Sunday, August 14, 2016

Wills and Probate - As the Client, Your Choice of Attorney is ALWAYS Up to You and Your Executor!

I recently met with some new clients (a married couple aged 60-70) to review their estate plan.  They had met with another attorney who prepared wills for them within the past year.  As we went over their estate planning goals and their previous wills, the first thing we discovered is that the wills they had prepared did not provide the bequest and specific gift terms they were looking for, and which they thought had been written into their wills. 

The second thing that stood out was a paragraph like this that the clients did not realize had been written into their wills (I'm paraphrasing):

"Joe and Jane Testators have retained Larry Lawyer to prepare their wills, and they want Ed Executor and their family to continue to retain Larry Lawyer to handle probate of their estates."

Now don't get me wrong, obviously when I help clients with estate planning, I certainly hope to be able to continue to help their families with probate and other legal issues that arise when the clients pass away.  But that decision is entirely up to the clients.  (So long as your chosen attorney chooses to accept you as a client in turn). In the estate context, when the original client herself passes away, that means the choice of attorney is up to her executor. 

Generally speaking, it would seem to make sense that the executor continue to retain the deceased client's lawyer for probate and related matters, because that lawyer is most familiar with the client's estate plan.  But that may not always be the case.  And in any event, it would take a lot of gall for any lawyer to pressure the executor to hire him, on the basis that that's what the deceased client wanted, let alone to actually write that into the client's will!! Needless to say, it is not enforceable.  In fact, I'd love to see the lawyer in that situation "double down" and try to enforce the provision in probate court. Any guesses how a probate judge is going to rule on that one?

Thursday, May 12, 2016

Residential Real Estate Transactions - Should You Hire a Lawyer, and When?

As part of my practice I help clients buy and sell real estate, including residential real estate.  The question often comes up of why are lawyers necessary in this process.  After all, isn't the lawyer "just going with you to the closing?"

This is a common misconception that is actually exacerbated when the lawyers do their jobs well, "making it look easy."  In reality, much of the lawyer's job, particularly the attorney for the seller, is done in advance of closing, behind the scenes.  For example, reviewing or drafting the contract, ordering or reviewing title insurance reports to ensure clean title will be conveyed, and preparing some of the documentation that will be signed and exchanged at closing.  These are the standard steps.

In addition to the standard stuff, there is also the conflict avoidance/resolution aspect, helping the parties sort through the issues that seem to arise in many if not most such transactions.  These include issues with buyer financing and appraisals, home inspections and alleged defects, failed radon tests, early occupancy requests, seller mortgage and lien payoffs and releases, property defect disclosures and failure to disclose issues, and many more.

Ok So I Should Hire A Lawyer.  Can't I Just Pay You To Come to the Closing With Me?

See the above as to why this is not a good idea.  The closing is the consummation of significant advance prep work that hopefully resolved most issues in dispute.  And if issues are disputed at closing, you want your lawyer to be prepared by having background knowledge about the transaction, and not just shoot from the hip.

In McLean County, Illinois, it has often been the case that the parties sign a preliminary contract with help of a realtor, then take that document to their attorneys for review afterwards, sometimes under an "attorney review clause" in the contract.  The problem with this is that it is human nature to feel offended when you've signed an agreement only to have the other side present you with changes they want to make days later.  What happened to the deal that was signed?  The contract forms commonly allow this to happen legally, but to the layman it can be hard to explain or accept, and it is always harder to propose changes after "the horse is out of the barn."  Furthermore, it is not unusual for the contract offered by a buyer to have a quick deadline -say 5:00 pm the day it is presented - upon which the offer is revoked.  For a seller who is seeing the contract form for the first time, that is simply not enough time to review and understand what they are signing before they sign it.

For these reasons, I highly recommend clients CONSULT AN ATTORNEY BEFORE SIGNING ANYTHING in a real estate transaction.  It is far better to be briefed by your lawyer on what to expect in the contract forms, and to already have some expectations in mind as to the standard terms, so that you as a Seller are prepared when you get that offer, or as a Buyer you are prepared to make an offer right away when you are shown your dream home.

I'm a member of the Illinois Real Estate Lawyers Association, and the following is their very helpful response to these questions.

Q. Why do I need a lawyer for a residential real estate purchase?

A. Intelligent consumers are well advised to enlist the assistance of a qualified real estate attorney. Buying a home will likely be the biggest and most important financial transaction of your life. You need a qualified professional to help guide you through the complicated world of today`s real estate transaction, and help you steer clear of problems.
Your real estate attorney owes an undivided duty of loyalty to you, unlike others involved in the real estate transaction, such as real estate salespersons, lenders, appraisers, inspectors and title insurance company representatives. Before you sign documents involving significant legal rights and obligations, your attorney can explain terms and help you understand what you are signing.
Therefore, you would be well-advised to see your lawyer first. Consult a qualified real estate attorney before signing any offer to purchase property. Thereafter, your real estate attorney can help you negotiate the specific terms of the contract, review title documents and ensure that clear title to the property will be conveyed, help you evaluate mortgage financing options and explain the terms of your mortgage loan, help guide you at closing through the stack of documents that you will be asked to sign, and check to be sure that the conveyance documents have been properly prepared and actually convey good title to the property to you. If you are married, your real estate attorney can also help you evaluate the pros and cons of taking title as joint tenants or as tenants by the entirety, and can explain to you the consequences of the various options.

Monday, December 28, 2015

Snow and Ice Removal and "Natural Accumulation" in Illinois

As I write this post, Central Illinois is having a severe ice storm on the heals of a very wet Christmas.  Thus I read with interest today the First District Illinois Appellate Court's recent decision in Murphy-Hylton v. Lieberman Management Services, Inc., as to the scope of the Snow and Ice Removal Act and "natural accumulation."  

At Illinois common law, a landowner has no duty to remove natural accumulations of snow, but can have a duty to remove unnatural accumulations, and if undertaking to remove snow, can incur liability if done negligently.  The Act changed the common law to provide immunity for injuries sustained by a person as a result of attempts to clear snow or ice, albeit negligently.  

In Murphy-Hylton, the plaintiff apparently injured herself by slipping on a patch of ice on an otherwise clear sidewalk.  Her complaint did not allege negligent removal of snow or ice.  Instead, the plaintiff argued that her injury was caused by the defendant's negligent and defective property maintenance or construction.  She apparently alleged that the ice patch in question was caused by a faulty downspout installation, causing gutter runoff to flow onto the sidewalk and then puddle and freeze.  

After the trial court had granted summary judgment for the defense based on the Act, the appellate court reversed, and held that the Act does not apply in such a case, and therefore the defendants were not immune from liability for the alleged damages.  In doing so the First District Appellate Court concurred with the Fourth District's holding in Greene v. Wood River Trust, and disagreed with the Second District's decision in Ryan v. Glen Ellyn Raintree Condo. Ass'n, although noting that the strict holdings of the two decisions do not necessarily conflict as applied to the facts of this case.  

These are important decisions to clarify the potential liability of condo and homeowner associations, property managers, snow removal contractors, and where defective building construction/design is alleged as in this case, general contractors and architects.  It is also important to show the importance of the specific pleading of plaintiff's allegations, in terms of potentially implicating an entirely different class of defendants, and determining applicability of insurance coverage.  

Wednesday, October 7, 2015

Implied Warranty Update - Does Not Extend to Architects for Design Flaws

I just posted a few days ago about the Illinois implied warranty of habitability and the recent case of Fatah v. Bim, which found that contractors can be liable for a claim of warranty breach by a subsequent homeowner, not the initial buyer, even when the initial buyer signed a waiver with the builder.  
The implied warranty is again in the news today, for a second Illinois appellate case, this time about whether the warranty extends to architects for alleged design flaws.  The court held that the warranty addresses the construction itself, not design, and therefore found the warranty did not extend to the architect.  
The case is also significant for the court's consideration of warranty disclaimer language in the contracts signed by the buyers, as to potential liability of the developer and other defendants.  The court found the disclaimer, which was in all caps, was sufficiently conspicuous as a matter of law, and that the developer was not required to verbally bring the the disclaimer to the buyers' attention before they signed.  
Finally the court also addressed when implied warranty claims may be raised against subcontractors (only where the general contractor is insolvent), and found the plaintiffs' pleadings did not sufficiently show the contractor's insolvency and therefore potential subcontractor liability.

Monday, October 5, 2015

New Construction Implied Warranties Waived By the Initial Buyer Can Still Extend to Subsequent Buyers

Illinois recognizes an implied warranty of habitability by the builder-seller of a new construction home to the buyer, that the home will be suitable for habitation.  This warranty is breached when (1) there are hidden, latent defects in or around the residence, that (2) interfere with the dwellers' use of the residence. See Board of Directors of Bloomfield Club Recreation Association v. Hoffman Group, Inc.

Builders can disclaim this implied warranty and buyers can waive it, by an express written agreement, provided that the disclaimer specifically references the implied warranty of habitability, the disclaimer language is brought to the purchasers' attention, as well as the consequences of waiver, and the purchasers knowingly waive their right to pursue any action for breach of the implied warranty of habitability.  This is often coupled with a replacement, express warranty from the builder (for example, to fix any defects within the first year after construction).

The recent case Fattah v. Bim provides a reminder of the strict parameters for the warranty, and also that the warranty, even if effectively waived by the initial purchaser, can still be claimed by a subsequent purchaser who did not knowingly waive it, even if the second owner bought the house "as is."  In Fattah, the issue involved a patio supported by a retaining wall behind the house.  The retaining wall failed and the patio collapsed four months after the second buyer moved into the property (February 2011, after the house had been built in 2007).  Extending the warranty to a subsequent purchaser is not new, and the Fattah court cites the 1982 Illinois Supreme Court decision in Redarowicz v. Ohlendorf on this point.

The "as is" agreement between the buyer and seller was not an agreement between the second owner and the builder, and therefore the court found this could not be sufficient basis for the builder to claim it amounted to a knowing waiver of the warranty.

The ruling begs the question, how can the builder better protect itself and extend the warranty to subsequent buyers?  Could for example the builder record a copy of the waiver of the implied warranty, so that any subsequent purchaser would be deemed to have at least constructive knowledge of its existence?  If the buyer went ahead with the purchase and said nothing, would that be enough to constitute acceptance of the waiver (and therefore a "knowing waiver" by the new buyer)?  The answer is unclear from this opinion, but this step would seem a relatively simple and prudent one that builders could take to at least strengthen their position.

Thursday, September 17, 2015

Foreclosure Law vs. Probate Act - Which One Wins?

The Illinois Appellate Court Second District's recent opinion In Re Estate of LaPlume provides an interesting case of foreclosure law and the Probate Act in conflict - which one wins? The foreclosure statute at issue was the Mortgage Foreclosure Act, and the plaintiff was a bank who had filed a mortgage foreclosure action separately from the decedent owner’s probate estate. The bank’s lien totaled about $165,000, and the total of liens and mortgages encumbering the property was more than $207,000.  The executor meanwhile found a potential buyer willing to pay $200,000 for the property, and filed a petition in the probate court under section 20-6 of the Probate Act, asking the court to order a short sale as per the offer.  The two cases were then consolidated in the probate court and during briefing of arguments, the executor received a revised offer to pay $205,000 for the property. The trial court ruled for the bank and dismissed the executor’s petitions, while noting on the record that the court would welcome clarification from the Appellate Court between the two laws at issue. 

The portion of the Probate Act at issue, in Section 20-6, states: 
“In any proceeding to sell or mortgage real estate the court may:  …
(b) direct the sale or mortgage of the property free of all mortgage, judgment or other liens that are due, provide for the satisfication of all those liens out of the proceeds of the sale or mortgage and settle and adjust all equities and all questions of priority among interested persons;
(c) with the assent of the owner of a mortgage lien that is not due, direct that the property be sold or mortgaged free of the lien and provide for the satisfaction of the lien out of the proceeds of the sale or mortgage.

   The appellate court noted subparagraph (c) would apply when the decedent and administrator have kept the payments current on the loan and mortgage, while subparagraph (b) applies where, as in LaPlume, the payments are past due and in default on the loan.  As to (b), the court noted that where this provision applies, the court need not obtain the assent of the mortgagee lienholder to sell the property.

The bank argued that the “first in time, first in right” doctrine should apply – the bank filed its foreclosure complaint before the executor filed the petition to sell the real estate under Section 20-6 of the Probate Act.  The executor in turn did not dispute the doctrine but pointed out that the estate was opened and letters of office issued first, before the bank’s suit.  The appellate court considered this and found that the bank’s action would have priority over the 20-6 petition as first in time, but that who filed first in this context was merely a factor for the probate court to consider in the 20-6(b) inquiry.  The “touchstone,” “paramount” factor according to the court was “whether agreed sale, between the estate and a buyer and overseen by the court, is necessary for the proper administration of the decedent’s estate.”  In addition to priority between competing claims as another factor, other factors referenced by the court could include “maximizing the value of the estate’s assets; maximizing the recovery of the estate’s creditors; and the public policy underpinning a secured creditor’s ability to recover its debt from the estate.”  The appellate court left the application of these factors in LaPlume to the trial judge to determine on remand.  However, it is clear that the “first in time” priority issue, which would normally govern in the foreclosure context, was a mere subservient factor in this case to the “paramount,” “touchstone” factor – is the sale necessary for the proper administration of the estate?  In that sense, one could conclude the court sided with the Probate Act over the foreclosure law. 

 Perhaps the Probate Act “won” this initial round, but did the foreclosure laws really “lose” in LaPlume?  Not necessarily.  Lien priority and protecting the secured creditor’s interests are still factors in the analysis, and although secondary to the “touchstone” factor, one can imagine the immense challenge facing an executor who seeks to use this opinion to justify a sale in probate that is unreasonable in terms of the lienholders’ interests.  Bear in mind, in LaPlume the “short sale” offer was for $205,000 where the total of liens and mortgages was $207,500, a mere difference of $2,500, and the opinion includes the probate court’s note that this figure did not include realtor commission, attorney fees, or other typical closing costs and estate administration costs.  The disparity between the offer and the mortgage would certainly appear to be relevant to the factor analysis and differentiate this case from many other "under water" cases.

Wednesday, August 26, 2015

McLean County Property Tax Assesssments Are Out - 9/24 Deadline to Appeal

The new property tax assessments were published in The Pantagraph (Bloomington, IL newspaper) the other day (see the paper or the county website to check your specific township). Every year we get calls, particularly in January and when the new tax bills go out in the spring, about this. Assessments can ONLY be challenged within 30 days of public notice, so the deadline to appeal this assessment is September 24 (see the website below for more on specific rules for that deadline and what must be done)! Please share this and let others know, anyone whose tax bill/assessment is out of whack has a very short time window to appeal (even if you don't get anything in the mail, printing this in the paper is legally all the notice they have to give you). If you wait until the actual bill comes out, that is too late!! Any questions you can either call my office or your lawyer, or see the McLean County Assessor page for more information.