Rhode Island Real Estate Lawyer Blog

When properties are sold at auction after a foreclosure or other court-ordered liquidation, the terms and conditions of the sale are generally outlined in a contract that is known to potential bidders before the sale takes place. The party who is required to pay the costs, taxes, and fees related to the property and have accrued or continue to accrue before the title is exchanged should be discussed in the auction and purchase agreements. The Rhode Island Supreme Court recently ruled in favor of the purchaser of an auctioned home, who claimed that an unreasonable 17-month delay by the seller before closing should invalidate the terms of the contract requiring the buyer to pay all of the accruing costs before the closing.

The plaintiff in the recently decided case is an organization that purchased a home from the defendants at a foreclosure sale. According to the facts discussed in the judicial opinion, the parties entered into a contract after the sale that stated the closing should be within 30 days of the auction, and that while delays can and should be granted for good cause, that “time was of the essence.” Additionally, the contract stated that the buyer was responsible for any accruing taxes, fees, or costs associated with the home between the time of the sale and the closing. According to the buyer’s complaint, the seller delayed the closing for over 17 months, and although the buyer cooperated and allowed the delay to occur, when the seller notified the buyer of their responsibility to pay the costs that accrued over the 17 months, the buyer refused and filed a claim in the Superior Court.

The Superior Court judge summarily ruled against the buyer’s claim, finding that the contract language was clear that the buyer was responsible for accruing costs, and ruling that the buyer’s decision to allow the seller to delay the closing made it clear that the buyer was assuming responsibility for the costs. The buyer appealed the Superior Court decision to the Rhode Island Supreme Court, which disagreed with the lower court’s determination that the contract clearly required the buyer to pay all of the accruing costs under any circumstances. The court reversed the lower court’s ruling on the case, holding that there was a factual question of whether the defendant could be held responsible for payment of the fees if the 17-month delay was unreasonable, as the plaintiff claimed. As a result of the appellate ruling, the case will proceed toward a trial on the issues.

Rhode Island real estate disputes can become extremely complicated when multiple parties dispute multiple claims over a single piece of property. If several parties own a property and a dispute arises, all parties to the action must be diligent in bringing their claims properly and at the right time, in order to prevent the issues from being finally decided before a party can make their case. The Rhode Island Supreme Court recently ruled that the leaseholder of a marina was not able to pursue a claim against the owner of the marina, who had terminated their lease after the property was sold.

The plaintiff in the recently decided case was a company that leased a marina from the owners, who were defendants in the case. According to the facts discussed in the judicial opinion, the property was divided between several heirs in a previously adjudicated estate case. It was to be sold to liquefy the heirs’ interest in the property as part of the estate partition proceeding. Because of this condition, the plaintiff’s lease was contingent upon the property not being sold to a good-faith buyer, and the lease could be terminated if the property was, in fact, sold.

When the property was put up for sale, the plaintiffs attempted to purchase the marina outright, but were eventually outbid by family members of the owners, who are also named as defendants in the case. Before the sale went through, the plaintiffs challenged the new purchaser’s bid in court, arguing that their bid should be considered as better for the sellers. Ultimately, the plaintiff’s claim to reconsider the bidding process was rejected and the property was transferred to the new owners, and the plaintiff’s lease was terminated.

Buyers of a new or previously occupied home in Rhode Island may enjoy several distinct legal protections from loss in the event that the home they purchased is defective, unsafe, or has other unforeseen and expensive issues that must be resolved. In addition to any specific protections granted through the warranty provisions of a purchase contract, buyers may also seek remedy for the negligence of a previous owner, a contractor, an architect, or any other person or organization that completed faulty work on a home. Another protection that Rhode Island home buyers enjoy comes from the implied warranty of habitability, which protects any residential home buyer from an uninhabitable home irrespective of the language of the purchase contract. The Rhode Island Supreme Court recently issued a decision on a case concerning the implied warranty of habitability, which ultimately places concrete time limits on when such a claim can be pursued.

The plaintiffs in the recently decided case purchased a home from the defendant, who had constructed the home in 1997. The defendant represented that he was a professional home builder, and that the construction had been completed to the professional standard for a home in the area. In 2013, after noticing slight water damage in a part of their home, the plaintiffs had an inspection performed and learned that a significant portion of their home would need to be replaced because of water damage that would have been prevented if the home was properly constructed.

The plaintiffs sought damages from the defendant by filing a multi-claim lawsuit against the builder of the home. In addition to breach of contract and tort claims, the plaintiff made a claim based upon the implied warranty of habitability. At the trial level, all of the plaintiffs’ claims in contract and tort were barred by statutes of limitation, which would not allow such claims to proceed if made more than 10 years after the sale of the home. The plaintiff appealed the ruling on the implied warranty of habitability cause of action to the Rhode Island Supreme Court, arguing that the law was unclear, and that the 10-year time limit should not have started to run until the plaintiff discovered the defect in construction.

Since the passage of the federal CARES Act, renters, landlords and homeowners have been subject to often changing protections and restrictions concerning the payment of rent or mortgage payments, as well as evictions and foreclosures. Shortly after President Biden’s inauguration, the new administration has issued several orders to clarify and extend the existing protections for a month or more. A recently published news article discusses the new executive actions and their possible effects on Rhode Island tenants and property owners.

The furthest reaching new executive action has been the administration’s extension of the eviction moratorium, which protects tenants who are unable to pay their rent as a result of the pandemic from being evicted by their landlords. To be eligible, tenants must make below $99,000 ($198,000 for a couple), and complete a CDC Eviction Declaration form (available through the CDC website). The latest extension protects renters from eviction through at least February 28, 2021, although it is likely to be extended further. It is important to note for both tenants and landlords, that this moratorium does not relieve tenants from the obligation to pay rent. Once the moratorium eventually expires, then landlords will be able to evict delinquent tenants and collect the full amount of rent due.

Another executive action that may protect both landlords and tenants involves the allocation of at least $30 billion in rental assistance payments to qualified renters through the Emergency Rental Assistance Program. These payments are made directly to the landlord from an eligible grantee, and can prevent the tenant from becoming delinquent while also allowing landlords to collect their income and pay the mortgage on their property. Eligibility for this program can be determined by contacting the U.S. Department of the Treasury online at treasury.gov.

Experienced landlords understand what is at stake when selecting a tenant for a residential rental property. Choosing the right tenant can make a landlord’s life extremely easy, and signing a lease with the wrong tenant can be expensive, stressful, and leave you with a damaged property or legal problems. Because the Rhode Island rental market is favorable for landlords at this time, a property will usually have multiple interested tenants, and landlords can thoughtfully choose who to offer the property to. A recently published landlord resource discusses some items to consider in selecting a tenant.

To effectively start the tenant selection process, landlords should set the right criteria in the rental listing, to screen out undesirable tenants. Most importantly, the tenant should make sufficient income, or have a co-signer that does, in order to pay the desired amount of rent. Certain criminal convictions can be screened for by the listing, and issues like smoking or pets should also be discussed. A listing should also note that a credit check and background check will be performed.

After a tenant reviews the listing and shows interest in a property, the parties should meet to show the premises. A showing is as much for the landlord to evaluate the possible tenant as it is for the tenant to evaluate the property. At the showing, a landlord should ask the prospective tenant about their current living situation, why they are moving, and when they would like to move in. Issues such as credit, smoking, and pets can be discussed if they were not brought up over the phone. Additionally, the landlord can get an idea of the tenants’ employment and lifestyle. If a tenant fails to show up or is very late to a showing, gives suspicious answers to questions about their past, or refuses to fill out an application and submit to a credit or background check, these may be red flags that help a landlord decide that another tenant would be more desirable.

Most Rhode Island home buyers will require a home inspection as a contingency to close the sale after they have submitted an offer on a home. While a general home inspection is a good idea and should be included in any home purchase, a recently published article makes the argument that buyers should also have other specialized inspections performed to protect themselves from unforeseen maintenance expenses that could arise.

The specialized inspections that should be performed on a home before purchase depend on several factors, including the age of the home and maintenance history. A general home inspection may bring the possibility of issues to light that should be followed up on by an inspector with specialized expertise, but some latent defects in a home may be missed entirely without a specialized inspection from the start. Important inspections may include a roof inspection, an electrical inspection, a pest inspection, and a radon inspection, among others.

The roof is one of the most important structural components of your home, and a damaged or defective roof can cause serious and expensive damage in the event of heavy rain or snow. For a relatively low price, a licensed roofing contractor can inspect the roof and ceilings of a home to find problem areas that could signal leaks or rot. Inspectors can also use specialized equipment to see if heat is escaping from a roof and causing unnecessary utility expenses.

The purchase or sale of a home or other real estate property in Rhode Island starts with a buyer making an offer on the property that the seller accepts, and the parties enter into a purchase agreement contract to proceed with the transaction. A transaction is not complete, however, until all of the final documents are executed, payment is tendered, and the title is transferred to the buyer at the closing. Unfortunately for sellers, it is not uncommon for buyers to back out of a purchase after an offer is accepted, and the property is under contract. A recently published trade industry article discusses how a contract can fall through, and outlines the methods sellers can take to protect their rights and minimize the damage done if a buyer gets cold feet and backs out before a sale is finalized.

The most common way a sale falls through before closing involves contingency clauses in the initial contract. Contingency clauses release a buyer from the obligation to purchase a property if certain conditions occur. The most commonly triggered contingency clauses involve a buyer getting out of a contact because they cannot secure financing on the property or are unable to sell their current home in time to purchase the new home. Contingency clauses may also be triggered if a home inspection or appraisal yields results that give the buyer second thoughts about the agreement’s terms. With the help of a skilled Rhode Island real estate attorney, sellers can ensure that contingency clauses in the initial purchase agreement are not drafted too broadly to encourage a buyer to change the terms of an agreement after the offer has been accepted.

Even if all of the contingency clauses are met and a buyer should proceed with a purchase, they may get cold feet or have second thoughts and try to get out of the sale. If this happens, a seller is left in a difficult position, because they are losing time and money while the home sits under contract, and if a buyer ultimately backs out, a seller may be left back at square one, putting the home back on the market. To prevent these problems, sellers can employ a qualified Rhode Island real estate attorney to include conditions within the purchase agreement that allows the seller to sue a buyer for damages if they back out of a sale without justification. Additionally, sellers can include what is known as an escape clause in the purchase agreement, which allows a seller to entertain and accept offers from other prospective buyers while the home is under contract. With an escape clause, if a seller wants to accept an offer from a different buyer, the original buyer will be given a certain amount of time to waive the contingencies and proceed toward a closing, or else the new buyer will be in a position to purchase the property.