4 tips to help you win your real estate lawsuit
Many people find themselves contemplating bringing a real estate lawsuit in Small Claims Court. Sellers often have to sue buyers for failing to close on a transaction. Or, sometimes buyers will have to sue sellers for wrongfully refusing to sign a release of the deposit. There are other types of real estate disputes, of course, but this article deals with a case of a buyer and seller disputing over the return of a deposit.
With that in mind, here are 4 important tips to help you win your real estate lawsuit:
1. Ensure it’s in the Contract
A very common dispute involves purchasers whom were under the impression that the real estate transaction was including a certain piece of furniture or specific zoning rights, etc. I can’t stress enough how important it is to ensure these understandings are written in black and white in the contract, i.e. the Agreement of Purchase and Sale.
Years ago when I was studying for the Bar exams, an instructor referred to the Agreement of Purchase and Sale as the “Bible”. Meaning, if it wasn’t written there, then don’t consider it part of the deal.
Note, there is case law that deals with the issue of misrepresentations made outside of the Agreement of Purchase and Sale, but the point is that rather than getting into these situations where you have to convince a judge of your case, better to ensure it’s written so that if the seller fails to include what he was supposed to under the contract, you have a much easier case.
2. Add an “address for service clause” in the Contract
After a lawsuit is issued (often referred to as “filed”) with the Small Claims Court, it must be “served” by the Plaintiff on the Defendant. To “serve” a lawsuit means to provide a copy of the lawsuit to the Defendant.
Often a real estate lawsuit has difficulty even getting off the ground because the Plaintiff cannot locate the Defendant to serve him. While there are ways to get around this issue such as by getting a court Order for substituted service on the Defendant’s real estate agent or lawyer as I did with this happy client, the reality is that this can add months of wasted time and legal expense to the lawsuit.
For this reason, I recommend that when parties are entering into the Agreement of Purchase and Sale, they should ask their real estate lawyer to include a clause that provides for where service of a lawsuit can be made, in the event of litigation. In this way, should the real estate transaction fall apart, you know where to serve the Defendant without difficulty.
UPDATE November 28, 2016: A loyal reader has asked if I was aware of the address for service clause under section 3 of the standard form Agreement of Purchase and Sale. Indeed I am, but the issue with the clause is that it doesn’t specifically state in the event of a dispute, leading judges to question of this can apply in litigation. For that reason, I think it is wise to add a clause clarifying this. I guess it can be done by way of adding the words for the purposes of this Agreement “and litigation” and having parties initial it, but that seems to make it somewhat sloppy and unclear. Overall, my reader was correct to point this out, and I should have been clearer. The feedback is much appreciated!
3. Ensure to name the real estate brokerage holding the deposit
A common mistake I find by self-represented (and, unfortunately, even represented) litigants is that they fail to name the real estate brokerage holding the deposit funds, as a Defendant to the lawsuit. This is necessary because the only way a successful party can force the real estate brokerage to release the deposit to him is by subjecting the brokerage to a court Order. This is obviously impossible without the brokerage named as a party.
Note, it should be stated clearly in the claim that the brokerage is being named just to subject it to the Court Order and that no Defence is necessary. You don’t want to unnecessarily anger the brokerage by suggesting they’ve done anything wrong just because they happen to be holding the funds. This is another common mistake I’ve seen. It’s never a good idea to tick off the one with the money!
4. Don’t Over-reach!
In contrast to the above, while you should ensure to name the right parties, you should definitely ensure not to name the wrong ones! For example, I have seen many cases where real estate agents are wrongly dragged into a lawsuit for a supposed “misrepresentation” or some other imaginary claim, clearly because the Plaintiff and/or his lawyer thought he would accomplish more by naming more parties.
While this is a strategy that may work from time to time, in my experience, it usually has quite the opposite effect when it comes to Small Claims Court. It can lead to a costs order for naming the wrong party, or it can have the effect of having multiple Defendants ganging up in court against the Plaintiff.
My advice for Small Claims Court is that if it is a legitimate party, then name him, otherwise better not to. If you’re unsure if you should be naming someone, then ask a lawyer. Anyway, you should be retaining a law firm to assist you. Real estate lawsuits are too complicated to leave it to chance.
The above article is for general informational purposes only and does not contain specific legal advice. For that, you will need to retain a competent law firm. Contact us to discuss further.