July 2015

Dangerous Mistakes Made by Real Estate Agents Drafting a Contract

A common mistake made by a real estate agent is to make modifications in drafting a lease or offer to purchase in order to close a deal.   Even if the agent is using a form lease or purchase contract the temptation to draft language, apart from the form, can turn out to be detrimental to all parties.

Drafting of a lease is permitted as long as the agent is acting as a scribe and just filling in the blanks on a form.  The danger is when the agent elects to create additional language either on the form or in an addendum.  He or she is acting as a lawyer without a license to practice law when drafting new language.  The agent may be acting with all good intentions, but the consequence could be defending himself in a court of law.

The one common mistake an agent can make is if the purchase is subject or contingent upon a 1031 Exchange and provides language in the document for that provision.  In some cases the agent may be the actual or partial owner of the property and believes he will not be liable.  Once again, even if the agent happens to be an attorney, it is advisable to employ a third party lawyer to draft the documents.

In my practice as an expert witness, I have seen many agents in a deposition when they have acted as a lawyer without a license.  The agent may have his legal expenses covered by his Errors & Omissions insurance; however, it could be excluded in his policy.  Furthermore, the agent could be sanctioned by the Bureau of Real Estate.

My advice to the agent is to employ an attorney to draft modifications in the contract before a sale or lease in order to prevent costly litigation down the road.

“I have known Lee Segal for more than 30 years, and I respect him enormously both professionally and personally. His unwavering honesty combined with his keen understanding of the nuances in the real estate field, has made him highly regarded by friends and colleagues alike. You can always count on him to be moral and upright in any circumstance.”   Sheldon Katzer, The Rosalinde and Arthur Gilbert Foundation
Sheldon Katzer, The Rosalinde and Arthur Gilbert Foundation