Yesterday my sister-in-law called me in panic. She was serviced with a notice to appear at the State Law Enforcement Service of Ukraine the next day because the hairdressing salon she bought a year ago is going to be confiscated for debts of it’s previous owner.
To be honest, all requests I received for analysis of a real estate sale-and-purchase or lease agreements were from my relatives, friends and friends of friends. No doubt all of them thought “why not have him look into the agreement just in case. Anyway it will be free for me.”. However, what really surprises me is that NOT ALL of my relatives and friends asked me for such a favor when there were buying/selling/leasing, even though they knew I would not ask them for money. My sister-in-law is among those who neglected to ask me to check her purchase deal.
Apparently, people believe that:
(i) a notary guarantees that the deal is clear and legitimate;
(ii) a real estate broker ensures that the real estate object is in good shape, condition and quality;
(iii) there could be no risk for tenants;
(iv) they can check everything themselves by asking neighbors, reading forums on the Internet, etc.; and so on.
Below I will outline why you should have better have a lawyer to check your real estate deal before you put your signature on the agreement.
For Tenants.
Imagine a situation that your landlord owes money to a bank and does not return the debt. The bank files a lawsuit and wins but landlord does not pay anyway. The bank involves the State Law Enforcement Service of Ukraine whose officers arrest the landlord’s apartment. They come, lock the apartment and seal it so no one could enter it. They also can get inside and inventory of all staff inside the apartment to confiscate it as well.
No imagine that all the mentioned above happened to an apartment you are renting. You return home from work but bumps into a closed sealed door and all your belongings inside are inventoried and are going to be sold on an auction to repay the landlord’s loan. You do not have now where to live and all your staff. The State Law Enforcement Service of Ukraine does not know who all those laptop, TV set, chair, bed, boots, coats, dishes, pots, etc. belong to. They are in the landlord’s apartment so they are considered as property of the landlord by default. So you will have a lot of trouble to prove that that Swiss watch and the golden ring are yours but not of the landlord.
Another situation. You come home (to your rented apartment) and notice that there is no entrance door. It just stands nearby. You come in and witness a huge mess inside. It is not a burglary. It is just a result of a search conducted by police in the apartment because there is a criminal case against your landlord. The police got a search warrant, executed it and left before your return home.
If you have a lawyer, he would check for court cases pertinent to your landlord or the apartment. He would also check for criminal processes against the landlord. A notary does not check on such things. A notary just makes sure that the person selling or leasing out a place has rights to do so and the place is transferrable.
As a bonus, a lawyer will analyze your lease agreement to make sure you have basic rights and will not be a slave for the validity period of the agreement. A notary does not check on this as well. For example, a lawyer will point out that you cannot solely terminate the agreement earlier its expiration date, or that you are liable for all damages caused to the landlord, third parties and their property during the lease, and so on and so forth. There are many matters that are regulated by law if otherwise is not expressly set forth in the agreement. By merely reading clauses of the agreement you will not notice all pitfalls.
For Lessors. A lessor is always at risk by letting another person use his property. To name just few: risk of nonpayment, damaging the premises, damaging property of third persons (by fire, flood, repairs, etc.). I would dwell here on a risk of not being able to evict a tenant. I know cases when a tenant lived in an apartment for several months, did not pay the rent yet the landlord was not able to evict him because the lease contract did not allow to do so. Especially it is hard to do when a tenant has children.
So reasons for a lessor to obtain legal advice before signing a contract are similar to those for a tenant. The convention is that the landlord provides a draft of lease agreement so you can use this advantage and foresee in there all desired provisions.
For Sellers. The main concern for a seller is to get paid or, if the deal then recognized null and void, to receive his property back. In practice, it often happens that a preliminary sale-and-purchase contract is concluded. Sometimes a real estate object transfer is done via a gift deed or another legal structure.
It is highly recommended to analyze a sale-and-purchase contract, a gift deed or another title transferring document. It is also very important for a seller to receive legal advice on what legal scheme to choose, pros and cons of every scheme, etc.
For Buyers. Everything described above in this and previous posts is also applicable for buying deals.
For cases, when a client wants to buy a premises in a newly built building or in a building that is still under construction, or wants to buy a house or a land plot… in all these cases it is crucially important to conduct due diligence of a relevant land plot title; the offered legal scheme of purchase; construction licenses and other documentation.
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