This question comes from Sarah Milner who I actually had met last week at a real estate investor function. Sarah asks if there is anything wrong with sharing legal forms between friend and colleagues, after all, they’re free!!
There is not a day that goes by that someone doesn’t call me for help with drafting or review a real estate or loan document that they can have for their transaction. A purchase agreement, a lease, a land contract, a mortgage, an assignment of purchase agreement, a lease option, a claim of lien…the list goes on. That’s what I am here for.
Sometimes people will actually send over an already signed document wanting to know about the impact of the contract terms they just agreed to and how they get out of the transaction. Or they’re wondering why they are not getting things they thought that they had “bargained for.” Nothing is worse however, then when I learn that significant money has changed hands in a transaction, the parties have failed to perform according to the contract terms, and more often than not, the parties have used legally deficient forms lacking proper enforcement provisions or remedies. The forms and documents they used were downloaded from the internet or passed on from a colleague or friend, very often for free. You’ve heard me say this before, time and time again but, “Nothing of Value is Free.”
Whatever business you are playing in real estate, say a landlord, wholesaler or house flipper, it’s always best to have a real estate attorney review your original documents that you intend to use for multiple transactions. Provided that you stick to the attorney approved forms and don’t make material changes to them, you should be able to rely on those forms until there are changes in your own circumstances or changes in the law. But don’t make modifications to your attorney approved forms without first checking with your attorney. Let me give you a favorite example – one of many -I had a client who came to me after he was being sued by his tenant for double the security deposit. You see, the landlord used his own lease and in his own effort to save on paper and space, he had his lease in 10 point font. The only problem is that Michigan law requires certain Landlord Tenant Notices to be in BOLD FACE 12 point font. Failure to comply with this requirement costs the landlord double the security deposit for violating the statute.
I have another client that took out some terms in a promissory note, not realizing that by doing so, he had given his borrower a 30 year mortgage instead of a 30 year mortgage with a five year balloon. Or how about the one client who inserted a balloon in a contract despite the fact that the law strictly prohibits such terms and now they are subjected to a rebut table presumption that their business arrangement is predatory – leaving him very exposed financially as well as legally.
One more okay. A simple deed form looks harmless enough until the wrong vesting or granting language is used by the draftor. When using free deed forms, poorly generated deeds can wreak havoc on family members, destroy property rights, and cost thousands of dollars in legal fees to correct. Real estate law is steeped in over a 1000 years of history but with the stroke of the pen, a well meaning lay person acting as their own attorney can disenfranchise themselves or a partner from their real estate- never to get it back. So much for “Free”
You see, using a legal document just because its free is a poor way to run your business. It’s like copying a book report from a classmate without first putting in the effort to read the book yourself. I assure you that there is going to be a lot of fumbling and flubbing when the teacher asks you later to explain the contents of the book. This is true for the law.
At the very least, when it comes to obtaining free legal documents, read them, understand them and then figure out, with the assistance of a real estate attorney, what legal provisions are missing and which ones should be included to meet the needs for your own circumstances. Spend a little bit on your business to make sure that you are taking the right legal steps – and this includes using proper legal documentation.
I’m David Soble. If you have a question or comment, I encourage you to leave them below the video. If you have a suggestion or wish to explore a legal topic, leave your comments and we will respond. Make sure you also go to www.ProvenResource.com for more articles, videos, slide presentations and also to register for the advance copy of my newest book, Shady, a book about protecting oneself in legal and business relationships among friends or relatives.
Thanks for watching.