Looking Back on 2021
As we approach the end of 2021, the biggest real estate legal headline for the year continues to relate to tight real estate inventories. This “seller’s market” involved buyers placing offers sight unseen, buyers waiving contractual provisions in order to provide more competitive offers, buyers foregoing traditional due diligence inspections on properties being purchased, and home sellers who had difficulty finding their next home within their budget. The tight inventory seems to have caused an increase in the following real estate legal issues:
– An Increase in Buyers Claims Against Sellers for Misrepresentation and Non-Disclosure. With buyers waiving their rights to conduct inspections, waiving their rights to request repairs, and quick closings, many buyers rushed into homes that may have been overpriced and full of headaches. In turn, some of these buyers have directed their frustrations onto the sellers and have made claims that sellers were less than honest in disclosing issues with the newly purchased homes. Whether the claims are legitimate, or based on “buyer’s remorse,” remains to be seen. Nonetheless, there has been a significant uptick in these claims.
– An Increase in Sellers Refusing to Sell and Specific Performance Lawsuits. Also on the rise are lawsuits involving the recording of a lis pendens and a demand for specific performance. In some cases, sellers have flat out refused to sell a home to their buyers, even when a contract requires it. In many cases, this is due to the seller finding a better buyer or obtaining a better financial offer after the seller has contractually agreed to sell their home to someone else. When this occurs, the buyer has a claim for specific performance. A request for specific performance involves a request that the seller be legally compelled, by a judge, to sell a property.
– Commission Disputes and Breaches of Real Estate Team Agreements. Because inventory is so limited, there are less commissions to go around. Ultimately, this has resulted in more and more commission disputes, fights over entitlement to pending escrows, and ethical claims of stealing clients. This may also be a result of the “Great Resignation,” where real estate agents and brokers have sought to terminate existing team agreements and/or sever themselves from their brokerages.
The other real estate legal issue of significance involved evictions and the eviction moratorium. The CDC Eviction Moratorium was ruled unconstitutional. Yet, many landlords and tenants continue to spar over past due rents and other rent-related issues.
What’s ahead for 2022?
As the U.S. continued to endure through the Pandemic in 2021, we saw a lot take place in the real estate world. The residential real estate market continued to climb steadily. The commercial real estate market continued to evolve and adapt to the pandemic. As we approach 2022, there are some things in the Arizona real estate world that will be different and many current trends that will continue.
– We expect the housing market to remain strong in 2022—with inventory low—although mortgage rates may rise slightly. Thus, we expect to continue to see a healthy amount of non-disclosure disputes resulting from buyers purchasing property only to then discover undisclosed defects. The extent to which sellers continue to exact concessions out of buyers during the escrow process—such as eliminating the inspection period—could result in an acceleration in the increase of non-disclosure disputes in 2022.
– Due to the change in homestead laws effective January 1, 2022, title companies have new obligations starting in 2022 with respect to providing notice to judgment creditors upon the sale of real property. While the new homestead laws increase the current exemption from $150,000 to $250,000, the laws are expected to cause increased litigation and a delay in escrows regarding payment to the judgment creditor out of the sale proceeds.
– It is anticipated that there will be an uptick of short-term rental disputes—both in HOA communities and non-HOA communities. Absent a variant that puts the country back into lockdown, short-term rentals should continue its rebound into 2022.
– We also expect the commercial real estate market to increase. The industrial and warehouse sector is exploding with growth and industrial companies will continue to relocate to Arizona. Retail will continue to adapt to changes from the pandemic—including an economy that is now more ecommerce oriented than pre-pandemic. Office space will continue to evolve to attract companies who want employees to return to the workplace. As a result of these adaptations, companies will continue to need counsel drafting and reviewing purchase contracts and leases.
– As investors continue to purchase real estate rental properties, there will be a continued need to form single asset limited liability companies for asset protection purposes.
– As overall real estate activity continues to remain strong and robust, we expect to see a healthy amount of real estate issues in 2022, relating to evictions, easement disputes, landlord tenant disputes, buyer seller disputes, zoning issues, contract disputes, and HOA-related disputes.
From Our Office to Yours . . .(even if it is your home office)We wish you every happiness this holiday season and throughout the coming year. Cheers to a healthy 2022.