Kelly Moore: Real Estate Lawyer Tooele Utah

An experienced Tooele Utah real estate lawyer can act as the settlement agent in your real estate transaction.

In a real estate sale transaction, the settlement agent searches the records to make sure that no claims against the property have been recorded from the time of the initial search of the records until the time of recording the deed. Then the deed and applicable lender documents are recorded. Once these final steps have been completed, the purchaser has become the insured owner of the property, and the settlement agent distributes the funds collected at settlement in accordance with the details reflected on the settlement statement.

The settlement agent pays not only the seller but also the government, for all taxes and water and sewer fees owed; the real estate agent, for the commission; the lender, for origination and related fees; the settlement agent and title insurance company, for settlement charges and the title insurance premium; and all other parties to whom payments are owed, as reflected on the settlement statement. Sometimes, the settlement agent distributes the funds at the settlement table, before the deed is actually recorded.

The settlement agent can make sure that the requirements for title insurance have been met by recording the deed and searching the records for any new claims since the original title report. Further, by making all disbursements, the settlement agent can make sure that any lienholder whose lien needs to be released of record is paid the agreed amount for the release.

If the amount to cause a release to be recorded or to ensure that property taxes and water and sewer fees have been paid is not known at the time of settlement, the settlement agent can hold in escrow from the seller’s funds an estimated amount to cover such costs when they become known after settlement. Similarly, the settlement agent may hold in escrow funds from the seller to cover incomplete repairs. This type of escrow can benefit the purchaser as well as satisfy the settlement agent’s concerns that a contractor or subcontractor might file a mechanic’s lien against the property, which might become the liability of the title insurance company.

Title Insurance Policy Issues

Because most title insurance companies are national or multistate in scope, the American Land Title Association (ALTA) has set national standards and created form documents that are used across the country. Even though the basic forms are uniform, a wide variety of changes may be made, depending on local custom and practice. Everything from the type of security documents (deeds of trust or mortgages) to when the settlement agent will disburse funds may be different, depending on local circumstances.
In addition, significant variations from the standard title insurance policies may be possible upon request by the purchaser or the lender. One type of variation, known as affirmative coverage, provides the purchaser and the lender with title insurance even when encumbrances have been identified as exceptions to the title insurance coverage. Examples of typical exceptions on a title insurance policy include any claims arising from property taxes and water sewer fees incurred after the settlement; discrepancies in boundary lines, which an accurate survey would disclose; covenants and rights of way that affect the property; claims arising out of bankruptcy and creditors’ rights laws; and claims arising from tenants or other parties in possession.

Examples of typical affirmative coverage for these exceptions include language ensuring that the unpaid taxes and water and sewer charges do not constitute liens under local law; language deleting the survey exception by noting the specific discrepancies that are reflected on a survey done for the particular property at issue; and language ensuring that, even though the property is encumbered, violation of a particular covenant will not cause the title to the property to be forfeited or reverted to a former owner. Affirmative coverage will not be routinely provided; it needs to be requested and/or negotiated with the title insurance company or settlement agent.

Lender Requirements

Ultimately, virtually every aspect of the pre-settlement, settlement, and post settlement processes may have to be changed to accommodate the particular and peculiar requirements of the lenders in each transaction. By and large, the purchaser/borrower is not in a position to argue too strenuously with how the lender wants to carry out these processes. Even where local custom and practice call for a particular approach, the lender’s requirements will ultimately control. For example, if the lender wants the borrower to use the lender’s counsel as the settlement agent, there is nothing in RESPA that prevents the lender from requiring the borrower to do so as a condition of obtaining the loan.

Similarly, the lender will decide which type of survey and surveyor’s certificate, as well as which title company and which type of affirmative coverage and exceptions will be acceptable.

The standard construction contract establishes a relationship among the owner, the architect (or designer), and the contractor. Typically, the owner contracts separately with the architect and the contractor and no contractual relationship exists between the architect and the contractor. The owner is the ultimate authority for the project and must coordinate the work of the other parties. The architect translates the owner’s ideas and budget into drawings and supervises construction as the agent of the owner. The contractor builds the project and supervises the work of all subcontractors required for the job. This triumvirate is typical of all construction projects and the relationships established require coordination by the owner in order to avoid conflict.

Most construction projects and most contracts executed between the owner and each of the members of the construction team utilize the standard construction contracts. These standard contracts, often serve as the baseline from which the parties negotiate, deleting certain terms and adding others, as appropriate.

Role of the Owner

The owner is the force behind the project and is seen by the other members of the team as the one party who will benefit most from the successful completion of construction. Typically, the owner will have the greatest financial stake in the project and will assume a correspondingly high risk. One of the owner’s key responsibilities is to select the architect, the contractor, and the construction manager, if appropriate. The owner, in selecting these professionals, must ask:

1. Is the architect capable of developing cost estimates and making day-to-day field decisions that reflect the owner’s goals and aspirations for the project?

2. Does the contractor have the integrity and capability, and sufficient inducement through payments or contractual obligations, to complete the proposed development?

The answers to these questions will determine the selection of both parties and the ultimate success of the project.

General Contractor

Contractors, in general, suffer from very bad press. Nearly everyone has had or has heard of a horror story involving a contractor, on jobs as small as a home repair or as large as construction of a skyscraper. The unfortunate truth is that there are bad contractors. However, new projects are completed every day, and contractors are building them. Knowing what to expect from a contractor is essential to the success of even the smallest real estate project.

A contractor can be selected through competitive bidding or interviews (often referred to as negotiated bids), or a combination of both. Many affordable housing projects, utilizing government funds, are required to use the competitive bidding process. This process is expected to result in the project’s being completed at the lowest possible cost because of open and free competition.

If the circumstances and financing allow, the owner may select a contractor through a negotiated bid process or interviews and recommendations and determine the one company most qualified and experienced for the work. To the extent possible, experienced developers often use a single contractor whom they know and trust for all of their development work. The interview process also may be used to select the contractors who will be invited to bid on the project or to select the contractor most suitable for the job after the bidding is complete.

The Owner’s Responsibilities to the Architect and Contractor
After a contractor and architect are selected, the owner is responsible to them for a number of tangible and intangible items and duties.
Other duties are implied by tradition and experience; all of them are reasonable:

• Funding the construction – The owner does not have to disclose to the Contractor the conditions, arrangements, or agreements that affect the project’s financing. The contractor, on the other hand, has no obligation to begin or continue work if reasonable evidence of funding cannot be shown. A contractor expects payments for work completed and reimbursement for materials purchased, contract expenses, or changes to the work. Establishing and maintaining a well-documented and expeditious payment process is critical to the success of a project. Failure of the owner to manage this payment process can have devastating effects on a project. For example, if a multifamily housing project is planned and is to utilize cost-saving prestressed concrete planks as a structural system, the subcontractor supplying the planks will manufacture them well in advance of the installation date. If project payments are delayed, the supplier may refuse to deliver the planks to the site. If a new floor is not in place, the other trades involved—plumbers, electricians and masons—will also be delayed. This domino effect can easily shut down an entire project.

• Securing surveys and defining easements, rights-of-way, or utility locations – The owner is responsible for obtaining an accurate and up-todate description of the property and of the existing conditions and improvements on the site. A project can be delayed significantly because of an unknown condition on the property, such as the lack of certain utility connections. As in the concrete planks example above, all work can be stopped, at considerable cost, while adjustments are made or plans are redesigned to include this previously unknown condition. Existing surveys should be re-examined for new or unrecorded conditions when a new survey is infeasible. Easements, rights of way, and utility locations can be checked with the municipal entity responsible for recording plats and deeds. The previous owner also should be consulted regarding any conditions that may have been granted but not recorded. The accuracy of these data is important because local laws and contracts often entitle the contractor to additional compensation for delays or work completed based on inaccurate data.

• Securing all necessary approvals from local, state, and federal authorities – Construction plans and specifications must be approved by the local building department, but they represent only the existing and proposed physical building conditions for the site. Additional approvals often are required for affordable housing projects. For example, in urban locations, zoning restrictions may preclude multifamily housing on the selected site or the use of wood frame construction for a three-family dwelling unit. Rural locations may encounter the need for a wetlands approval or specific water rights. The examples of approvals are endless, but the responsibility for obtaining them lies solely with the owner and the owner’s consultants.

An experienced Tooele Utah real estate lawyer, consultants, and other expediters familiar with the local laws are essential in obtaining the necessary authority to proceed with the project.

Providing evidence that any fees, assessments, or charges for use of the site have been paid. These costs are related to access to and use of the site. The owner may have acquired clear title to the property; however, additional costs may be necessary in order to make the property usable. Water and sewer connection fees, tax assessments, waste disposal fees, and temporary utility connection costs all may be required prior to or during construction. The construction contract should state explicitly whether the owner or the contractor is responsible for these costs.

In addition, affordable housing projects often make efficient use of the site for economies of scale. A “tight” site may require additional land on a temporary basis to facilitate construction. Staging areas, storage, parking, or crane access are just a few examples of the needs that may arise during construction. The need for additional space should be apparent to the contractor at a preconstruction site inspection, but the owner is responsible for acquiring the area necessary to accomplish the work proposed. All acquisition costs are the owner’s responsibility.