Residential Real Estate Law Outline

8/3/2019 Residential Real Estate Law Outline

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Residential Real Estate Law Outline

Week 1

1. Snapshota.

Improvements (infrastructure)i. Offsite

b. Jurisdictional bodies/Permittingi. Interior design and outdoor design approval not the same

ii. Roadwayiii. Village use and density

1. Power that is delegated to municipalities2. Has an impact on the value of the land3. Body of case law that gives guidance when the ordinances may not

be constitutional

4. Bulk standardsa. Floor area ratiosb. Land use

c. Feasibility analysisi. Is the land suitable for what we plan to do

1. One of the most expensiveii. Due diligence period where you have the ability to get out

d. Tri-party relationshipi. Owner

ii. Architectiii. General Contractors

2. Chronology of a Deala. Come up with acquisition number

i. Look at comparablesii. Pro formas

1. How many units can be builtb. Primary due diligencec. Underwritingd. Make offer

i.

Get the land under control or under contractii. Some will buy outright and take the risk

1. Often public companies or large businessese. Environmental Reports

i. Illinois put liability on the title buyer1. Unless there was due inquiry

a. Phase 1 environmental analysis: research


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i. Certain standards that have to be followed to saythat we have undertaken due inquiry

1. Ie stains that would suggest barrels of oil inthe ground

ii. Do to find out if there are other problems that wouldrequire more inquiry

1. Would affect the numbers of the pro formasii. Geotechical Investigation Report

1. Need to know a little bit about geology2. Whether or not you can build on the land

a. Is the soil stable enough to carry the weight of the houseb. Ie house settles drywall cracks

iii. Wetlands are something that you need to be aware of1. Have federal jurisdiction

a.

Rationale: have allowed the discovery of very importantthings

i. Ie medicine2. Definition in federal law3. Letting them exist in their state and creating a buffer where cant

do business within that buffer

a. If do acquire wetlands, have regulations on how to maintainit

3. Title reportsa. Title insurance: checks title and makes sure that you own Schedule A minus

Schedule Bi. Effective date is that as of the date that the title company or policy going

backwards in time, insuring you that you are entitled as up to that time

ii. Schedule A: legal description of the land1. This is the land that you hold fee simple land to as of this date2. Holding the whole bundle

iii. Schedule B: Encumbrances1. Covers easements2. Legal obligations that run with the land3. Recapture agreements

b. Survey reporti. All of improvements on the land that exists

ii. Prescriptive easements1. Corollary to adverse possession

c. More important than the deed4. Land use due diligence after making an offer


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a. 60-90 days of due diligence without monetary risksi. Meeting with village staff/trustees/board about whether they would

support the use of the project

1. Some will have pre-conference application5. Zoning with community

a. Ordinances made up of text and mapsi. Property has a zone: residential, business, etc

1. Likely going to go in and ask to change the zoningii. Happening at the municipal level

1. Bring in marketing experts, architectb. Public process

i. Preliminary approval with pictureii. Engineering design

1. Final approval2.

Sanitary, water, and storm pipes

a. Concerns: Separation of pipes, leakagei. Location: water pipes work on pressure, sewer pipes

work on gravity

b. Have to have them close to the sitei. If offsite factor into pro forma

6. Sales, marketinga. Legal perspective: contracts with customers, what the salesmen are saying

i. Have to make sure that the house is built according to plans and specs(contract)

ii. Warranty/what happens after closing7. Brief overview of jurisdictional bodies

a. Flood plain issues: FEMA (Federal Emergency Management Agency)i. Depends on the elevation

ii. Elevations that get inundated with water at 50/100 year eventsiii. Un-buildable big due diligence issues

b. Wetlands: Army Corps of Engineersc. Environmental: EPAd. Zoning/land use: municipality

i. If not in a municipality county1. Local issue

e. Water: municipalityi. Also storm water

f. Roadway: county, state, federal departments of transportationi. Issues: curb cuts access

g. Fire protection districts: Fire chief, police chief


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i. Create the rules for building codesii. Cant get a freeze on updates to building codes that involve life safety

issues

h. Department of national resourcesi. Animals, historic event in that area, endangered animals

i. Historic preservationi. Local, state, or federal level

8. Real Estate Sales Contracta. 3 different acquisition approach

i. 30 days and close1. 30 days due diligence and then close

a. Any other risks buyer will deal with itb. Value will reflect that risk (lower price)

2. Large business, wealthy clientsii.

Simple option

1. Buying the rights to buy something at a certain price at a certaintime

2. Addresses concern about whole purchase price3. If you can control the land in an option, if you get to where you

need it to make it work pay it, if not, lose the option

iii. Putting down earnest money that will be non-refundable if we fail to close1. Mid-size companies2. Different remedies than in an option contract

a. In general, remediesi. Specific performance

ii. Recissionsiii. Damages

3. Seller cant get specific performance because money is not uniquea. Land on the other hand is unique buyer can get specific

performance

4. Law gives you these remediesa. If want to limit remedies, have to do it contractually

5. In an option, paying for the option to buya. Still have to pay purchase priceb. Earnest money is credited towards the purchase price

6. Getting to a closing means that you have to be successful in duediligence and zoning

a. Zoning serves as collateral for a lender7. Able to manage your risks

a. Ie not being able to get zoning


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b. Can stage earnest money if dont know how village willfeel about the project

9. Guel v. Bullocka. Although contract failed to specify city or state of subject property, P was entitled

to opportunity to introduce parol evidence to clear up any ambiguity

b. Elements of a contract under statue of fraudi. Description of the property which is sufficiently certain so that it can be

identified

ii. Price, terms and conditions of saleiii. Names of the vendor and vendeeiv. Signature of the party to be charged

Week 2

1. Home Rule- 25,000 or more in population or by referenduma. More flexibility in governingb. 2 enabling statutes

i. 6(a) of Illinois Constitution1. Home rule unit may exercise any power and perform any function

pertaining to its government and affairs

a. Including, the power to regulate for the protection of thepublic health, safety, morals, and welfare

ii. 5/11-13-1 of ILCS1. Grants to corporate authorities in each municipality certain powers2. Regulate and limit bulk (what is arising from the ground) of

buildings

3. Building codes4. Value of the land increases with the uses you can get of it

a. Counties and municipalities have tremendous influenceover the value of a parcel because of zoning

2. Zoning ordinances are made up of 2 partsa. Text

i. Rules and definitionb. Map

3.

Residential districtsa. Go from less intense to more intense as the numbers increaseb. Probably the least intense of that zoning districtc. Default is R-1

i. Why not open space as the default?1. 5th Amendment- cant take without fair market value to them


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2. If property was inadvertently left of zoning area have a good 5thAmendment claim because deprived of all economic use of the

land

d. Permit v. Special Permiti. Permit- as to the rights of owner

ii. Special Permit- depending on the facts and circumstances of proposal, wewill consider this

4. Northbrook Zoning Codea. Review standards tableb. Some uses allowed to encroach into yardsawnings, eavesc. Public Hearing Process 11-303

i. Theme of due process1. Notice by signs, mailings, newspaper

ii. If faulty notice back to the start1.

Void from the beginning

2. Notice element is important part of public processa. Intentional or not is irrelevant

5. Open Meetings Acta. Public policy that citizens shall be given advance notice of and right to attend all

meetings at which any business of a public body is discussed

i. Meeting- any gathering (in person, video, audio conference, telephonecall, electronic means, etc) of either

1. A majority of a quorum of the members of a public body held forthe purpose of discussing public business

2. If 5-member bodyquorum of the members (3 members) held forthe purpose of discussing public business

b. Exception for discussing litigation or land salei. Cant hamstring public bodies from conducting business

1. Other side can just watch and see what your strategies areii. Public interest would be clearly endangered or the personal privacy or

guaranteed rights of individuals would be clearly in danger of unwarranted

invasion

iii. Exceptions construed against closed meetings6. Zoning Process

a. Map amendmentb. Sometimes text amendment

i. Ie creation of a new zoning categoryc. Variation

i. Small exception to the details1. Ie changes in measurements


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ii. Youre almost there but just need a little tweakd. Special use permit

i. Planned unit developmentii. But overall, the density or lots are the same

1. Aggregating the numbers2. But changing up the design

iii. Zoning category will set the bulk parameters, after that, then get creative7. Subdivision Process

a. Cant create your projects without subdivision mapi. Bank wants this for financing

b. Plat of subdivision does/effectuates three thingsi. Creates the lots of records

ii. Sets out easementsiii. Creates restrictive covenants

1.

Ie cant alter the grade of the common areac. Who has to sign off on the plat

i. Communityii. Roadway jurisdiction

1. Curb cuts, additional improvements, unsafe conditions (retentionponds too close to the roadway)

8. LaSalle National Bank of Chicago v. County of Cooka. If restrictions imposed bear no real and substantial relation to the public health,

safety, morals, comfort and general welfare ordinance is void

i. Zoning ordinance is presumptively validii. Not up to the courts to interfere with the discretion with which municipal

bodies are vested

1. Unless the legislative action of the municipality is shown to bearbitrary, capricious, or unrelated to the public health, safety, and

morals

b. LaSalle standards- determining the validity of the ordinancei. Existing uses and zoning of nearby property

ii. Extent to which property values are diminished by the particular zoningrestrictions

iii. Extent to which the destruction of property values of P promotes thehealth, safety, morals, or general welfare of the public

iv. Relative gain to the public as compared to the hardship imposed upon theindividual property owner

v. Suitability of the subject property for the zoned purposes


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vi. Length of time the property had been vacant as zoned considered int ehcontext of land development in the area in the vicinity of the subject

property

c. Invalidated the zoning ordinances9. Sinclair Pipeline Company v. Village of Richton Park

a. Bolstering LaSalle standards--First case after LaSalleb. Defines what the relief is

i. LaSalle erred by simply invalidating the ordinanceii. Creates relief of mandamus

1. Can come in for injunctive reliefa. To zone that property what it should be zoned

2. Relief awarded may guarantee that the owner will be allowed toproceed with that use without further litigation and that he will not

proceed with a different use

c.

Concept that the land owner does not need to exhaust all administrative remediesi. If you get turned down by the municipality, dont have to go back and try

some other way

10.LaSalle and Sinclair causes people to act within certain parametersa. What grew up around the propertyyou are entitled to creates checks and

balances

i. How does it work in the real world/commerce1. Using those standards as a business standards

a. Look at property coming in this contextb. Sent message to the local bodies as to what are the guidelines that causes them to

make better calls in the fieldi. As municipalities make their decisions, now rely on the LaSalle standards,

adopt into the zoning code

Week 3

1. Developers Agreementa. Deal between the municipality and developer about what is about to go down

i. Basics of contracts lawii. Want to include code freeze (dont want costs to increase because of

building code changes)1. Matter of business concerns code freeze granted2. Life safety concerns no freeze granted

b. Entitlements that are going to the developersc. Not contract zoning because no consideration is going from the developer to the

city


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i. Ie agreeing to forebear something that you are entitled to (restrict usesbeyond zoing)

2. Timinga. Negotiate things that address concerns of presales and village concernsb. Water, underground work compromise

i. Position that allows developer to move forward but addresses the interestsof the village

3. Certificate of occupancya. All improvements have to be in before certificate is granted

i. If so becomes a huge burden on the developer; sequence of construction4. Development of the property

a. Disclosure documenti. Village doesnt want to be stuck with complaints about additions about

homeowner

1.

Village requires that issues to be addressed, maintenanceobligations that want to be highlighted to the buer

ii. Forces Developer to record a separate documentb. Home improvement limitations as a result of building envelope restrictions

i. Title insurance on schedule Bii. Result restrictions run with the land

5. Improvementsa. Addresses types of improvements and who is responsible for what

i. Includes landscapingb. Streets Villagec. Mains

i. Sanitary, water villageii. Storm pipe can go either way

1. Storm water retention Homeowners association2. Underground pipe village but move to HOA

d. Service lines to the housei. Part sits on owners lot

ii. Part sits on village right of wayiii. If runs through common area HOA

e. Landscaping HOAf. Interests

i. Village wants specifications of the improvements are up to the villagesstandards

1. Want to make sure that it will work2. Ie how strong the streets are

ii. Developer- warranty and maintenance period


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1. Pass warranty on to the subcontractorg. Developers duty to construct improvements

i. Plans/Specifications (what is it made of)ii. Parties involved

1. Architect/engineer designs2. Owner3. Contractor puts it in

h. Developers Guaranty and Maintenance of Improvementsi. If improvement is repaired Guaranty shall be extended

1. Pitfall to watch out for2. Tacking period to what is improved

6. Environmental Compliancea. Site remediation to residential standard

i. No further remediation letterb.

Village hires own consultants to make sure done carefully because of liability

7. Declaration of Covenantsa. Roadmap as to what goes into the contractb. Village wants to make sure that what goes to the association gets laid out because

doesnt want to be stuck with it

8. Village of Northbrook Subdivision & Development Codea. Amount of Performance Guarantee

i. Performance surety1. Form of financial insurance that a party is easy to draw upon in

case the developer fails to perform

a. Ie letter of creditii. Included in since can be drawn upon developers pay interest on it dont

borrow twice

1. As build improvements ask for partial reduction of letter of creditthat is allowed under 3-504

9. Contract with the municipalitya. LaSalle Standardsb. Is the landowner agreeing to a use of restrictions that amounts to consideration?

10.Contract zoning- a land use regulation where a local zoning authority accommodates aprivate interest by rezoning a district or a parcel of land within that district, on the

condition that the limitations or restrictions set by the town for those parcels are accepted

by the owner

a. Conditions are not necessarily applied to other similarly zoned parcels.11.Ziemer v. County of Peoria

a. Dedication of land for roadway purposes is not unusual


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Documents

Residential Real Estate Law Outline