Real Estate Litigation
Real estate involves esoteric rules, intricate contracts, huge amounts of money, and tough businesspeople. No wonder it is a frequent source of litigation. Many litigators focus on real estate practice: One reason is there is a community of people in the industry where reputation is important, and being known to those people helps secure business. Another reason is that it may be hard for newcomers to learn standard rules and practices that come up in cases. A third is that a lot of the rules are specific to local areas, so there is an advantage to knowing one area well.
Why should you read this post about real estate litigation?
There’s money in real estate and there’s money in litigation, so you think this post will give you information about a high-power mix of industries.
You’re hoping to see if there is “fake estate” litigation.
After reading your lease, you want to understand the crazy people who write these things.
One World Trade Center, New York, NY
https://en.wikipedia.org/wiki/Skyscraper#/media/File:One_World_Trade_Center,_New_York_(33224081040).jpg
Landlord and Tenant Disputes
A lot of disputes between landlords and tenants arise from three subjects. The tenant has not paid rent, the tenant refuses to leave, or either the landlord or tenant is not fulfilling their promises in the lease.
A landlord cannot simply kick out a tenant when she does not pay rent. Instead, there is a process to demand rent and, if need be, seek an eviction. But the tenant may be able to explain why she is not paying rent. Litigation may be how the parties ultimately resolve the dispute.
To evict a tenant, a landlord may seek a holdover proceeding. These usually take place in a specialized landlord-tenant court. There are strict rules a landlord must follow in order to obtain an order permitting it to lock out a tenant. For commercial leases, a tenant may seek to get more time to cure whatever problem led the landlord to seek an eviction by asking the court for a Yellowstone injunction.
Often, a lease does not expressly state that the landlord must keep the premises safe and usable. But for residential leases, courts will imply a warranty of habitability, requiring the landlord to provide running water, heat, and other necessities. If the landlord fails to do this, the tenant may go to court and claim a breach to seek damages. The tenant may also claim right to spend money to fix problems instead of paying that same amount as rent to the landlord, that is, they may argue the right to subtract the cost of repairs from rent.
Real Estate Ownership Disputes
A lot of litigation arises from disputes about who owns a property. There may be ambiguities about borders described in historical land records, sleeping for decades in the drawers of a county clerk’s office. Or it could be that a company or a trust bought property, and now it is unclear who can act on behalf of that owner. It could also be that someone thought they had bought land, but the sale did not follow all the rules that apply to land transfers, so the purchase is disputed.
When courts resolve these cases, they often direct a county clerk to update land ownership records to reflect the outcome. One issue that may come up in litigation is the “statute of frauds,” which requires agreements that involve real estate to be in writing. Another is “adverse possession,” a legal concept that states that someone who acts like they own land for a certain number of years can be deemed to effectively own it, requiring people who claim to own land to quickly challenge someone—say, a squatter—who “openly and notoriously” acts like they own it. Still another is “eminent domain,” an act in which the government takes property from a private party for public use, often prompting the person who had their land taken to challenge the action in court.
Differences Between Residential and Commercial Disputes
In many disputes, there is an imbalance of power between two sides. Often, a residential landlord has more power than a tenant. And so the landlord drafts an agreement that strongly favors the landlord. The landlord has dedicated lawyers working on its behalf, while the tenant may not. As a result, a lot of disputes never get litigated because the tenant does not know their rights or did not get the kind of deal that people with equal bargaining power could obtain.
But this imbalance is not entirely one-sided. Consumer protection laws protect residential tenants. They bar certain unreasonable provisions or landlords’ automatically insertion of provisions into a lease. Public service organizations provide free or low-cost counsel to residential tenants. Landlord-tenant courts, at least in New York, are notoriously sympathetic to tenants. This may frustrate potential landlords. Further, the residential housing market is competitive: Landlords who offer decent management but higher prices may lose out to landlords who seem to offer better deals. As a former renter myself, I understand that renters are mostly motivated by price and quality of a property. They may not even see a lease until the last minute, and then they not have the bandwidth to read the fine print before movers arrive.
This imbalance is reduced both in high-end residential properties, where richer renters or buyers hire counsel and tend to have more seasoned agents who negotiate on their behalf, and in commercial properties, where both sides often have professional representatives. Reflecting this greater balance of power, the rules that protect average residential consumers may not apply to investment or commercial transactions.