Monday, September 13, 2010

Reason No. 136 to Hire a Real Estate Lawyer

I honestly thought they were going to get rid of covenant fees by legislation from real estate transaction or the like.  But according to this NYT story they are alive and well, at least in some jurisdictions.

Yup, the developer, for the next 99 years, gets what amounts to a 1% transfer tax whenever a property is sold.  The thought, I guess, is that these rights could be securitized and sold to give the developer more cash or perhaps coupons to clip down the road.  And now of course people are complaining that these fees were buried deep into a declaration of covenants and taht they are unfair.  Yadda, yadda, yadda.

Part of me is angry at the developers for potentially being sneaky.  (I can't say with certainty what disclosure, if any, there was.) But another part of part of me wants to laugh at the buyers.  Where the heck was your real estate lawyer?

I live in an area where lawyers are not involved in most real estate transactions.  I am also on the board of my homeowners association, which has some pretty lengthy and specific restrictive covenants.  Regularly residents who violate the covenants complain that they did not know about Restriction X regarding their house. My first response is always: "Well, you bought the house subject to the covenants, so you are deemed under the law to know about them whether you read the document or not."  My second response is a question: "Who was your real estate lawyer, and did he or she review the covenants and explain them to you?"  When the answer is invariably, "I did not hire one," I usually need not say more, although if pressed I suppose I might reply, "Your negligence is not our neighborhood's problem."

And don't even think about filing an insurance claim, unless for some reason the declaration is not an exception to your title insurance policy.

The moral: hire a lawyer, for crying out loud.  Few people make investments larger than a house.  Cheaping out on something this important can be foolish.  Yes, I am not a fan of resale fees, but at least if you know about them you can be in a position to not buy the property, negotiate a price reduction or perhaps get the covenants changed.

1 comments:

D said...

I think it's a reasonable economic decision to let the client review the declarations first. Most declarations aren't that hard to read. I usually have the client read them and ask me if clarify anything they don't understand.

 
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