Real Estate Investing Lawsuits

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 What Is Real Estate Investing?

Real estate investments are pieces of real property that are intended to generate money for the owner, as opposed to owning long-term. Common examples of real estate investment property include residential or commercial property that can be rented to leaseholders or temporary guests, such as:

  • Apartment buildings;
  • Vacation homes; and
  • Commercial store space.

Generally speaking, this property is not the property owner’s personal home; additionally, it is purchased for the sole reason of either obtaining profit through rentals, or from selling the property at a later time when the market is favorable to sellers.

There are a variety of ways in which real estate may be part of an investment portfolio, including:

  • Purchasing a joint ownership position in a large building;
  • Purchasing a co-op;
  • Purchasing commercial space and leasing the space to a business;
  • Purchasing residential property in a neighborhood for a low price, and sitting on the property until it becomes profitable to resell the property;
  • Flipping residential property by purchasing a home at a low price, renovating the home, and then reselling the home at a higher price; and
  • Purchasing an inexpensive home and renting it out to tenants.

Real estate investing refers to the actual act of purchasing homes for the purpose of gaining some sort of profit from the purchase transaction. In this respect, real estate investing is similar to other investments, such those involving stocks or securities. Generally speaking, the property acquisition is motivated more by an increase in profit than actual use of the property for living purposes.

What Are Some Common Examples Of Issues Associated With Real Estate Investing Lawsuits?

Real estate investments are frequently the source of legal disputes or conflicts. Some common disputes involve legal issues such as:

  • Real Estate Fraud: Real estate fraud occurs when one person involved in a real estate transaction makes false representations of relevant information to another person involved in the transaction. Alternatively, one person may fail to disclose relevant information to the other person; the other person then acts on the false information or omission, to their financial detriment.
    • Fraud in real estate transactions can occur during any phase of a real estate transaction, from the mortgage application or approval phase to the closing of a sale or purchase of a piece of real property. However, there are many ways in which prospective renters can also be the victims of real estate fraud. The crime of real estate fraud may be punishable by time in jail or prison, as well as significant fines;
  • Defective Titles: Having valid title to property means that one person has the exclusive legal right to own and use a piece of property. In order for a title to be valid, that title must be free of defects; if a title is considered to be defective, the seller of the property may be required to clear title or remedy title defects before the seller completes the sale of their property to a buyer.
    • It is important to note that not all title defects can be easily cured, or remedied. When the legal ownership of property is disputed, the person who is claiming ownership may have to file a lawsuit in court. This lawsuit is known as a “quiet title” lawsuit;
  • Deed Disputes: A deed is a type of legal document that is used to transfer ownership rights of a home, or other piece of real property, from the current owner to a new one. There are many different types of deeds, each of which has its own legal requirements. The most common reasons that a deed may be used is to either transfer ownership during the purchase or sale of a home, or when a person inherits property from someone else. Deeds can also be used to transfer gifts, trust contents, and certain rights, such as a sheriff’s deed or tax deed. Deed disputes are generally associated with ownership disputes;
  • Boundary Disputes: Boundary disputes generally occur when two adjoining landowners disagree about where the line between their two pieces of property runs. Additionally, boundary disputes often arise when one property owner wants to make a change to their property, while the other property owner disputes their right to do so while claiming it would infringe upon their property; and
  • Breaches of Contract: A breach of contract occurs when one party to a valid contract has failed to fulfill their side of the agreement. The terms of a contract are what guides the parties in what they must do, as well as how they should do it, in order to maintain their promise. If one party does not do what the contract instructs that they do, then the non-breaching party will generally be allowed to take legal action by filing a lawsuit against the breaching party in court.
    • A breach of contract can occur as either a partial or a complete breach; the court will determine whether the breach was substantial or only a minor one. This determination will help the court when deciding what type of damages the breaching party should be required to pay.

Real estate investing disputes generally require a legal damages award in order to compensate the non-liable party for losses. Such awards will be further discussed below.

Some real estate investments are handled through an agent-principal relationship. An example of this would be when a trustee handles real estate investments on behalf of another person under a trust fund account arrangement. In such circumstances, the trustee may have a legal duty to invest the property wisely and prudently. If the trustee violates their legal duties and responsibilities, this could lead to legal liability.

How Are Real Estate Investing Lawsuits Remedied?

Most of the remedies that are associated with real estate investing lawsuits mirror those awarded in breach of contract cases. Equitable remedies are a specific set of remedies that can be issued by a court during a breach of contract case.

Generally speaking, legal remedies are divided into two categories: legal remedies and equitable remedies. Legal remedies are those that allow the non-breaching party to recover compensatory (or, money) damages. Equitable remedies are actions that a court must prescribe, and are often used in order to help resolve a substantial breach or contract dispute. This is applied when money damages would be considered insufficient to resolve the issue or protect the parties from harm.

It is generally required that a party seeks a compensatory or monetary damage award before the court will even consider granting equitable relief. What this means is that if the parties cannot show that money will not sufficiently fix their contract dispute, they will most likely not be eligible for any equitable remedies.

However, there are certain circumstances in which a party to a contract may be able to receive monetary compensation under the rules of equity. These are known as “restitutionary damages”, which are a considerably specific and limited type of damage in a breach of contract case. Restitutionary damages are intended to prevent one party from being unjustly enriched for their breach. An example of this would be if the non-breaching party has already delivered their goods, but the other party has not yet paid for them. A judge may order the breaching party to pay restitutionary damages in order to stop them from receiving an agreed upon benefit for free, and at the expense of the other party.

Do I Need An Attorney For Real Estate Investing Lawsuits?

If you are involved in a dispute associated with a real estate investment, you should consult with an experienced and local real estate lawyer to discuss your lawsuit options. An attorney will be best suited to helping you understand your state’s laws regarding real estate and real estate investing, and will represent you in court as needed.

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