Managing Partner Robert M. Steeg is a regular contributing columnist on real estate for Reuters Legal News and Westlaw Today. His article, “Little Loopholes in Real Estate Documents Can Lead to Big Problems,” was published on August 8, 2024. Following is an excerpt, which you can continue reading on Reuters Legal News and Westlaw Today.
Little Loopholes in Real Estate Documents Can Lead to Big Problems
Part of the challenge of transactional law in general, and real estate law in particular, is that the person drafting the document has to try to anticipate and address a myriad of things that might happen in the future. Little loopholes in contracts, leases and other commercial and residential real estate documents can lead to bigger problems later. Following are a few areas a careful document drafter needs to address to avoid future issues.
Contracts in general
Many states find provisions that leave issues “to be negotiated later” or “to be agreed upon later” to be unenforceable because they do not constitute an agreement but simply leave the particular item to the “whim” of the parties later.
If there are items that are not completely settled, make sure to provide an objective method of resolving them rather than stating that any particular deal points are to be addressed later. Mathematical formulas, arbitration, and appraisal by one or more appraisers are a few examples of objective methods.
What happens if a particular deadline falls on a weekend or a legal holiday? Parties often get in a dispute when a deadline falls on a Sunday, for example. Does that mean that the deadline is the previous Friday or the following Monday? Don’t allow your contract to have this ambiguity. Do include a provision that clearly states whether the deadline moves to the first previous business day or to the first subsequent business day, and make sure that the term “legal holiday” is clearly defined, too.
Most contracts have an “attorney’s fee” clause. Usually the wording allows the “prevailing party” to recover its attorney’s fees and costs from the other party. However, there may be problems in determining the “prevailing party.” If a party gets only part of what it wanted, is it the “prevailing party?” If a party does not sue but obtains what it wants by negotiation, is it the “prevailing party,” or does that require the commencement of legal proceedings?
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