “the parties’ “rent to buy” agreement is not a land-sale contract, but a rental agreement subject to Indiana’s residential landlord tenant statute.
Most real estate sales end happily ever after, including the For Sale By Owner Indianapolis (FSBO) transactions. That is most, but not all. Because the seller is typically in receipt of the net sale proceeds at closing, sellers rarely find themselves with any complaints. The overwhelming majority of real estate lawsuits are initiated by disgruntled buyers, who sue their sellers. The buyer takes the risk that they won’t have problems with their home, and the seller takes the risk they won’t be sued. Capeesh?
It is fundamental that sellers are motivated to get the highest price whenever a sale takes place. This is true for almost everything, including real estate. Conversely, buyers want to purchase for the lowest price. Everyone engaged in a 
