Category Archives: Real Estate

The Keys to (Very) Satisfied Clients

During my years of practice, I have always deeply valued the importance of client relationships and client service. Ultimately, it is my clients that have built my business and it is my clients that allow me to do what I love. With each family, individual or business, I focus on the following principles:

  1. Communication. Clear, timely, plain-language communication goes a long way! Follow up emails are great to keep clients posted on progress or to pinpoint additional needed information, but in-person meetings and phone calls are irreplaceable. I focus on keep keeping my clients informed on the status of our work and making sure to explain things in a straightforward and results-oriented manner.
  2. Great Legal Work; Great Results. I understand that my clients hire me to help them. Focusing on a client’s need(s) helps lead to great results. There is no doubt that spending time in the details (without charging any more for it) makes a significant difference in getting the timely results that every client is looking for. Engaging in regular continuing education courses and writing topical industry articles help me stay on top of the field.
  3. Long-term Commitment. When I begin working with a new client, I hope our relationship lasts for years. I am eager to stay in touch and meet with clients on an on-going basis. I typically do not charge any fee to meet or talk by phone to answer questions or provide ongoing guidance.
  4. Fair Fees. Clients love clearly stated, fixed-rate fees. I generally forego “hourly billing” in favor of fixed fees that we establish upfront at our first meeting. We also provide an “engagement agreement” that spells out all our fees in writing. I am committed to reasonable, fair and transparent billing—no surprises.

Trusts: When Would I Need a Trust?

A trust can be a wonderful tool to help set in place an estate plan that accomplishes a client’s goals. Situations, goals and life circumstances vary, so there really is no across-the-board answer as to whether a trust “makes sense” for a particular demographic of clients. Ultimately, putting in place a trust usually makes the best sense when a client wants to (i) avoid probate upon their death, and/or (ii) use assets, property and money for a specific purpose after their death. First, while there are some other ways to avoid probate, a trust generally does so in the simplest and most comprehensive fashion. Second, a trust is generally the only effective tool at carrying out plans or wishes that assets be used for a certain defined purpose after death. This can be particularly important when money will be needed to raise children or to fund education. However, the ability to control how assets are used is also tremendously important in circumstances where the (now deceased) creator of the trust wants to ensure that assets are not wasted away, wants to provide periodic payments for support, wants to delay all or some of the distributions and/or wants to provide for someone whose judgment or capacities may not be up to managing a large sum of money. In working with clients, I view a trust as a potential tool to accomplish the goals and plans of my client. Sometimes, we do not recommend a trust because it is just not needed to accomplish those goals. However, in many instances, this tool becomes very important and is a critical part of setting in place a comprehensive, complete and meaningful estate plan.

Trusts: Real Estate and the Trust

In order to accomplish its goals and purposes, a trust must be “funded”—meaning the trust must own the assets of the creator of the trust. It needs to have assets in it. Often, one of the largest assets is real estate. This could simply be a personal residence but might also include other real estate such as rental property, a second home or even vacant land. Real estate is transferred to the trust by executing a deed that is then recorded with the county (or St. Louis City) recorder of deeds. There are times when this is most effectively accomplished by an immediate transfer by deed at the same time the trust is signed. Other times, a “beneficiary deed” is used to facilitate an automatic transfer upon death. There are also occasions in which unique circumstances surrounding the property (such as shared ownership with another person) may require some varied approach. Regardless of circumstances, we work with our clients to handle real estate transfers seamlessly as part of their estate planning.

How Much Do Lawyers Charge? Flat Fees vs. Hourly Billing

In the course of my practice, I have learned the value that “flat fee” billing has to my clients. If you ask people what their least favorite part of working with their lawyer is, very often their answer will center on fees, the “billable hour” and increments of those hours that force them to worry about even calling their lawyer! Perhaps worse yet, clients can be left not having any idea what their final bill will be! At Schleiffarth Law Firm LLC, we charge only flat fees. Additionally, initial consultations are free of charge. My clients (and potential clients) can come in, meet with me for an hour, discuss their concerns, questions or case and leave with a precise fee agreement. Or they can even decide to not hire me (hopefully this is rare!) and there will be no bill, no charge, no fee. I have discovered that billing transparency, clearly defined fees and free consultations lead to happy clients.

Should I Hire A Lawyer Instead of a Real Estate Agent?

We frequently have individuals contact our office seeking assistance and guidance in the course of either selling their home or buying a new home. Most often, these clients are hoping to avoid the commission that is typically paid to real estate agents (real estate agents generally charge a combined commission of 5-6% of the sale price of the home). In some cases, the agent’s ability to market the property for the Seller and guide them through the sale process can be of great value. For a buyer, an agent may be helpful in the search for the right home and the related purchase process—and a buyer frequently also considers the service “free” since their agent is compensated from the total commission paid by the Seller from the sale of the home. However, there are many instances in which a client will be better served and can save significant amount of money by hiring a real estate lawyer instead. Most commonly, for a Seller, this would be the case if they already have a buyer (for sale by owner, family member, friend, whatever else). In such a case, hiring an agent simply does not make financial sense and a lawyer is much less expensive. For a buyer, if they are comfortable doing their own home search, a real estate attorney is similarly the best alternative. The commission paid to their agent (from the sale proceeds) essentially adds to the desired sale price from the Seller (i.e. its not free). Without an agent, the Buyer can typically negotiate off at least 2.5% of the sale price right off the bat. While every property and situation is different and merits detailed and personalized consideration, it is important to understand when an attorney is cheaper and better than a real estate agent.

Easement Agreements: Getting it Right

Easement agreements can be effective in their goal of granting rights to use property with very little (if any) formal language. However, the concern addressed herein is the need to spell out the details of the agreement, to protect one’s rights and avoid potential liability. Addressing these critical components will not only ensure clarity in the parties’ understanding, but will also go great lengths toward avoiding disputes, potential litigation and unintended outcomes. The following nine items must be considered and addressed in any easement agreement:

1. Legal Description of Properties. It is extremely important that an easement agreement contain a complete and accurate description of each of the affected properties. A full legal description is ideal, but even when this is not available, some description is necessary, even if only described by address, visual depiction or reference to the owners.

2. Depiction of the Easement Area. The easement area (in other words the portion of property to which one party is granted permission to use or access) should be depicted visually. Such a depiction need not be elaborate, but a clear “drawing” of the relevant easement area will help provide clarity and avoid potential disputes. In larger scale matters (or those with a high risk of dispute), a professional survey with an indicated easement area may be advised. However, in smaller-scale situations, even hand-written indications on a previously-prepared survey will likely be sufficient.

3. Covenant Not to Disturb the Use of the Easement. Although it may have a clearly defined right to use the owner’s property, the party be granted easement rights (which we will refer to as the “benefited party”) must also be sure to that the owner’s use of the property will not create practical problems. To this end, the benefited party should insist that the easement agreement include language that protects its right to undisturbed use of the easement. If such language is not included, the owner of the property may have the right to continue to use the property in a fashion that makes the benefited party’s use impractical or impossible. A simple covenant not to disturb the benefited party’s use of the easement might read as follows: “Party A agrees not to unreasonably interfere with the exercise of the Easement Rights by Party B or its guests, agents, invitees or licensees.” Furthermore, if exclusive use of the easement area is desired, this must be explicitly spelled out in the easement agreement.

4. Determination of Maintenance Obligations. Even after rights and non-disturbance issues are clarified, the parties to an easement agreement face the issue of who will take care of that portion of the property, pay for any needed repairs or address related problems that occur. Put simply, the parties must determine who will maintain the easement area. These obligations can be retained by the owner of the property or can be placed upon the benefited party. Maintenance obligations should be clearly spelled out in the easement agreement. Doing so serves three purposes: (i) it raises the issues for discussion between the parties, (ii) it avoids potential confusion and (iii) it avoids later dispute or litigation. Possible language could read as follows: “Party A shall maintain the Easement Area in good repair and condition, all at its sole discretion. Nothing contained herein shall create any obligation on the part of Party A to maintain any other portions of the property.”

5. Payment of Taxes. The owner of the property is typically responsible for the payment of all applicable real estate taxes and real property assessments. However, the parties to an easement agreement may want to consider re-allocating this responsibility, especially in the event of an exclusive easement over large portion of the subject property. For example, if Owner A grants easement rights to Owner B who owns the neighboring parcel, giving Owner B the exclusive right to use half of Owner A’s property for a period of five years as a parking lot, Owner A should strongly consider forcing Owner B to foot the bill on at least a portion of the applicable real estate taxes. Simple language might read as
follows: “Owner B shall be responsible for the payment of one-half (1/2) of all real property taxes and/or assessments levied against Property A during the period of its easement rights. The payment of such taxes shall be made by Owner B to Owner A within thirty (30) days of notice of such taxes and/or assessments.” Conversely, if the benefited party will not be responsible for any portion of real estate taxes, this should be clearly stated, in order to avoid potential disputes. A simple statement such as the following might be used: “Grantee shall have no obligation to pay any taxes, assessments or other charges or fees applicable or chargeable to the Easement Property or the owner(s) thereof.”

6. Indemnification and Exculpation. In any easement agreement, there arises the very serious consideration of potential liability for the behavior or acts of the other party with respect to the portion of property that is essentially being shared for a period. Even in seemingly simple easement scenarios, the parties must consider their potential liabilities with respect to their ownership or use of the property. The following provisions will prove beneficial in protecting a Grantor from the acts of the other party, and can be readily adapted to similarly protect a Grantee: “Grantee shall indemnify, defend and hold the Grantor, its heirs, representations, agents, employees, successors and assigns, harmless from any and all costs, liabilities, damages, losses, claims, actions or proceedings whatsoever, including, without limitation, for injury to persons (including death) which may be claimed to have arisen out of (i) any damage, accident, injury or other similar occurrences in the Easement Area due to Grantee’s negligence or misconduct; or (ii) the use, maintenance or repair of the Easement Area by Grantee, its guests, invitees, agents, or contractors. It is expressly understood and agreed that, notwithstanding anything in this Agreement to the contrary, the liability of Grantor hereunder, to the extent any exists, shall be limited solely and exclusively to the interest of Grantor in and to the Grantor Property, and neither Grantor, nor any of its heirs, representatives, successors, employees, affiliates or agents, shall have any personal liability for any claim arising hereunder and Grantee hereby expressly waives and releases Grantor and such heirs, representatives, successors, employees, affiliates and agents from any and all personal liability.”

7. Insurance. Similar to the tax payment issue discussed above, an easement agreement needs to clearly state any obligations of the parties to maintain any forms of insurance. Considerations would obviously include property insurance, but may also include other coverage as well, as dictated by the circumstances. For example, the owner of the property may want the benefited party to pay for insurance for the portion of the property being used via the easement rights.

8. Default Provisions and Termination. Some consideration must be made for events or behavior on the part of either party that will terminate the easement. A property owner may want to include certain activities (including failure to make any required payments) that will result in termination of the easement. Conversely, the benefited party will want to clarify that breaches (or at least certain breaches) of the agreement explicitly do not result in termination of its easement rights. Possible considerations should include failure to make requirement payments to the property owner, failure to fulfill any maintenance obligations, failure to pay any required taxes or insurance premiums, and any other matters that are deemed relevant by the parties. Much of the detail with respect to default and termination will be dependant upon the unique nature of each situation.

9. In Gross vs. Appurtenant. These seemingly daunting legal terms represent very simple concepts. There are essentially two types of easement rights that can be granted to the benefited party. An “in gross” easement is granted to an individual or entity, and them only. If they sell or otherwise dispose of the property, they retain the rights granted by the easement agreement. Accordingly, future property owners are not benefited by this type of easement. Put simply, it is an agreement applicable only to the parties that have entered into that agreement—a personal right to use of the property. An “appurtenant” easement is an easement that essentially attaches to the relevant properties or “runs with the land.” In the event a property owner sells its property, the easement rights ‘survive’ that sale and will benefit the future owner. This distinction is critical in any easement agreement and should be addressed squarely. Simple language is sufficient, such as the following: “This easement shall be an appurtenant easement and shall benefit future owners of the properties,” or “This easement shall be in gross for the benefit of Party B and Party B only and shall not be deemed to run with the land.”

Zoning Districts

Overview:  Any purchaser understands that their valuation of the property is largely dependent on their ability to use the property as intended.  When the future use of the property is identical to the prior use, there is often little reason for concern.  However, when the use is going to be changed in any degree, a diligent purchaser must be satisfied that their intended use is permitted by local zoning ordinances.   Buyer will want to be assured the opportunity to obtain any required approvals and permits from the local governing body before they will close on the deal.  It should be noted that even where use is unchanged, a purchaser should obtain a zoning letter from the local planning commission assuring them that the use is indeed permitted.

Suggested language (Buyer):   When the future use of the property will require any type of local government approval (such as a special use permit, lot consolidation, lot split or variance) Buyer should include a relevant contingency in the purchase agreement.  An example of such language might read as follows:

“Purchaser’s obligations under this Agreement are contingent upon its securing the required permits, lot changes, zoning changes and any and all other land use approvals (the “Approvals”) necessary to use and operate the Property according to its intended plans as a _______.  Purchaser shall have a reasonable amount of time to obtain the Approvals from the appropriate entities, which shall be no less than ___ days from the execution of this Agreement.  In the event Purchaser fails to obtain the Approvals, Purchaser may provide notice to Seller within this ___day period and terminate this Agreement.”

 Suggested Language (Seller):  If Buyer demands that a zoning and land use contingency be included in the purchase agreement, Seller must be careful to specify the desired change / approval and require buyer to take diligent and timely effort to pursue these approvals.  Suggested language could read as follows:

“Purchaser’s obligations under this Agreement are contingent upon its securing the following approvals from __________: __________  (the “Approvals”) with respect to the Property.  Purchaser shall have ___days from the execution of this Agreement to obtain the Approvals from the appropriate entities.  Purchaser shall exert due diligence to obtain the Approvals and in the event that Purchaser does not provide notice to Seller of its election to exercise its rights pursuant to this paragraph within ___ days from the executon of this Agreement, this contingency shall be deemded waived by

Title and Survey Contingency

Overview:  At the center of any real estate transaction is the assumption that that the Buyer is getting what they think they are getting, with respect to the property.  Accordingly, every buyer entering into a purchase agreement must make some provision to address potential title and survey concerns.  While prior or outdated title policies can provide some peace of mind, these are not adequate to protect Buyer’s interest in the property.  Buyer needs to obtain an updated title commitment and preferably an updated survey of the property.  To this end, the sale agreement should contain a provision clearly specifying that Buyer’s obligation to close on the transaction is contingent upon their approval of a title and survey report or commitment dated after the date of the agreement.  On Seller’s end, while you cannot expect to bypass this contingency, Seller can and should seek language in the contingency that is limited in its application and very clear in its specifics.

Suggested language (Buyer):   A purchaser’s title and survey language should be detailed and somewhat extensive in order to adequately protect the buyer against a variety of potential title and survey concerns.  A properly drafted contingency should include the following provisions:

(a)    Purchaser may purchase survey and title reports

(b)   Purchaser to notify seller of objectionable or problematic title/survey matters

(c)    Seller should have a period to investigate/correct

(d)   Purchaser may elect to proceed regardless of the problem or may terminate the agreement

(e)   Satisfaction of reports determined solely by Purchaser

Suggested language (Seller):   Seller cannot expect to eliminate a title and survey contingency.  However, a Seller should be diligent in not giving the Buyer an absolute right to terminate the agreement for reasons that are not overly burdensome.  A Seller should consider implementing the following provisions:

(a)    Purchaser should be obligated to immediately notify Seller of title/survey objections

(b)   Purchaser’s satisfaction of reports should be held to a standard of reasonableness

(c)    If Seller cures the problems, Purchaser should be obligated to proceed to closing

(d)   Purchaser should have a limited timeframe in which to raise title objections

What’s a Deed and What’s the Difference?

In the world of real estate transactions, the term “deed” can have a number of different meanings.  In my law firm’s representation of real estate investors, developers and property owners generally, it is not uncommon to find myself explaining to a client the difference between these various types of “deeds.”  This somewhat ambiguous term can prove to be understandably confusing even to experienced real estate investors and long-time property owners.

This article will help remove some confusion from these topics by detailing six important types of “deeds.”  It cannot be emphasized enough that each of these instruments is unique from each other.   These are NOT interchangeable terms and are NOT interchangeable documents.

 

Quit Claim Deed

Quit claim deeds are, in many ways, the simplest type of deed in our discussion.  These are sometimes mistakenly referred to as “quick-claim deeds,” which term is incorrect and inaccurate.  A quit claim deed states that the party executing (signing) the document transfers all of its interest that it may have in a particular parcel of real estate to another party, as named in the document.  In other words, it is a transfer or conveyance instrument.  However, a quit claim deed makes no warrant or claim that the party conveying its interest actually has title to the property to begin with.  Instead, it simply conveys all of the interest (no matter how existent or non-existent) that the party has in the real estate. A quit claim deed is most often used in situations where there are questions or disputes regarding title, in inter-family transfers and in the funding of trusts or corporate entities.

 

General Warranty Deed 

A general warranty deed conveys an ownership interest in real estate.  However, unlike a quit claim deed, by signing a general warranty deed, the seller/grantor makes the following covenants:

(1)    The Seller/Grantor owns the property

(2)    The Seller/Grantor has a right to convey the property

(3)    The property is free of encumbrances, except as noted

(4)    The Seller/Grantor will defend title against claims by all persons

Due to the covenants made by the Seller/Grantor, a general warranty deed is the strongest form

of conveying property.  As a purchaser, a general warranty deed is the most desirable instrument by which to obtain an ownership interest in property.[i]

 

Special Warranty Deed

In a similar fashion to a general warranty deed, a special warranty deed conveys an ownership interest in real estate with certain covenants by the seller/grantor.  These covenants are as follows:

(1)    The property is free and clear of encumbrances, except as noted

(2)    The Seller/Grantor will defend title against all claims of persons making claims under the Seller/Grantor (in other words, parties claiming to have derived an ownership interest from the Seller/Grantor)[ii]

 

Beneficiary Deed

A beneficiary deed is used to convey property upon the death of the owner.  The instrument is signed (and recorded with the local recorder of deeds) during the owner’s lifetime and names the party to receive the property, but the transfer does not actually occur until the owner dies.  Specifically authorized by statute in Missouri (see Ch. 461.025 RSMo), a beneficiary deed is an effective estate planning tool.  A beneficiary deed only transfers property upon death and is not effective to convey any present interest while the owner remains living.


Deed of Trust  

A deed of trust is an instrument by which a lender or similar party takes a “security interest” in a parcel of real estate.  Practically speaking, a “security interest” is not an immediate outright transfer of the property, but instead merely gives the lender/grantee the right to foreclose on and sell the property if the borrower/grantor fails to keep up its end of a related loan agreement.  Accordingly, a deed of trust is typically prepared in conjunction with a loan and promissory note. A deed of trust is similar to a mortgage.

Legally speaking, the deed of trust actually transfers the property to a named “trustee” who allows the current owner to continue to use the real estate, except that if and when the borrower/grantor defaults on the related loan, the trustee would foreclose on the property, essentially acting on behalf of the lender/grantee.  Summarized simply, a deed of trust is a mortgage-like document, used in Missouri in place of an actual mortgage.

 

Deed of Release

A deed of release is typically signed by a lien holder or mortgagee (i.e. a lender) when a lien on property is going to be released.  For example, a bank (who has had a lien on property in the form of a deed of trust) would execute a deed of release after the underlying loan is paid off by the debtor. The deed of release effectively cancels the deed of trust.  Missouri law requires that a lien holder provide a deed of release within 15 days of a borrower paying off the related loan and making a formal request for a deed of release (see Ch.  443.130 RSMo).  Once recorded with the local recorder of deeds office, a deed of release terminates the lien holder’s interest that had been created by the deed of trust.

 

 

Environmental Conditions Contingency

OVERVIEW: An environmental conditions contingency specifies that Buyer’s obligation to close on the sale of the property is subject to a satisfactory report with respect to the environmental conditions affecting the property. Relevant information is typically obtained through a Phase I Environmental Assessment performed by a licensed and qualified environmental testing specialist. Environmental contingencies are important in any type of purchase, but understandably increase in their relevance when there is a history of an environmentally disfavored use of the property (ex: service station with an underground storage tank) or when the intended future use of the property is environmentally sensitive. It should be noted that the importance of and need for this contingency is tied to potential liability for environmental contamination, even if such contamination occurred prior to a purchaser’s ownership of the property.

SUGGESTED LANGUAGE (BUYER): It is advised that most buyers should include some form of an environmental contingency in a purchase agreement, although its relevance may be substantially reduced in some settings. It should be noted that a purchaser must anticipate the cost of (and be willing to pay for) the Phase I Assessment or the contingency serves no apparent purpose. Furthermore, a purchase agreement should require Seller to provide all prior environmental reports with respect to the property, a review of which may aid Buyer in determining the need for another report and this contingency. Suggested language of an environmental contingency might read as follows:

“Purchaser’s obligations under this Agreement are contingent upon its receipt of a satisfactory report regarding the environrmneal conditions directly and/or indirectly affecting the Property. The satisfactory nature of any such report shall be determined in the sole discretion of Purchaser. Purchaser shall have no less than___ days following the execution of this Agreement to obtain and review this report. In the event Purchaser determines that the report is not satisfactory, Purchaser may provide notice to Seller within this ___ day period and temrinate this Agreement.”

SUGGESTED LANGUAGE (SELLER): If an envrionmental conditions contingency is demanded by the purchaser, Seller should seek to limit Buyer’s discretion in determining the satisfactory nature of the Phase I report. Furthermore, it would be beneficial to disclaim any known environmental conditions. For example:

“Purchaser’s obligations under this Agreement are contingent upon its receipt of a satisfactory report regarding the environmental conditions directly affecting the Property. The satisfactory nature of any such report shall be determined in the reasonable judgment of Purchaser and in consideration of similarly situated properties. The following conditions shall not be considered in Purchaser’s determination of the satisfactory nature of the report and/or property: ______, ______, _______. Purchaser shall immediately obtain such report and in the event that Purchaser does not provide notice to Seller of its election to exercise its rights pursuant to this paragraph within ___ days from the executon of this Agreement, this contingency shall be deemded waived by Purchaser.”