REAL ESTATE TRANSACTIONS
The law subject of real estate and real estate transactions is generally known as the buying and selling of properties. These properties might be residences or commercial property or farms or a variety of other types. These sales might be arranged by a realtor or they might be constructed by either or both of the seller’s or buyer’s attorney. The public understands that this important transaction of buying and selling real properties should be addressed in a properly drawn contract along with other related papers. The knowledge that an experienced attorney can bring to real estate is critical for a successful conclusion for the seller and the buyer. This law firm looks forward to assisting clients in any and all aspects of a real estate sale and purchase, and many related real estate matters. Here, we address the separate subjects of: Elements within a Real Estate Transaction. Real Estate Closings. Real Estate Title Evidence. Acquisition Financing.
1. Various Elements of a Real Estate Transaction:
a. The contract, whether written by the seller’s attorney or the buyer’s attorney, will include usual language such as: A title perfect legal description. Described consideration. Payment of taxes and insurance. Possession. Title evidence. Inclusion or exclusion of warranties. Closing (more about this, below). And many other references. In the event there are unusual characteristics, those typically relate to the particular nature of the real property in question.
b. Leases address the personal obligation between the owner/lessor and the tenant/lessee regarding possession. Possession in a lease may be described as a temporary interest granted to the lessee for a particular purpose. There are numerous reasons that leases are written such as: residential, farming, commercial, as companion to some organizational entity. Leases vary in many respects depending upon the object of the parties and the nature of the real property.
c. Easements are granted uses of land which strictly depend upon the feature of land use. There may be travel across the property for needed access. There might be a right of encroachment for an activity which is not objectionable.
d. Zoning and land use addresses the interplay between government restrictions and the landowner’s unrestricted right to use the property. While zoning laws are adverse to complete ownership, the same could also enhance the value of the property by restricting less desirable uses.
e. Construction improvements are of special concern because, most typically, labor and materials furnished onto the property must be correctly paid. Construction laws carefully address the rights of those who provide improvements on real property and likewise protect the owner from liens for non-payment. Of importance to builders, no matter the type of property, is the manner in which a properly drawn construction contract will protect all parties.
f. Environmental concerns will usually affect every real estate transaction. For the landowner, or tenant or lender, Federal and State environmental laws represent a potential mine field that must be navigated with care. Applicable federal law includes CERCLA known as the superfund statute. Nebraska law on the subject is addressed by the Nebraska Department of Environmental Quality, a State Agency, in subjects such as: landfills, livestock waste, and petroleum releases.
g. Accretion land is real property located along a river or stream which was originally surveyed in the 19th Century. This land includes concerns and issues relative to the principles of evulsion and reliction. These principles usually result from, even though gradually, the movement of the river as it migrates along its course. Accretion land is addressed by the long legal history of the rights of abutting land owners. Disputes about the location of common boundary lines or shared uses require care and attention to the development of legal title - an important feature - and resulting ownership rights.
h. Sub-surface rights, notably mineral interests of producing oil and natural gas, are particular concerns because by law and practice minerals may be, and very often are separated in ownership from the ownership of the surface. Because the minerals of producing oil or natural gas are devisable, mineral interests are conveyed separately from the surface. Minerals in place are real property, however, the production of the same is personal property. Minerals and the development of the same requires a keen understanding of the body of law which relates to the rights of ownership and the rights to develop these minerals within the context of established principles for leasing and severance.
2. Real Estate Closings:
a. A closer is defined as “a person who collects and disperses funds on behalf of another in closing a real estate transaction.” Those who might conduct a closing, as provided by Nebraska Statutes, include: Attorneys, title insurance agents, realtors, and lenders. Each of these is regulated by their respective authorities - attorneys by the Nebraska Supreme Court.
b. Before the early 1990’s, attorneys were the primary closing agent for Nebraska real estate transactions of all types; along with a realtor who constructed the real estate sale and the lender who provided the financing. More recently, a title insurance agent, who likely wrote the title evidence/title insurance on the transaction, might perform the closing.
c. This law firm assists a closing by providing that original service, or we will work along with title agents and others to get the job done. A properly accomplished closing includes far more than simply exchanging a deed for consideration, as there are many legal and practical concerns.
d. Concepts within in a closing include: “Good funds” which means the responsibility to be certain that the money on the table is satisfactory and sound. “IRS reporting” is the legal obligation for a real estate transaction to be identified to the Federal Government. “RESPA satisfaction” which is a comprehensive Federal Law that protects the ethics within the transaction and requires certain minimum standards. “Privacy concerns” which have become prevalent since a Federal Law in 1999. “The Patriot Act” which seeks to identify the parties to the transaction.
e. There are numerous details which an experienced attorney must carefully complete in a real estate closing to be certain that the interests of all parties are satisfied. This law firm looks forward to providing that service.
3. Real Estate Title Evidence:
a. Before more recent years, title evidence was provided in an abstract of title prepared by a Nebraska registered abstracter. Typically, the buyer’s attorney would read the abstract to offer an opinion on the title and make requirements for corrections. The abstract has given away to title insurance.
b. Title insurance came in use across Nebraska in the 1970’s and over a period of approximately a decade evolved to the point where it is now the principle method of proving title within a real estate transaction. A title insurance commitment is first written, which explains the nature of the title with suggested corrections. The obligation to clear title settles before closing of the transaction. When title is clear, and the new interest in the title of the buyer and/or the lender has been closed, the insured interests are written into a title insurance policy. The process of insuring title is not routine as it should be followed, throughout, by the attorney.
c. Title insurance insures against defects from liens and other defects or encumbrances affecting the title. The policy of protection is actually an indemnity contract to pay for proven monetary loss. The title insurance contact is unique in that it constitutes an attempt at risk avoidance and thus is different than other property insurance which is casualty based. Risks insured are of several types: Fraud, forgery, competency or capacity. Construction liens. Public record errors, including the errors of the title searcher. In the language of the standard ALTA policy, basic coverage is offered for: Title vesting, encumbrances against title, unmarketability, and lack of access. When title policy coverage is joined with a closing, the Nebraska title agent is obliged to offer a closing protection letter.
4. Acquisition Financing:
a. Traditionally, the buyer goes to a bank to get a loan. This still is favored, but increasingly the buyer will join with other investors with the single purpose of making an investment outside of the typical context of a bank financed purchase. The manner in which this financing is raised requires skill to be certain that there is a proper blend of an organizational entity necessary for the purpose, as well as attending to the various needs of the players.
b. Acquisition funding might come from various sources. Examples: 1031 Exchange money which might be directly contributed to complete an exchange which could involve multiple parties. More recently, this could involve a “tenant in common exchange” in which the investors have a divisible interest in the real property purchased. Or, this could involve the use of one or more organizational entities - such as a limited partnership - in which there is a share in the investment of the enterprise but also some limitation of liability which might be necessary to accommodate the wishes of diverse participants. At all levels of funding real estate purchases, the risk to the investor as well as the motive for profit has to be carefully analyzed and promoted in cleanly drawn agreements.