Issues in Real Estate Transactions

Today’s real estate markets have certainly heated up in recent months. It is a seller’s market on the used residential side and a buyer’s market with substantial new construction being outpaced by the market of buyers. Even though it seems like the commercial market is flush with opportunities, we are seeing an uptick in new construction, sales and leasing.

We often receive inquiries to review and comment on leases, sales contracts, construction contracts, offers to purchase, closing documents title insurance and environmental indemnifications. Many of the documents presented to us are prepared by non-lawyers or prepared by lawyers who do not adequately represent the interests of our clients. Most often, we receive pre-printed forms used by real estate brokers. Wisconsin law prohibits any person, including a licensed real estate broker, from practicing law without a law license. To help brokers from violating the law, the Wisconsin Department of Regulation and Licensing developed preprinted and pre-approved forms which may be used by brokers without leaving them sideways with the law.

The terms and conditions of these documents are easy to misunderstand. Even the basic Commercial Offer to Purchase form is nine pages long and contains obligations on both buyer and seller that are often overlooked. By way of example, a common misunderstanding by buyers is that their only risk in entering into a purchase contract is losing their earnest money; however, in reality the Residential Offer to Purchase has language that allows a seller to sue the buyer to force the purchase of the property. Other topics contained in the forms that require a more in-depth understanding of the law include, without limitation, estoppels, title, surveys, representations and warranties, contingencies and default provisions.

In addition to examining and understanding the issues these forms address, it is also important to consider the issues these forms overlook. As beneficial and convenient as standardized forms are, one of the greatest downsides to the forms is that buyers, sellers, and brokers sometimes mistakenly believe that these standardized forms adequately cover all issues that might arise in connection with a real estate transaction. To be sure, in more complex real estate transactions, these forms should be considered a starting point for negotiations leading to a contract. The benefit of involving an attorney in a real estate transaction is that we are able to use addenda or riders to address issues about which the form is silent or tailor the form to the transactions at hand.

Leases, Mortgages, Closing documents and Title Insurance also contain provisions, which are many times confusing or misconstrued. With most real estate transactions involving significant capital investment, we greatly suggest that, for our clients’ protection, we have the opportunity to review these documents and provide valuable feedback to ensure the transaction goes smoothly – a modest expense given the investment at hand.

For more information please contact a member of the Commercial Real Estate, Development & Leasing Team at the Law Firm of Conway, Olejniczak & Jerry, S.C.

Written By:
Attorney Thomas M. Olejniczak