6.3 Lawyer Up

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A realtor’s success and continued career in real estate is built on referrals. This emphasis gives agents strong incentives to make sure you, the client, is happy and satisfi ed.

6.3 Lawyer Up

I highly recommend engaging a good real estate attorney as an advisor on your VRP team. Buying a vacation property will probably be the second largest purchase you will make in your life. Issues will come up that you won’t be familiar with—but an experienced attorney absolutely will be.

The VRP seller should likewise have the advice and guidance of an attorney with respect to a VRP purchase agreement. Even if the agreement is a standard form, its terms should be explained to the seller. Then, they can be revised if necessary. An attorney should also determine if the agreement was properly signed.

Even if a lawyer is not needed during the course of negotiations, the buyer and seller each may have to consult with a lawyer before closing to answer important questions, such as the tax consequences of the transaction.

Purchase Agreements The purchase agreement is the single most important document in the VRP purchase transaction. Although standard forms can be useful, a lawyer is helpful in explaining the forms and making changes and additions to refl ect the buyer’s and the seller’s wishes. There are many issues that may need to be addressed in the purchase agreement. Here are some common ones:

• If the VRP has been altered or there has been an addition to the property, was it permitted? • If the VRP buyer has plans to change the property, what is planned?

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• What happens if a buyer has an engineer or architect inspect the property and fi nds issues? • What are the legal consequences if the closing does not take place? What happens to the down payment or earnest money?

Finally, an attorney can help review the title search and explain the title exceptions as to what is not insured. He or she will also determine whether the legal description of the VRP is correct and whether there are problems with adjoining owners or prior owners.

Please note that the title search does not tell you, the buyer, anything about existing and prospective zoning of the property in question. A lawyer can explain whether existing zoning prohibits a two-family home, short-term vacation rentals, or whether planned improvements violate zoning ordinances. This is crucial information for you to have well in advance of any VRP purchase.

The Closing The closing is the most important event in the purchase and sale transaction of your VRP. The deed and other closing papers must be prepared. Title passes from seller to buyer, who pays the balance of the purchase price. This balance is often paid in part using mortgage loan. A closing statement should be prepared prior to the closing indicating the debits and credits to the buyer and seller. An attorney is helpful in explaining all closing costs. The deed and mortgage instruments are signed, and your lawyer will see to it that these documents are appropriately executed and explained.

The closing process can be confusing. If you are the only person there without a lawyer, your rights may be at risk. If you want peace of mind when making one of the biggest purchases of your lifetime, you should consider speaking with an experienced real estate attorney.

Jason Eisner, J.D., is the owner of Imperial Title LLC based in Boca Raton, Florida. Recruited out of the University of WisconsinMadison in 2002 to work for a property development fi rm in Florida,

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Jason attended law school at Nova Southeastern University and received his J.D. in 2011. From there, his close relationships with premier property developers around the state of Florida lead him to create a niche in the vacation property market. With his title company, Jason has done more closings with VRP then virtually any other attorney in the state. He is the go-to for all of the Encore Club closings in Reunion, and for good reason. His fi rst piece of advice for fi nding a good attorney? Engage someone seasoned in real estate transactions, who handles buyer representation regularly or handles the title and closing side on a regular basis.

Jason cautions that there’s a big diff erence between transactional attorneys and litigators: “Litigators, they’re fi ghting back and forth,” he says. “Transactional attorneys typically, unless something goes awry, are trying to make everything go smoothly so everyone’s happy and they close.

“Buyers shouldn’t use their wills and estate attorney, or their attorney who did probate for them, or the attorney who handled their traffi c ticket. None of that. These lawyers might say they can do it, but if you’re really looking for the right person, it’s got to be a real estate attorney.”

Be Aware of Property Restrictions There are some key diff erences between buying a primary residence and buying a vacation home that you want to rent out. Jason says that when you’re buying a vacation home, it is so important to understand the rules regarding frequency of rentals: “I can’t emphasize this enough. Because it could be seasonal, monthly, two rentals a year. Buyers must understand the community’s allowances for frequency of rentals.”

When a buyer engages an attorney, the attorney should help them understand all the limitations and restrictions that go into owning that rental property. The only way to understand this is for the attorney to request, from the closing agent or the title agent, all of the documentation in connection with the title.

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“When a purchaser buys,” he explains, “in contracts it typically will state that the closing agent will provide a closing commitment to the buyer within a certain period of time. When that commitment is provided, it will list what we call the B2 exceptions. The B2 exceptions are documents of record that will aff ect your ownership. For example, a declaration that has to do with the HOA. Or a declaration that has to do with a club. Those are the big ones because they explain the various rules and regulations that have to be abided by in a community.”

To get the use out of the VRP that you intend, you have to understand what’s in those documents.

“I’ve had people come to me after a closing where they wanted to rent out a property seasonally,” Jason explains, “and the HOA told them that they were unable to do so. When they purchased the property, they didn’t have an attorney, which was a mistake. When I went back and looked, I pointed out that the documents clearly stated that the only rentals allowed were annual. So, these particular buyers didn’t do their due diligence to fi nd out if their intended purpose— renting out the property seasonally—would be viable. In this case, it wasn’t.”

Here is another thing a lawyer can look at for you, the VRP buyer: oftentimes, a VRP is located within a PLAT or a PUD, or planned unit development. There are ordinances about trash, about shrubbery, about diff erent things you can and cannot do with your property. Buyers have to understand those rules as well. For instance, you can trim trees and shrubs but you may only be allowed to place them on the curb for pickup at certain times in a month.

Ask your real estate attorney about special taxes as well. “A lot of these communities are called community development districts,” Jason says. “It’s where the development of a certain project and its 800 homes is going to have a severe economic impact on the surrounding areas. So, they create a special taxing district, and fi gure out what the debt will be, attributable to each unit—as well as the operating and maintenance side of it.

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“The reason they have this is because when you build 800 homes, it’s going to have an impact on the sewer systems, the water systems, the schools, the libraries, the lights, the intersections. The local government knows they’ll have to expand those services, so they tax the new development’s units. For instance, at Encore there is a special non-ad valorem tax of roughly $3500 going on the bill for the next 30 years. That’s another big thing—an important factor in understanding your overall carrying costs.”

Another consideration is easements. “Let’s say you have a community that has 100 units and the power company is FPL,” Jason explains. “FPL will have documents in there that state easements are running right in front of the property, or behind. They have the ability to go in and fi x things on your property if there is an issue. Does it happen all the time? No. Does it happen? Yes. Same thing with your water company, your sewer company, your gas company, AT&T, Comcast. All of these diff erent companies will have agreements where they can enter the property and fi x things that may threaten their services being provided to the community. So, those are important to review.”

Prepare for Closing If you work with a seasoned attorney, as you should, that attorney is going to guide you along the way and ask for various things.

It’s a good idea to know, from the onset, how you want to take title to the property. Have the contract drafted such that the way you want to be on title is what’s on the contract.

“So, what that means,” Jason explains, “is if John Smith is purchasing a vacation property in Bear’s Den and he wants to be on the title individually, with his wife Jane, the way they should draft the contract is ‘John and Jane Smith.’ Not just John Smith, because then the contract would have to be changed. If he wants to take title in a corporation, an LLC, or a partnership, then he should know that ahead of time and have those documents in place and set up.

“That way they know, going in, that they have the documentation