Common Causes for Real Estate Litigation and How to Prevent Them - Hackstaff, Snow, Atkinson & Griess, LLC

Common Causes for Real Estate Litigation and How to Prevent Them

Common real estate litigation issues and how to avoid them. Few real estate transactions are simple and straightforward, but thankfully most are completed at the closing table without any further issue or need for litigation. There are, however, some situations that can lead to legal proceedings. We’ve compiled a quick list of the most common challenges that brokers and sellers should be mindful of and take steps to mitigate their risk.

Septic Systems

Most Colorado county health departments require that septic systems be permitted, inspected and regularly maintained and serviced. For older homes built before the permitting process was established, there could be an aging septic system without a permit. 

The seller may not know they have a septic system, or realize it was never permitted. The buyer may not know about the transfer requirements for septic systems, which often means an additional permit. The title company doesn’t look for a permit issue, and for a while, no one is aware of the problem until something goes wrong with the septic system.

What to do: Do the legwork to find out if a property has a septic system and if the county requires a transfer permit. Note that permits are filed with the health department, not the building department.

Things to look for:

  • Property is one acre or more
  • Property was built or developed before 1960
  • There are no records for a sewer tap
  • The owner is not being charged sewer fees

Solar Leases

Many people assume that roof-mounted solar panels are included with a home, since they are typically physically attached to the structure or seem permanently installed in a yard. But in some cases, solar panels are only leased from a solar company, and most contracts stipulate that the panels be returned upon the property sale or contract termination.

What to do: Always ask about solar panels and find out what the contract states, if there is a transfer option, or if the panels must be returned. If you’re representing the buyer, never assume that they convey. If you’re representing the seller, disclose the panel status clearly.

Failure to Disclose and Seller’s Property Disclosures

Under Colorado statutory requirements, brokers/selles are required to disclose any actually known adverse material conditions. These situations often arise around water intrusion or mold, which a seller may have attempted to correct but didn’t completely resolve the issue. A buyer finds water stains or mold evidence, and questions the brokers intentions.

What to do: The statutes say that brokers have no duty to investigate a property on behalf of another party, as well as no duty to verify the representations of the seller. Ask the questions you need to ask to present the most accurate information, and simply be aware of the statutes.

Water Rights

As suburbia edges into what was formerly agricultural land, water rights come into play. Colorado water rights are based on shares, meaning someone with water rights owns a certain number of shares based on feet per acre. Sellers often want to reserve their water rights, or they may have already sold them to the city or municipality. Buyers who may not know or ask about the rights discover a well and want to use it for irrigation. Or they may discover the rights were sold, and want to know what value they missed out on. 

What to do: Always ask about the water rights, even for suburban properties where you may not think water rights are an issue. This applies to brokers representing both buyers and sellers – it’s always important to know as much as possible and find the documentation to prove it.

Flood Zones and Forest Fires

Forest fires are unfortunately becoming more of a common occurrence, as is seasonal flooding. Buyers may not realize their new property is at higher risk for either scenario, and may not purchase the appropriate insurance. When there’s damage or a loss, they may go back to and blame the broker for not clueing them in. 

What to do: Whether you’re looking to list a property or viewing one with a client, take a look at the landscape. Is it in or near a forest? When was the last time the neighborhood experienced flooding? Find out what kind of insurance is needed. The HOA is a good place to start.

Oil and Gas Rights

As with water rights, more and more suburban development is occurring on previously agricultural land, or land that has been discovered to contain oil and gas deposits. Sellers sometimes want to keep their mineral rights, and that information doesn’t always make it into the buy/sell contract. Additionally, the title company may not discover this in their search, and so may prepare a standard deed.

What to do: Brokers should do their research and find out what’s going on with oil and gas activity in the area or neighborhood. If a seller is going to reserve mineral rights, it’s important to understand that mineral rights are property rights, not personal property rights. Mineral rights must be in the deed or reserved in the deed.

Have a real estate concern? Talk with one of our attorneys.

Real estate can be complicated and complex. The experienced real estate attorneys at Hackstaff, Snow, Atkinson & Griess can help you navigate any real estate disputes. Contact our Denver law firm today at 303-534-4317 or send us a message.