Each week, we update our Question and Answer page with answers to legal questions we receive regarding real estate, finance, business and probate matters.
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Real Estate Questions
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Top Questions Concerning Real Estate Law
There was major structural damage covered up during our home inspection. The agent says we are required to close on the home. Is this true?
If there is a structural issue or home defect that comes to light prior to a closing and the seller should have disclosed the defect that was known to them, then you may have grounds to cancel the transaction. The fact the home inspector could not get into the garage to do their home inspection is important to note. I would suggest that you speak with a real estate attorney further so that they can review your documents, before an anticipated closing. As far as commission driven sales people, they are not attorneys and cannot provide legal advice.
How do I take someone to court even after statutes of limitations have passed?
The Statute of Limitations is based upon when you discover or should have reasonably discovered the issue. The start of the time to bring the action begins from that time and will be cut off – pursuant to law. That is why they call it the ‘statute of limitations.” You snooze, you will lose. Get with an attorney to assess your rights further.
What if the apartment complex I’m living in is not registered as a rental and there's safety hazards?
Don’t wait for your landlord if you feel this is a public safety hazard.This seems to be a code enforcement issue. I would contact the city housing or ordinance enforcement department with your concerns.
Can we convert our garage into a ‘mother in law’ suite in Michigan without violating multi-family laws?
A multi-family home is a single building that’s set up to accommodate more than one family living separately. The key word is “separately.” Multi-family properties are often apartment buildings or duplexes. What you’re proposing or questioning has to do with the municipal codes. Some communities will not allow for numerous but unrelated occupants to live under one roof, while an extended family has the ability to share a single family property. Check with your municipality before making any significant changes to your home.
Our landlord died with no will, what do we do?
First, you can continue to pay under the lease as if the Landlord had not passed. However, if you like the home, as the landlord’s heirs are willing to sell it to you, go get a mortgage, or at the very least have a new sale agreement drafted. But before you do anything, the title to the home will need to be properly transferred to the landlord’s heirs which may involve a probate action. Consult with a real estate and probate attorney before you agree to any changes to your lease.
Can I sue my mortgage lender due to their lack of due diligence?
One would need to determine if you received written notice of any outstanding conditions or items necessary to complete your mortgage application. Still it is highly unlikely that you could sue the lender for their negligence unless you could show that you were already approved for the mortgage and that you met all of their conditions. Up until the time of a firm loan commitment, the lender can and will find ways to deny your loan, so bringing an action against them would be difficult.
Is there anything I can do to stop an easement or road going through my property?
There is something called an easement by necessity. An easement by necessity is an easement implied by law in favor of grantees/ owners that have no access to their land except over other lands owned by the grantor or a stranger. The law will imply an easement over the grantor’s land when such a situation occurs.
Can you please explain the specifics of one grantee passing away on a Quit Claim Deed with three grantees?
The death will affect how the remaining grantees own the property. That will depend on how the title was conveyed. There is “magic language” in deeds that conveys or vest title in a grantee and how that language is stated will control what grantees need to do in the future.
THE CITY WANTS ME TO FIX UP OR DEMOLISH THE OLD BARN ON MY PROPERTY, DO I HAVE TO?
Generally, municipalities have the right to enforce building and zoning ordinances that do not comply with safety, fire or blight codes. While the property may not be open to the public, there are a host of other reasons the government can issue a citation. So, you may have to either fix up the barn or demolish it. However, you should have a real estate attorney to review your city’s zoning code to see if you might have any other available options.
WHAT HAPPENS TO THE MORTGAGE ON A HOME WHEN THERE ARE TWO CO-OWNERS AND THE CO-OWNER THAT HAS THE MORTGAGE PASSES?
The lender cannot simply foreclose on a property where there is a death of a co-owner of a mortgaged property. Similarly, the lender cannot foreclose on a property where a transfer occurs after the death from the decedent to a spouse or to their children. However, if one does not continue to pay on the mortgage, the lender will be able to foreclose on the Property.
AFTER PURCHASING A HOME, I DISCOVERED SOME MAINTENANCE ISSUES. CAN I RECOVER FROM THE PRIOR OWNER?
Under the Michigan Seller Disclosure Act, it is very unlikely that this maintenance defect is a defect that should have been disclosed by the seller. Unless the maintenance defect was one that affected the structural or mechanical condition of the property, it does not appear as though the Seller was obligated to disclose the maintenance defect. I would say your money is better spent on new paint rather than hiring an attorney to try and recover from the prior owner
CAN I SUE AN APPRAISAL COMPANY FOR PREPARING A BAD APPRAISAL THAT COST ME $10K ON THE SALE OF MY HOME?
It’s highly unlikely that you’d prevail at court by suing a licensed professional appraiser for their opinion of value despite the fact that it negatively impacted your sales price. Therefore, I’d save your money on attorney fees. The duty of the appraiser is not to you, but to the buyer and to the lender. Banks make their decisions to lend based upon these opinions. Instead, the provisions of your purchase agreement should have given you, as the seller, the discretion to proceed with the sale or not. Another option would have been to require the buyer to come up with the difference between the appraised value and the agreed upon purchase price. Finally, you could have disputed the appraisal by having another appraisal. However, in that instance the decision to proceed is up to the buyer since they are the one obtaining the mortgage.
I DON'T THINK MY REALTOR GOT ME THE BEST DEAL, DO I HAVE ANY RECOURSE?
In the end, you control your own deal. If you did not want to sign the agreement, you did not have to sign the contract. However, by signing the agreement, you agreed to the terms therein. You could file a complaint with LARA – State of MI, but being from out state now, it will only serve as a complaint. Suing the realtor would be an option if you had better evidence of malfeasance. Unfortunately, accepting a deal that you later regret does not necessarily mean that the realtor “ripped” you off.
I WENT TO YOUR WEBSITE. WHY DO YOU PUT PROBATE AND REAL ESTATE AS ONE “AREA OF PRACTICE” WHEN CLEARLY THEY ARE TWO SEPARATE AREAS OF LAW?
Many areas of law overlap – real life does not happen in a vacuum and neither do fact patterns or legal outcomes. To use your example above, we may have a client who is dealing with probating a will, but then there are issues as to how title to a residence is held. There may be a tenant residing in the home of the decedent, or a mortgage remains outstanding after a homeowner’s death. Sometimes we may find ourselves in circuit court, probate court and even district court all because of a probate case, but one that has underlying real estate legal issues. The same will hold true for other areas of law as involving divorce matters, contract matters, and business matters. In our world, real estate law serves as the hub of a wheel intersecting with other legal areas or ‘spokes.”
Land Contract Questions
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Top Questions Concerning Land Contracts
The seller of my home is not cooperating with a payoff on a land contract to sell or refinance. What do I do?
You should always have the seller execute the deed at the time the land contract is signed and submit the deed to an attorney’s escrow for when the land contract is paid off; the agreement is satisfied. This way you don’t have to chase after the seller at a later date.
WHAT IS A MEMORANDUM OF LAND CONTRACT?
A memorandum of land contract is an instrument executed for the purpose of reflecting the existence of a land contract and the seller’s and purchaser’s interests in the real property subject to the underlying land contract. It contains only the names of the parties to the contract, the date of the execution, and the description of the real property involved. It does not disclose the consideration, the terms of payment, the time of performance, or the covenants or terms.
CAN A PURCHASER LEGALLY SELL OR RENT A HOUSE ON LAND CONTRACT IF THERE IS A MORTGAGE?
Once a purchaser comes into legal title to a property, they can sell a property on land contract. They will need to have a real estate attorney review the underlying mortgage to see if the ‘due on sale” provision of the mortgage will pose a problem or not.
IS THERE A PENALTY UNDER LAW FOR FAILURE TO TENDER THE DEED ON A LAND CONTRACT PURCHASE (CONTRACT FULFILLED BY BUYER IN FULL)?
The closest thing to a statute dealing with failure to provide a deed upon a land contract payoff is a Michigan statute as it relates to providing discharges after 60 days. However, the land contract provisions control. So if the deed is not provided and the buyer performed as required, then the buyer can maintain an action for breach of contract claim.
MY FATHER BOUGHT A HOME THROUGH LAND CONTRACT, NOW HE WANTS TO DEED THE PROPERTY TO ME SO I CAN PAY IT OFF. CAN WE DO THIS AND, IF SO, WHAT KIND OF DEED SHOULD WE USE?
First, your father should give you an assignment of the land contract provided that the land contract terms allow for an assignment. Second, a deed is worthless as your father does not have title in his name. It is still with the seller. A deed (quitclaim preferably) would do very little at this time. Finally, a lender will most likely require that you should be on title for at least 12 months before you could finance the property in your name. You would want to get the seller to approve the assignment of the land contract in your name as buyer, and make verifiable payments under the land contract for 12 months. After this, you can get a valid deed upon the payoff of the land contract.
I AM BEING EVICTED FROM MY HOME THAT I HAD PURCHASED ON LAND CONTRACT. CAN I REMOVE THE IMPROVEMENTS THAT I MADE, SUCH AS INSTALLING NEW CABINETS AND A NEW WATER HEATER?
Generally “no,” you cannot remove these items as stated. This is because these items have become ‘attached” to the home and cannot be removed.
I AM ABLE TO PAY MY LAND CONTRACT OFF EARLY BUT THE LAND CONTRACT OWNER WON'T LET ME, WHAT CAN I DO?
The land contract provisions control. However, generally Michigan law, as well as federal law, have certain restrictions concerning land contracts and prepayment. I suggest having a competent real estate attorney review your land contract before taking further action.
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Top Questions Concerning Real Estate and Contracts
DO ALL CONTRACTS HAVE TO BE IN WRITING TO BE ENFOREABLE?
No, a contract can be legally enforceable whether it is made in writing or it is an oral agreement. There are some exceptions however. Under the Statute of Frauds, certain agreements are not enforceable if they are not in writing. For example, agreements related to real estate that have a term exceeding one year must be in writing to be valid. Check with our attorneys to learn more about these exceptions.
WHAT IF I SIGNED AN AGREEMENT ON BEHALF OF A SMALL COMPANY THAT I OWN. AM I ALSO PERSONALLY RESPONSIBLE FOR THE COMPANY IF IT DEFAULTS?
Whether or not you will be held personally responsible under a contract will depend on the provisions in the contract. If you signed as a ‘personal guarantor’ for the company, you will be held accountable for the company’s obligations, but to what extent will depend upon how you negotiated your guaranty.
I NEVER SIGNED AN AGREEMENT THAT YEARS LATER, I AM NOW BEING SUED OVER. CAN I BE HELD LIABLE?
Even if you feel that you did not enter into an agreement, a court may find that you are bound by a contract pursuant to the legal doctrine of ‘promissory estoppel.” The court will determine if (1) a legal relationship either exists or is anticipated between the parties, (2) representations are given in circumstances that lead the other party to assume the promise will be performed, (3) reliance by the other party on the promise or representation to their own detriment, and (4) it would be unconscionable for the promisor to go back on their promise.
CAN I COLLECT PUNITIVE DAMAGES FOR A SELLER'S BREACH OF A BUSINESS AGREEMENT?
Unless the conduct of the other party was so outrageous, reckless or malicious, it is highly unlikely that a court would awared punitive or exemplary damages in a contract case. Compensatory damages are awarded instead. Courts most often awared compensatory damages covering the actual loss the nonbreaching party incurred as a result of the breach of contract. Compensatory damages replace the loss caused by the breach.
Deed and Conveyance Questions
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Top Questions Concerning Deeds and Conveyances
WHICH IS THE BEST WAY TO HAVE PROPERTY TRANSFERRED, A QUIT CLAIM DEED OR WARRANTY DEED?
It depends on what type of warranties and assurances you wish to receive from the seller and what representations you wish to make to the buyer. You should first have a property title search reviewed by a competent real estate attorney as this definitely helps in your decision.
I AM A CO-OWNER OF A PROPERTY. HOW CAN I MAKE THE CO OWNER SELL THE HOUSE SINCE I DON'T WANT TO PAY FOR THE REPAIRS AT THE HOME ANYMORE?
If you have a half interest in a home as tenants in common with another owner, you can sell your interest without the other owner’s permission. Or you can also file a partition action that requests that the court to order that the home be sold and that the sales proceeds be split in accordance with your legal interest.
MY FIANCÉ AND I BOUGHT A HOUSE TOGETHER. HE IS ON THE MORTGAGE BUT WE BOTH ARE ON DEED. CAN HE REMOVE ME FROM THE DEED WITHOUT CONSENT?
The only way you can be removed from the deed is either with a court order or by your own endorsement.
MY MOM IS ELDERLY AND WANTS TO PUT MY NAME ON THE DEED TO HER HOUSE THAT IS PAID OFF. SHOULD WE HIRE AN ATTORNEY FOR THIS?
First, how is does the deed name your mother’s interest? Is this a quit claim deed? A Warranty Deed? A Covenant Deed? A Ladybird Deed? Second, does she want you to hold it Jointly with Rights of Full Survivorship or as tenants in common? If you don’t draft deeds on a regular basis, it is probably best to use a real estate attorney to properly convey title to a property. That way you know it is done right and there are no far reaching legal or tax consequences.
MY BOYFRIEND AND I ARE BUYING A PROPERTY TOGETHER. WE ARE GOING TO BOTH BE ON THE DEED. HOW CAN I PROTECT MY FINANCES IF I AM PAYING FOR MOST OF THE PURCHASE PRICE? WHAT IF WE SPLIT UP?
In the event of a break up, It’s important to have an agreement at the onset that addresses how the parties will split sales proceeds or specifies when a property is to be sold or refinanced. Real estate attorneys create these agreements in advance BEFORE you sign a deed or purchase a property.
Purchase Agreement Questions
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Top Questions Concerning Purchase Agreements
A realtor is telling me that I have to sign a mutual release with a potential buyer when my counter offer to their purchase agreement was never accepted?
No. In contracts, a counter offer serves as a rejection of the initial offer. Since your counter offer that was never met with the purchaser’s acceptance, there is no contractual agreement. Therefore, there would be no need for a mutual release from the agreement.
DOES A PURCHASE AGREEMENT ALWAYS NEED TO BE IN WRITING?
The Statute of Frauds requires that for a purchase agreement concerning real estate to be enforceable it must be in writing. Leases that have less than a one year term are the exception.
IS IT REQUIRED BY LAW OR IS IT JUST CUSTOMARY PRACTICE FOR THE SELLER TO PAY THE TITLE INSURANCE FOR THE BUYER?
It is purely customary. The parties can negotiate what closing costs and expenses they will be responsible for.
I SIGNED A PURCHASE AGREEMENT AND WAS APPROVED BY A MORTGAGE COMPANY, NOW I WANT TO OPT OUT. WHAT ARE THE CONSEQUENCES?
First, your rights and remedies are spelled out in the provisions of the purchase agreement. No one can tell you if and how you can stop the process without first reviewing the documents. Second, do not feel bullied by any mortgage broker or agent to complete a transaction without first speaking with a competent real estate attorney. You may be able to “back out” of your deal, but not without first reviewing the transaction documents.
I SIGNED A NON DISCLOSURE AGREEMENT ("NDA") AND PURCHASE AGREEMENT FOR A COMMERCIAL BUILDING AND NOW THE LANDLORD/ SELLER IS TELLING ME NOT TO DEAL WITH THE REAL ESTATE BROKER. WHAT DO I DO?
It depends on what the Non -Disclosure Agreements says. Usually in a commercial brokerage agreement there will be some provision dealing with Non-Circumvention of the broker.
Once listings or buyers agreements are endorsed with a broker, the signor may be obligated for a sales commission even if the broker was not directly involved with the final transaction. You will need to provide the documents to a competent real estate attorney for further review to determine what your obligations and options are.
THE AD FOR THE PROPERTY SAID THE LOT WAS 426' X 215', BUT THAT IT WOULD BE REDRAWN TO 500' X250'. AFTER THE PURCHASE AGREEMENT WAS SIGNED THE LINES WERE SURVEYED AT 395' X220'. WHAT CAN I DO NOW?
So the legal description / lot size was misrepresented in the home listing. Unless you made the listing document itself as part of the purchase agreement, it cannot be relied upon and the seller is not liable to you for the stated lot size. You did your due diligence by having the property surveyed. There should be a contingency period in which you can either move forward or cancel the transaction. You should also have your earnest money returned or if you determine if the price is appropriate for the lot size, you have the option to move forward.
Real Estate and Probate Questions
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Top Questions Concerning Real Estate and Probate
How can I stop my sister from using the power of attorney for my father who happened to pass away last month?
A power of attorney expires upon the death of the party who grants their power of attorney (the ‘Principal”). So your sister, (the ‘attorney in fact”) cannot enter into any binding transactions after the death of the principal. What happens with your father’s rental home will have to be determined by his will, if he in fact left one.
WHAT ARE THE MAIN DIFFERENCES BETWEEN A TRUST AND A WILL?
The first difference between a will and a trust is that a will covers any property that is only in your name when you die. It does not cover property held in joint tenancy or in a trust. A trust, on the other hand, covers only property that has been transferred to the trust.
Another main difference between a will and a trust is that a will goes into effect only after you die, while a trust takes effect as soon as you create it. A will is a document that directs who will receive your property at your death and it appoints a legal representative to carry out your wishes. By contrast, a trust can be used to begin distributing property before death, at death, or afterward. A trust is a legal arrangement through which one person called a “trustee,” holds legal title to property for another person, called a “beneficiary.”
Further, a trust is able to pass through probate. This means that, while a court ensures that a will is valid and that the property named in the will gets distributed the way the deceased wanted, a trust passes outside of probate. So a court does not need to oversee the trust process, which can save time and money. A trust, unlike a will, does not become part of the public record. A trust can remain private.
Lastly, A will allows you to name a guardian for children and to specify funeral arrangements, while a trust does not. On the other hand, a trust can be used to plan for disability or to provide savings on taxes, while a will does not.
WHAT DOES PROBATE MEAN?
Probate is the legal process of proving the validity of a Will to a court, which verifies that the deceased person’s intentions are carried out.
If you die without a will, your estate will still have to go through the Probate process. However, instead of giving your Executor the go-ahead to distribute your property, the court will name an Executor (known as an “estate administrator”) and will direct that person how to distribute your property.
To begin a probate proceeding, an attorney acting on behalf of the estate must initiate the Probate proceeding by submitting an official document called a Petition for Probate of Will to the court. The court will review the will and determine whether or not it’s a valid legal document—that is, whether or not the Will is legally binding and was in fact created by you. If the court determines that the Will is valid, the court then gives the Executor legal documents called Letters of Administration. These documents authorize the Executor to distribute assets tobeneficiaries. This may include transferring assets from your name into the names of the beneficiaries and paying any debts or taxes on behalf of your estate.
WHAT DOES DYING INTESTATE MEAN?
Dying intestate means the person has died without a will or the court has determined the will invalid. The estate’s assets are distributed to the decedent’s heirs according to the state’s intestacy laws. Intestacy laws vary state to state, but typically the estate will be distributed between the surviving spouse and surviving children.
For example, in Michigan if you die with no surviving spouse but surviving children, then the children inherit everything. If you die with a surviving spouse but no descendants or parents, then the spouse inherits everything. For each situation there are specific intestacy rules that will tell you to who and how much to distribute from the estate.
WHY SHOULD I ESTABLISH A DURABLE POWER OF ATTORNEY?
Many people establish a Durable Power of Attorney (DPOA) when they get older and start experiencing difficulty managing finances. By appointing a power of attorney (POA) , the POA agent can handle paying bills, managing bank accounts, overseeing investments, and preparing and filing tax returns on your behalf, which becomes increasingly important as you age and are no longer able to handle these duties.
A POA can be limited or general. A limited POA gives an agent the right to perform specific actions on your behalf. Whereas a general POA is comprehensive and gives the agent all the rights you have yourself.
A DPOA goes into effect the moment the paperwork is signed and stays in effect even if you’re deemed mentally incompetent. However, as long as you’re deemed competent you can change it at any time.
If a POA is not named, a potential agent may apply to the court to be named your guardian or conservator. Compared to naming a POA, guardianship proceedings can be time consuming, expensive, and stressful. In addition, there is the risk that the court may appoint someone as a guardian or conservator who you might not have chosen or preferred.
WHAT DOES HAVING A CONSERVATOR MEAN?
A conservator takes care of an incapacitated adult’s property. Whereas a guardian takes care of an incapacitated adult’s personal needs. One person can be both the guardian and the conservator for an incapacitated adult. Each of these responsibilities limits an incapacitated adult’s legal right to manage their own assets and can cost the incapacitated adult time and money.
A conservator’s responsibility to manage the incapacitated adult’s assets includes the collection, preservation, and investment of the individual’s property. Furthermore, the conservator must use the property for the support, care, and benefit of the individual and his or her dependents. The duty of loyalty prevents the conservator from using any of the incapacitated adult’s assets for personal use.
For example, say Susie was named the conservator for John who just became incapacitated after being in a serious car accident. John is now living in an assisted living home. Susie would manage John’s home, investment portfolio, and other assets. However, Susie would not be able to gift John’s boat to herself to use that summer.
IF THE ESTATE IS IN PROBATE, CAN I RENT OUT THE ESTATE'S HOME?
Only if the Estate owns the home and you personally have been appointed as the personal representative of the estate, and the Letters of Authority from the Probate Court giving you the power to rent the home, then you may have the power to rent out the home. Consult with a real estate or probate attorney before proceeding further with a lease in order to avoid legal problems later on.
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Top Questions Concerning Real Estate and Business
As the only member of an LLC, do I need to put down how much I am contributing or can I leave that part blank?
Yes. You still need to show the amount of contribution you made to the new corporation. Your accountant will need this figure as well.
HOW MANY INVESTMENT PROPERTIES CAN I PUT IN ONE LIMITED LIABILITY COMPANY?
As many as you’d like to put under one corporate “shield.” There are other considerations you should take before doing so, such as the locations of the properties, or the property types. Consult with a real estate and business attorney before you proceed.
WHAT IS AN OPERATING AGREEMENT?
An operating agreement is a contract that sets forth the responsibilities between members of a limited liability company. Having an operating agreement is required if you are doing business and want the legal protections afforded by the state in which you are incorporated.
DO I REALLY NEED A WRITTEN AGREEMENT WHEN OPENING A BUSINESS WITH A FAMILY MEMBER?
Yes. Setting out your business goals and expectations with your business partner in writing is a good idea to protect against disputes and problems at a later date. Written agreements memorialize the oral representations made between parties. Nothing is more disappointing (or expensive) than when family members or friends fight over a business arrangement and there is nothing but a verbal agreement for the parties to rely upon.
WHAT IS BETTER TO FORM, A LIMITED LIABILITY COMPANY OR A C-CORPORATION?
Which corporate formation one should select is based in part, upon the number of business owners, their legal needs and their tax status. Consult with a business attorney beforehand.
SHOULD I SIGN FOR A BUSINESS LOAN AS AN INDIVIDUAL?
If your business is taking out a business loan and you sign for the loan individually, you essentially become a ‘co-signor’ or ‘guarantor’ for your company’s loan obligation. Consult with a business attorney before you endorse any lending documents to avoid further and unnecessary legal and financial liability.