Rhode Island Real Estate Lawyer Blog

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.

If you have made an offer on a piece of real estate in Rhode Island, and the seller accepts the offer, there is a contractual obligation to proceed in good faith with the purchase. However, the process is far from over. During the time period between the contract acceptance and the closing and transfer of title, several tasks must be completed, and many documents need to be prepared and properly executed to avoid unnecessary delay and expense in the closing process.

Many of the tasks to complete before closing are based on the need for a buyer to secure financing of their property. Although not all of these steps must be taken if a buyer is paying in cash, a prudent cash-in-hand buyer will proceed with these steps anyway, to ensure the property is as promised. A qualified Rhode Island real estate attorney can act as a closing attorney and advise a buyer how to proceed with the transaction in a way that will protect their contractual rights without unnecessary expense.

If a buyer is seeking financing on the purchased property, a lending institution will generally require that a survey is done on the property before the closing. The buyer is usually responsible for paying for the price of the survey. However, a recently performed survey may be used or updated at a reduced cost. In addition to a land survey, a buyer seeking financing may be required to obtain an appraisal of the property to get a loan. Cash buyers may want an appraisal independently to ensure that the property is worth what they are paying. A qualified Rhode Island closing attorney can refer a buyer to a reputable appraising agency to perform the appraisal.

Performing a home inspection prior to a Rhode Island residential real estate closing is an important part of the real estate process. Depending on the agreement between the buyer, the seller, as well as their brokers and the financers, a home inspection may be paid for by any party. However, it is in the interest of all parties that a thorough and comprehensive Rhode Island home inspection is performed before a transaction is finalized.

If a home inspection fails to reveal a structural defect or other physical issue occurring on a building or lot, the question of liability for the defect is not clearly settled under Rhode Island law. Relevant publications have discussed the liability of home inspectors for their own diligence when they declare that a home is free of defects. Under Rhode Island law, home inspectors are required to maintain liability insurance of $250,000 and obtain a state license to perform their services. In the event that a home inspector is negligent and fails to discover a defect that should reasonably be found by a qualified home inspector, they could be liable in a civil lawsuit brought by the buyer seeking compensation for damages related to the defect.

If a home inspector does find an issue with a structure and a buyer decides to purchase the home anyway, the seller may not be protected from legal action brought against them by the buyer. The Rhode Island Supreme Court has weighed in on this very issue. In the case, the plaintiff was the buyer of a home that was found to have signs of water damage and possible flooding issues. After purchasing the home, the plaintiff did not seek to address the water issues, but later sued the seller when a flood caused severe damage to the home.

Buyers interested in purchasing a residential or commercial property in Rhode Island are able to use technology and the convenience of Multiple Listing Services (MLSs) to quickly and efficiently review property listings that may interest them. The MLS is a database created by two or more brokers that provides information about properties that are on the market. Brokers using an MLS can review each other’s property listings, and ultimately connect buyers to sellers. Because the MLS is often made accessible online, its use has made it easy for buyers to find properties to purchase, however inaccuracies within MLS listings can lead to problems that Rhode Island buyers may not foresee.

According to an article published in an industry trade journal, much of the information found on an MLS is automatically populated from property tax records or other publicly available information that may not be accurate or up to date. The article notes an example where the square footage of a home is listed in the MLS as different from the actual square footage, and a potential buyer is misled as to the size and value of the home they are looking into.

Who Is to Blame if the Information Contained in an MLS Listing Is Inaccurate?

According to recently decided court cases, a seller or the seller’s broker can be held accountable for failure to disclose the correct information about a home to a buyer. If this information came from an MLS listing and was prepared by a third-party broker, they may also be responsible, although obtaining compensation from a third party can be difficult.

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States and municipalities often find it necessary to procure private lands in order to complete development or infrastructure projects. State laws in Rhode Island and other states are designed to encourage government entities and private landowners to reach an agreement for the purchase of private land when the government desires such land for a development or infrastructure project. If a state or municipality is unable to reach an agreement to purchase private land to complete a project, the public entity may pursue a “taking” of the land, where the owner is forced to transfer title of the land to the government, and is to be compensated a fair price for their property. However, the government’s power to seize land in this manner is not unfettered, as is demonstrated by a recent state supreme court ruling in such a case.

In the recently decided case, the plaintiff is the state of New Hampshire, which sought to purchase a part of a parcel of land that was owned by the defendant to expand a highway that was adjacent to the land. According to the facts discussed in the judicial opinion, the state and the defendant could not reach an agreement to transfer the land. The state initiated a proceeding with the New Hampshire Board of Tax and Land Appeals to seize title to the land. The request was granted, and the defendant objected to the taking, bringing the issue to court. At the lower court level, the state argued that the board’s decision to grant the taking was not based on fraud or a mistake of law, and the court found the argument sufficient to uphold the taking.

The defendant appealed the ruling to the state supreme court, arguing that the lower court applied the incorrect legal standard to review the board’s decision to grant the taking. Rather than the standard of fraud or legal mistake, the defendant argued that the lower court was required to evaluate the plaintiff’s claim and defendant’s objection anew, and determine whether the necessity, public use, and net public benefit to taking the land would outweigh the infringement on the defendant’s property rights. The high court agreed with the defendant, holding that the legal standard applied by the lower court was not proper, and ultimately reversed the decision and sent the claim down to the lower court for reconsideration under the new standard. Although the defendant has not definitively prevented the taking with this legal victory, the lower court will be more likely to rule in their favor when applying the required legal standard.

A residential real estate transaction in Rhode Island is a complicated and delicate process that usually includes several professionals in addition to the buyer and seller. Purchases and sales of real estate also require the preparation and review of many documents, including an examination of a title for marketability, preparation of a deed, drafting a durable power of attorney, drafting a residency affidavit, and conducting a closing of the transaction, among other activities. The Rhode Island Supreme Court recently addressed the question of which of these duties must be performed by (or under the supervision of) a licensed attorney, and which, if any, can be performed by another type of real estate professional.

The recently decided case was brought to the Rhode Island Supreme Court by a unique procedure. Specifically, the case came about when a committee of the Rhode Island Bar Association requested the court to give its interpretation of a law pertaining to cases in which the committee was determining whether several parties should be charged with the unauthorized practice of law for fulfilling several duties in a real estate transaction without the supervision of a licensed attorney.

Before addressing the questions of whether each of the specific duties in question must be performed by a licensed attorney, the court made clear that all parts of a real estate transaction are best performed under the supervision of a licensed attorney. The court seemed to encourage both parties of a real estate transaction to employ a qualified Rhode Island real estate attorney throughout the process, although the Court ultimately answered the question of whether a non-attorney could perform some of the duties without committing the unauthorized practice of law slightly differently.