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  • Writer's pictureDeLone Dawisha

THE VALUE OF A REAL ESTATE ATTORNEY IN MICHIGAN: DODGING COSTLY MISTAKES

INTRODUCTION


Real estate transactions can be strewn with potential pitfalls. While Michigan's vibrant property market presents many opportunities, it also harbors a myriad of legal complexities that could cost the unwary dearly. Enter the role of a real estate attorney: a professional uniquely equipped to guide you safely through this intricate landscape. This comprehensive guide will delve into the value of a real estate attorney in Michigan, highlighting how they can help you avoid costly mistakes and ensure a smooth, successful transaction.


BACKGROUND AND GENERAL CONSIDERATIONS


1.) The Role of a Real Estate Attorney


While Michigan law doesn't mandate the involvement of a real estate attorney in property transactions, the benefits of their expertise extend far beyond ticking a statutory box.


A real estate attorney is more than just a legal professional; they serve as your compass throughout the transaction, enhancing your understanding of your rights and obligations, and empowering you to make decisions that are both informed and beneficial.


A real estate attorney also serves as an advocate, representing your interests throughout the transaction. Whether it's negotiating the terms of a contract, resolving disputes, or providing advice on potential property issues, a real estate attorney uses their skills to ensure that your interests are always at the forefront.


The involvement of a real estate attorney in a property transaction can be the difference between a successful, stress-free transaction and one fraught with costly legal pitfalls.


2.) Key Areas Where a Real Estate Attorney Can Save You From Costly Mistakes


a.) Due Diligence and Title Search:


Due diligence is a fundamental step in any property transaction. It involves a comprehensive review of various aspects of the property, including physical conditions, financial considerations, zoning restrictions, and legal status of the title. As part of this process, a title company typically conducts a title search to ensure the property is free from liens, encumbrances, or other legal issues that could disrupt the transaction. A real estate attorney's role in this process is to provide expert legal counsel on the findings of the title search and other aspects of due diligence. They interpret any potential issues discovered, advise on their legal implications, and guide you on how to address these issues effectively. This dual-pronged approach ensures that you are fully informed about the property you are purchasing and are protected from potential legal and financial pitfalls.


b.) Understanding and Preparing Legal Documents:


The sheer volume of paperwork involved in real estate transactions can be overwhelming. Documents such as purchase agreements, title deeds, financing agreements, and closing documents are typically laden with legal terminology that can be challenging for a layperson to comprehend. A real estate attorney can demystify these complexities for you. They can interpret the legalese, ensuring that you fully grasp the terms and conditions you're agreeing to. Moreover, they can prepare and review documents on your behalf, ensuring that every clause safeguards your interests.


c.) Negotiation:


The negotiation phase of a property transaction can be a high-stakes game, where the right representation can save you thousands of dollars. A real estate attorney is skilled in the art of negotiation. They can represent you effectively, bargaining for terms and conditions that are favorable to you. Whether it's arguing for a lower purchase price, better financing terms, or even concessions based on property inspection results, a real estate attorney has the expertise to tilt the scales in your favor.


d.) Closing Process:


The closing process, which is the final step in a property transaction, can be fraught with complexities. It involves the preparation and signing of the closing documents, payment of fees and taxes, and the transfer of property ownership. An attorney can deftly navigate this process for you. They can ensure that all the necessary documents are correctly prepared and signed, all required fees and taxes are duly paid, and the property deed is legally transferred and appropriately recorded. Their involvement can make the difference between a smooth, successful closing and a chaotic one laden with costly omissions or errors.


3.) Real-World Examples of Costly Mistakes


Consider these hypothetical scenarios where the absence of a real estate attorney led to costly consequences:


a.) Scenario 1:


A Michigan resident purchases a beautiful waterfront home in Traverse City. They did not perform a thorough title search, and after the transaction, they discover an easement allowing public access to the beach via their property. This easement devalues the property and interferes with their enjoyment of their new home.


b.) Scenario 2:


A small business owner in Detroit purchases a commercial property. Unaware of the zoning laws, they later discover that their intended use for the property is not permitted, leading to significant financial loss and disruption to their business plan.


c.) Scenario 3:


A commercial real estate investor in Grand Rapids proceeds with the purchase of a large multi-tenant shopping center. The investor signs the purchase agreement without seeking the advice of an experienced real estate attorney. At the closing, they are taken aback to see a $60,000 debit for city/town and county taxes on their closing statement, mirrored by a credit for the same amount on the seller's closing statement. As it turns out, the purchase agreement included a real property tax proration methodology that heavily favored the seller, resulting in the buyer shouldering a much larger tax burden than anticipated. This unexpected expense significantly impacts their investment calculations.


d.) Scenario 4:


A residential real estate investor in Ann Arbor purchases a historic home with plans to renovate and rent it out. After closing, while beginning renovations, they discover significant structural issues that were not disclosed during the sales process. These issues result in considerable unforeseen costs and delays to the renovation plan, causing a substantial financial setback.


e.) Scenario 5:


A burgeoning tech startup in Lansing signs a lease for a prime office space with a spectacular view of the Grand River. The CEO, charmed by the view and the potential it has for inspiring his team, does not engage a real estate attorney to review the lease. After a few months, the landlord decides to move the startup to another unit in the building, citing a clause in the lease that allows for such changes at the landlord's discretion. The new unit lacks the river view and is not substantially similar in quality. The CEO protests, but the landlord points to the clause in the lease agreement. The startup is left with no choice but to relocate within the building, leading to substantial disruption of their operations and a decline in employee morale due to the downgrade in office quality.


f.) Scenario 6:


A thriving retail business in Grand Rapids decides to expand and leases a larger storefront in a prime location. The business owner, excited by the prospect of increased foot traffic and sales, quickly signs the lease without having a real estate attorney review it. After a few months, the landlord presents the business owner with a bill for property taxes, insurance, and maintenance costs. The business owner is shocked, as they were under the impression that these expenses were covered by their monthly lease payments. Upon revisiting the lease, they find a clause stating that the tenant is responsible for all triple net costs, which include property taxes, insurance, and maintenance. This unexpected financial burden puts a significant strain on the business's finances and disrupts their growth plans.


In all six scenarios, a real estate attorney could have identified and addressed these issues before they turned into costly mistakes.


4.) Frequently Asked Questions (FAQs):


a.) Do I need a real estate attorney for every property transaction?


While it's not mandatory in Michigan, having a real estate attorney involved in any property transaction—no matter how big or small—can help protect your interests and save you from potential legal and financial pitfalls.


b.) Can I negotiate the terms of a real estate contract on my own?


While it's technically possible to negotiate contract terms on your own, it's often beneficial to have an experienced real estate attorney represent you. They have the legal knowledge and negotiation skills to secure terms that are favorable to you.


c.) What if I discover property issues after closing?


If you discover problems with the property after the closing, the options available to you largely depend on the specifics of your situation. An attorney can provide you with advice tailored to your circumstances.


d.) Can a real estate attorney help me if I'm buying a property "as is"?


Yes, even if you're buying a property "as is", a real estate attorney can still be of great help. They can ensure you fully understand what you're agreeing to, and can advise you on steps to take to protect yourself from potential issues.


e.) How can a real estate attorney assist with a lease agreement?


A real estate attorney can help both landlords and tenants understand their rights and responsibilities under a lease agreement. They can also assist with drafting leases and resolving any disputes that arise.


f.) What role does a real estate attorney play in a foreclosure?


If you're facing foreclosure, a real estate attorney can explain your legal options, represent you in court, negotiate with your lender, and possibly help you save your home. If you're considering buying a foreclosed property, an attorney can help you understand the process, conduct a thorough title search, and protect your interests throughout the transaction.


g.) Can a real estate attorney help me with property disputes with my neighbor?


Yes, a real estate attorney can provide legal advice and representation in various types of property disputes, including boundary issues, easement disputes, and issues related to nuisance or trespassing.


h.) What if the property I'm interested in has an easement?


A real estate attorney can help you understand the terms of the easement and how it may affect your use and enjoyment of the property. They can also guide you in negotiating and drafting easement agreements.


i.) I'm interested in investing in commercial real estate. How can a real estate attorney assist me?


Commercial real estate transactions can be complex, involving various factors such as zoning laws, lease agreements, and more. A real estate attorney can guide you through the process, helping you understand your rights and responsibilities, conduct due diligence, negotiate favorable terms, and ensure a smooth transaction.


j.) What is a commercial lease, and how does it differ from a residential lease?


Commercial and residential leases have different legal stipulations and implications. For instance, commercial leases often include provisions concerning the property's use, modifications, and maintenance responsibilities that are typically not present in residential leases. Understanding these differences is essential for safeguarding your interests, particularly if you're transitioning from residential to commercial property investment.


k.) What are common area maintenance (CAM) charges, and who typically pays for them?

CAM charges are costs related to the upkeep of common areas in a commercial property, such as hallways, elevators, and parking lots. These charges are usually the tenant's responsibility, but their calculation and allocation can be complex. An experienced attorney can help clarify these aspects and potentially negotiate more favorable terms.


l.) What are 'use' clauses in commercial leases, and why are they important?

'Use' clauses dictate how a tenant can utilize the leased property. These clauses can be restrictive or expansive and significantly influence the tenant's operations. Misunderstanding or overlooking the implications of these clauses can result in serious consequences, including lease termination.


m.) What are the typical lease terms for commercial properties, and how are they negotiated?

Typical lease terms can range from a few years to over a decade, depending on the property and business type. Negotiating these terms requires a deep understanding of market conditions, business projections, and legal stipulations. An attorney can provide valuable insights and representation in these negotiations.


n.) What does 'rent escalation' mean in a commercial lease agreement?

Rent escalation is a clause that allows landlords to increase the rent over time. The increase might be a fixed percentage or tied to a cost-of-living index. Understanding and negotiating these clauses can significantly impact your long-term financial obligations.


o.) How can I negotiate an early termination clause in my commercial lease?

Early termination clauses provide a way out of a lease before its end date. However, these clauses often come with penalties or conditions. An attorney can help negotiate more favorable terms, providing flexibility without undue financial burdens.


p.) What is a personal guarantee in a commercial lease, and should I avoid it?" A personal guarantee makes you personally responsible for the lease obligations if your business can't fulfill them. This can be a significant risk, and it's crucial to understand the implications before signing.


q.) What are the legal considerations when subleasing commercial space?

Subleasing involves leasing your rented space to a third party. It can be a viable option if you have surplus space, but it comes with legal complications that require careful consideration and expert guidance.


r.) What are 'build-out' allowances, and how do they work?

'Build-out' allowances are funds provided by the landlord for property modifications. These allowances can be critical for tailoring a space to your needs, but the terms can be complex and often require negotiation.


s.) What is a 'triple net' lease, and how does it affect my costs as a tenant?


In a triple net lease, tenants are responsible for property taxes, insurance, and maintenance costs in addition to rent. These leases can significantly increase your costs and require thorough review and understanding.


t.) How does zoning affect my intended use of a commercial property?


Zoning laws dictate how a property can be used and can significantly impact your business operations. Ignoring or misunderstanding these laws can result in costly fines, legal disputes, or even the inability to operate your business.


u.) What are my rights as a commercial tenant if my landlord sells the building?


The sale of a leased property can create uncertainty for tenants. Understanding your rights and protections under the lease and Michigan law is critical to prevent disruptions to your business.


CONCLUSION


The value of a real estate attorney in Michigan goes beyond mere legal representation. They provide the expertise and guidance necessary to navigate the complex world of real estate transactions, saving you from potential pitfalls and costly mistakes. Whether you're a first-time homebuyer or a seasoned investor, the advice and assistance of a real estate attorney can be invaluable in ensuring a smooth, successful transaction.

Remember, while this guide provides a general overview, each real estate transaction is unique and may present its own set of challenges.


As an experienced Michigan real estate attorney, I can provide the specialized guidance you need. Contact me today for a free initial consultation, and let's work together towards making your real estate journey as secure and successful as possible.


DeLone Dawisha

Principal and Founder

Dawisha Law, PLLC

248-904-5123

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