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Legal updates from Three Rivers Association Attorney

By Gary S. Mueller, Three Rivers Association of REALTORS® Attorney

Phone:  815-725-7300                        e-mail:  This email address is being protected from spambots. You need JavaScript enabled to view it.

Gary Mueller resized cropped CopySterlingR 2019 Med

April, 2019

It is finally, officially Spring.  Any chance that the calendar will encourage Mother Nature to abide by her contract with all of us and allow Spring to start?  By the time you read this, we will know if the Blackhawks made the playoffs (slight chance), the Cubs and White Sox are destined for greatness this year (less than a slight chance), and that my NCAA bracket will already be trashed (extremely, highly likely). 

From time to time, I will try to share insights on various real estate topics without any specific reference to law suits or statutes. This submittal is one of those times.

Our office is experiencing an increasing number of situations where non-married couples are purchasing real estate. Whether the couple is moving in together or the couple is buying a home prior to getting married (and a wedding date is either set or impending), the adults have some issues to consider when buying real estate.  First, the couple may take title to the property as tenants in common or as joint tenants.  Tenants in common means that each of the owners owns an undivided one-half interest in the property and, if one of the owners passes away, his/her interest in the real estate passes to his/her family and not to the other owner.  Joint tenancy, on the other hand, means that each of the owners owns an undivided one-half interest in the property and, if one of the owners passes away, his/her interest passes to the surviving owner.  Second, though unpleasant to discuss, the parties should be counseled on what happens if they no longer get along and decide to split up.  What happens to the down payment that one party paid but the other party did not contribute toward?  What happens to any improvements paid for by one party but not the other?  If the relationship goes south, what is the expectation of the parties to amicable address these apparent inequities?  The answer, though rarely used by clients to my office (due, typically, to the expense rather than the soundness of the advice), is to set up a partnership agreement between the parties so that all of these matters are addressed.  I counsel clients about this but, in 29 years of practice, I have had fewer than 5 couples follow this advice.  Third, when can the parties switch title and ownership to tenants by the entirety?  Tenants by the entirety is only available to a married couple and the property must be the primary residence for the parties.  Tenants by entirety means, though the math does not make sense, each party owns 100% of the property and, if one passes, the survivor has sole ownership of the property.  Should a judgment be rendered against one of the two parties and not the other, the person who obtained the judgment can go after assets of the freeloader except for the primary residence as the other party owns 100% of the asset---so tenants by the entirety may protect a married couple’s primary residence from a creditor.  In the case of a non-married couple, a deed from the parties to the parties as a married couple may allow the parties to retitle the property as tenants by the entirety.  In any case, couples should be told of these factors prior to the closing so that a reasoned decision can be made prior to closing---rather than the decision at the closing in an oftentimes uncomfortable situation (one party does not want to offend the other party by requesting tenants in common as the party paid the $40,000 down payment and wants his/her family to have some protection if he/she dies so that the surviving family can try to recoup the down payment, for example).

When a buyer contracts to purchase a condo and receives a 22.1 Disclosure from the Association, can the buyer terminate the contract based on the information presented (for example, that the Association is in the middle of a law suit over failing roofs in the complex or the Association budget reveals that there are no assets in reserve for the 120 unit complex)?  The simple answer is yes, if the following four prongs are met: 1)  whether the buyer is within the class of persons the Disclosure Act is designed to protect (as a buyer, the individual IS within the class of persons to be protected); 2) whether implying a cause of action (should the buyer have to sue to get out of the contract) is consistent with the underlying purpose of the Act (as the buyer, the disclosure is to provide information to the buyer and the buyer, armed with the information, should have recourse to address his/her concerns); 3) whether the buyer’s injury is one the statute was designed to prevent (the MAIN reason behind the Disclosure is to make the buyer aware of the financial condition of the Association); and 4) whether implying the cause of action is necessary to effectuate the purpose of the Act (there really are few other avenues for the buyer----with the financial information presented, buyer either buys the property or is allowed to terminate the contract).  (Nikolopulos v. Balourdos, 614 N.E.2d 412 (1st Dist. 1993).  So what does this mean practically?  Sellers should make every effort to get the completed 22.1 Disclosures filled by the Association or management company and, thereafter, presented to the buyer as soon as possible.  With the buyer able to terminate a contract over the financial information of the Association (whenever in the process the information is given), it is far better to get this to the buyer sooner rather than later. If the deal is going to be terminated, find out before even more time, money, and effort are wasted.

One last tidbit----subcontractors CANNOT breach an implied warranty of habitability if said subcontractors have no, separate contract with a property owner.  As a result, practically speaking, any person contracting with a general contractor for the construction of a residence should also make sure that he/she has a separate contract with any subcontractors.  The property owner cannot rely on any warranties included in the initial contract with the general contractor to bind a subcontractor to the same warranties.

I hope your business model continues to serve you and your clients well.  Keep working hard. Stay relevant.  Thank you for allowing our office to work with you. 

My best

Gary