This article is about the common causes of real estate litigation ans how to avoid them. It identifies potential pitfalls and proactive steps you must take to minimise the risks of dispute and lawsuits in real estate transactions.
Nowadays in the real estate market with litigations and estate disputes having become increasingly rampant, most real estate transactions which are seemingly long, complicated processes, have a high probability of leading to legal disputes. Ranging from boundary disputes, contracts breach to issues with title and property defects, real estate litigations can become very complex, metamorphosing into a very expensive and time consuming process.
Regardless of your role within the real estate business,whether you are a residential or commercial landowner, an real estate agent, common broker or even a big property management organisation, being entangled in a dispute or a lawsuit can be a very demeaning situation aside from the high costs involved in settling the case.
This is because like any other business, cases of multiple lawsuits or disputes depicit a very bad image for the affected party, prompting prospective clients to refrain from handling transactions with such businesses and their owners.
In this article we would be discussing the common causes of real estate litigations and how best to avoid them, but before we go any further, let’s explain the concept of real estate litigation.
What is real Estate Litigation?
Real estate litigation can be defined as an highly complex field of a legal process that handles disputes related to property rights, real estate contracts and even zoning laws. It is a legal process in which any dispute that can be related to property issues or real estate in general can be resolved in the court of law. These disputes can result from conflicts or a variety of situations such as disagreements over landed property boundaries, landlord- tenants conflicts, contract breaches, land zoning problems etc.
Hence, it is of utmost importance to educate and enlighten these real estate shareholders on the need to be critically knowledgeable of these intricate legal matters effectively for them to best protect their interests. For this reason, the role real estate attorneys play within this system is highly indispensable, with their deep understanding of the local property laws and policies proving a big difference-maker in resolving any potential illegalities and saving eventual stress and additional costs.
In addition to the role real estate attorneys play, the proper use of clear well defined contracts, proper title search, proper verification of estate property boundaries and effective communication between the two transacting parties will help to prevent and reduce the risks of litigations and disputes.
Common causes of real estate litigations
1. Contract breaches
A contract is a written agreement between two parties i.e usually the buyer and the seller to transfer the ownership of a landed property. A good contract should be well documented and bear important details such as property title, payment amount and method, purchased assets, closing date, stipulated terms and conditions and more.
Contract breaches is an event in which one party involved in a real estate transaction fails to keep up his obligations as required by the agreement. Examples of common breaches include; incomplete repairs, failure to complete rent, incomplete transfer of land title etc.
Failure to honour this mutual agreement will lead to disputes that can be legally taken up and sued by the other party for “breach of contract.” The implications of breaching contracts can scale up to monetary reimbursements to even eventual contract termination which might result in the termination of the whole business transaction.
Hence to avoid this obvious outcome, it is important that all involved parties clearly understand all terms and conditions stipulated in the contract, ensuring that they are clearly interpreted and comprehended.
2. Failure to Conduct Proper inspection
Though proper inspection is prerequisite when acquiring landed property in real estate, nowadays a leading cause for most disputes especially between landowners and tenants are undisclosed defects to properties that are later discovered in the long run.
Let us examine the average case in the Nigerian real estate, a house owner is aware of these defects in his house let’s say a leaking roof and chooses not to disclose them to the tenants. The tenants believing the word of the house owner pays his rent immediately and settles into the house without any inspection. In such a situation, the tenant has been misled into getting such properties without being duly informed.
After these defects are discovered, it is usually too late as payment has already been made. This will ignite a refresh round disputes and litigations between the property owner and his tenants which might resort to legal interventions.
A leading cause of this is negligence to gather necessary information about the property through proper title searches, inspections and surveys by the tenant (the buyer). Hence any buyer of a real estate product should put concerted efforts into conducting comprehensive inspection of the proper before finalising the transaction. A real estate attorney can be sought that will cross-reference and verify the authencity of the property documents.
As regards the part of the seller, to avoid any legal disputes potentially in the future, any defects to the property you are leasing or selling should be properly disclosed to the seller during the finalization stages. This mandatory step might prove to be crucial in avoiding any future litigations that might want to result from the transaction.
3. Landed Property Boundary Disputes
This is another leading cause of real estate litigations amongst real estate shareholders within the country. This type of dispute occurs when there is a serious disagreement over where the boundaries of a landed property lies, with conflicting views over the property demarcations.
This is particularly common in regions where the land surveying cannot be properly accounted for or has been poorly conducted. Another prominent cause is when different property owners have different interpretations regarding where the boundaries of their property lies exactly. The latter is especially common in the Nigerian real estate sector via property inheritance cases in which the children have different views as regards the extent of their parent’s landed properties.
This issue which is seemingly easy to resolve can supercede into larger, complex disputes which might require only legal intervention for its effective resolution.
In addition to the above, conflicts over easements (a person’s right to use a landed property) or property encroachment is another leading factor attributing to this form of litigation or dispute.
4. Payment and Financing Issues
Most real estate business transactions are characterised with complex payments arrangements, so it is not shocking when disputes over payment occurs in a real estate transaction. This usually comes in the form of disagreement over the due amount to be paid, inconsistent timing of agreed payments, failure to meet mortgage requirements, loan terms disputes and the likes are common causes that can lead to this type of litigation.
Most times, a prominent cause of this form of dispute is miscommunication between the transacting parties as regards the payment terms and conditions. This usually results in bad blood between the two transacting parties, usually requiring legal intervention.
To prevent this form of dispute, it is important to carefully review all financial aspects of the property contracts and documents. This is necessary to ensure contractual compliance with one’s financial obligations, thereby avoiding disputes
Common Ways to avoid real estate litigationsÂ
1. Conducting a regular and thorough survey with the help of a qualified surveyor will help to clearly map out landed property boundaries they preventing disputes
2. Obtaining title insurance documents with the help of real estate attorneys can help to doubly authenticate and safeguard against potential boundaries issues in future
3. Work with a qualified real estate attorney to draft well outlined and comprehensive contracts and agreements will be best in protecting your interests while reducing the risks of disputes and litigations. The agreements should be well documented, properly detailed while being legally sound with clearly stated terms.
4. Consult qualified professionals to educate you on your rights and requirements. This will ensure your compliance with the relevant property laws and policies.
5. Maintaining a proactive stand on maintenance and repairs will help to address conflicts between tenants and landlords before they can escalate into major disputes.
Conclusion
As the Nigerian real estate market continues to grow and thrive, from this article we can now acknowledge the fact that litigations and disputes can negatively impact the market, leading to avoidable financial losses.
Hence for this reason, it is crucial for real estate shareholders to actively take this steps to minimise risks of disputes and manage the expectations of their clients. This will significantly help to minimise the potential for real estate litigations whilst protecting their interests.
Recommended articles
10 Factors to Consider When Searching for a Property to buy.
5 roles of a real estate attorney in real estate transactions.