February 3, 2025 • 28 mins
Show Notes:
In this episode of Jim Sells the Suncoast, Jim is joined by real estate attorney Reid McCullough, who brings clarity to the often-confusing world of HOAs, disclosures, and contract pitfalls. Whether you’re buying, selling, or managing property, Reid’s insights will help you avoid legal hurdles, protect your investment, and maintain good neighborly relations.
Key Highlights
- HOA Insights
- HOA Requirements & Approvals: From application fees to background checks and financial disclosures, buyers need to stay proactive to ensure a smooth closing.
- Rules & Restrictions: Architectural review committees often have broad authority to maintain the community aesthetic—making major modifications can be a legal minefield.
- Disclosure Duties & Misrepresentations
- Why Inspections Matter: Seller disclosures can miss key issues; hiring a qualified inspector and possibly an appraiser is well worth the cost.
- Legal Consequences for Non-Disclosure: Failing to reveal known defects (e.g., major flood damage) can lead to lawsuits, punitive damages, and costly legal battles.
- Boundary Disputes & Easements
- Neighbor Disputes: Overlapping fences or unclear lot lines can often be resolved by communication and a fresh survey rather than heading straight to court.
- Title Insurance Claims: Undisclosed easements that devalue property may trigger a title insurance claim—especially if they weren’t mentioned before closing.
- Contracts & the Statute of Frauds
- Put It in Writing: Verbal agreements or informal add-ons can create misunderstandings at closing. Use official forms (e.g., FAR/BAR contracts) to cover contingencies properly.
- Custom Contracts = Caution: Two-page “simple” deals often lack important protections for both parties. When in doubt, consult an attorney or push for standard contract terms.
- Common Real Estate Myths
- Enforcing Verbal Promises: Anything not in the written contract is essentially unenforceable.
- Surprises at Closing: Make sure any extras—like furnishings or special concessions—are spelled out clearly in the contract.
What’s Next?
Need help demystifying contracts, HOAs, or other real estate legalities? Reach out to Jim at jim.ahearn@gmail.com or visit Jim Sells the Suncoast. Whether you’re buying your first home or expanding your real estate portfolio, understanding the law can save you stress—and money—in the long run.
A Personal Note from Jim:
Hey there, I’m Jim Ahearn, your go-to real estate guide and host of Jim Sells The Suncoast podcast! 🎙️✨ Dreaming of Florida life? I’ve got you covered! As your dedicated buyer's agent, I’ll handle everything from walk-throughs to closing, making your home-buying journey as smooth as a Florida breeze.
Whether you're local or tuning in from afar, I’ll bring the Suncoast to you with virtual tours and expert advice. Let’s chat about your dream home and I'll connect you with all the right people to make it happen.
Ready to move to paradise? Drop me a line – I can’t wait to help! 🌴🏡
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Jim (00:02):
Okay.
Cool.
And good morning to the Suncoasttoday.
I am.
It's my pleasure to have ReedMcCullough on.
He is the epitome of yourneighborhood lawyer.
He's been in the area for quitea while, been practicing law for
11 years, focused on realestate, and he makes the complex
palatable when we're talkinglaw, maybe palatable is the
(00:23):
right word, and brings a littlebit of passion to this passion.
So welcome, Reed.
Thanks for being here.
Reid (00:28):
Jim, thank you so much for having me.
I really appreciate getting thechance to share what I do and
what I've been working on latelywith you.
Jim (00:36):
Fantastic.
I know when we look at realestate law and real estate in
general, the experts can reallycontribute quite a bit because
most people will do two, three,four transactions in a lifetime
and you might do that in a week.
So there's a lot of insight thatcan be gained from.
Just what and what's going on.
So I've got a little bit of listof questions.
Hopefully we can walk throughsome of these and we can expand
(00:59):
on them and see what kind ofinsight can you bring to the
table on that to help theaverage person is going through
this transaction.
All right, first one, let's talkHOAs, homeowner associations.
Every HOA is a little different.
There's a lot in there, but whatshould buyers know about
purchasing a property within anHOA and how can they avoid
(01:19):
potential legal disputes withthe association?
Reid (01:23):
Absolutely.
When people are thinking aboutbuying, they're doing one of two
things.
They're applying to a homeownerassociation or a condo
association which share a lot ofthe same DNA.
But their authority is derivedfrom two different statutes.
Jim (01:37):
great editor,
Reid (01:39):
Fantastic.
If you're applying to homeownersassociations, what you should.
expect is a comprehensivefinancial disclosure.
many people are broadsided bythe depth to which the
associations want to ensure thatthey can collect money So often
you see bank statements, creditchecks, criminal background
(02:01):
checks and fees that must bepaid up front.
This is 1 of the biggest thingsI see people flood when they're
coming to the closing table isthat they've done all their due
diligence.
They got the property appraised.
The lender is happy.
But, they just never turned inthat 150 check to the condo
association or the homeownerassociation, and as a result,
(02:22):
the homeowner association hasn'tdone anything.
1 of the biggest things I wouldadmonish people is not just to
have your financial stuff readyfor the for the bank or for the
lenders to buy it.
But also to make sure that thecommunity knows who you are and
that they've got your check for100 or 150 bucks that they need
to do their research on to makesure you're not accredited.
Jim (02:43):
Okay, so that's something particularly your agent should
be making sure that you're awareof what's going on.
So what else in an HOA?
What kind of power do they haveand what kind of limit do they
have when you've moved in?
And hey, I want to paint myhouse purple.
Reid (02:58):
Ah, yes.
The rules and restrictions.
So part of every contract forsale in an HOA comes with
certain sellers disclosures,which include copies of the HOA
rules and regs.
Generally the managers of HOAs,even if you are an owner in the
community will answer somelimited questions for you.
(03:20):
So your plan is to.
Let's say you want to move inand build a shed or detached
garage they'll give you thebroad strokes as to what you can
and can't do within the rules,
Jim (03:31):
right?
Reid (03:32):
I would caution any prospective buyer that's looking
to make significant exteriormodifications that it is like
navigating the landmineminefield park, the Many
associations have architecturalreview committees, which are
like municipal government inmany respects, and that they
have promulgated rules that theywant the community to follow in
(03:55):
terms of how it looks and feel.
And they have plenary power tosay, no, it doesn't really fit
the spirit of the communitywhich sort of leads you down the
road of starting a purchase bysuing your HOA, which is not a
great place for anyone to be.
I generally discourage lawsuitsagainst associations in all but
(04:18):
the most extreme circumstances.
Jim (04:21):
You like that neighborhood for a certain reason or for a
certain aesthetic and they wantto maintain that same thing.
So it's good and bad, I guessthat it's going to prevent
people from changing it.
Reid (04:32):
There are some changes in recent years.
To allow for superseding rulesto override nature.
For instance, Governor DeSantislast year signed some
legislation that allowshomeowners to provide hurricane
protection.
For their houses.
And the HOA isn't really allowedto argue with you about, your
(04:54):
storm shutters or the style ofyour hurricane impact windows,
for instance so there has beensome retraction of power from
the HOAs in favor of the stateand in favor of the individual
homeowners, but by and large,fighting with an HOA is almost
always an uphill battle.
I generally stack up the costagainst, the cost of buying a
(05:18):
comparable property somewhereelse.
Jim (05:20):
And then to your point, you have certain rights.
You want to protect your housefrom damage.
That's great, but you can'tleave them up year round.
They're going to make sure thatwe have that aesthetic when
there's not something imminent.
Reid (05:33):
correct.
Jim (05:33):
Okay.
Let's slide over to disclosuresand misrepresentations.
How can buyers ensure they arefully formed about a property's
history before closing?
Reid (05:43):
Oh, that's a great question.
The, by and large, you what I,what that means is that unless
the unless the seller is alsothe builder.
There's and, there's beencontinuity of ownership.
So new construction, you've gota pretty comprehensive idea of
what's going on with theproperty, but after that 1st
(06:05):
owner, you're generally yougenerally have to take someone's
word for it.
If they accept the sellerdisclosures and you say, okay.
You checked not applicable or noknowledge to many things I've
seen most sellers disclosuresand I find that the best you can
do is your own research, Iwouldn't recommend anyone buy a
(06:26):
property without a, aninspection.
And even if you're buying cash,it's worth it.
Sometimes it's worth getting anappraisal too.
Especially if you're consideringlike a for sale buying owner
transaction where nobodyinvolved knows the nature of the
property or the nature of themarket conditions, it's worth,
(06:46):
obviously, first and foremost,it's worth having the advice of
a licensed realtor to guide yourvaluation and your estimates to
help you prepare that offer.
When you're considering thenature of the property you're
buying, the physicalcharacteristics, I generally
treat seller's disclosures asabout worth the paper they're
printed on.
(07:06):
In my personal purchases in thepast, I always do, to the nth
degree, my own inspections, myown walkthroughs.
Sometimes worth even taking acontractor to think about making
improvements to property, takinga contractor to those inspect
inspections to say, okay, Jimfrom ABC contracting companies
here, he's going to tell me whathe thinks, the interior
(07:27):
renovation is it's going to needto update this 1950s kitchen.
I always, when it comes toseller's disclosures and how to
really get a feel for theproperty you're buying.
The number one thing you can dois to hire your own racer.
Jim (07:41):
Okay.
So when you're looking at apurchase, that's going to be,
could be several hundredthousand to a million plus
spending a thousand dollars oninspection and appraisal is a
pretty smart investment goinginto it.
Third party that somebody that'snot invested.
They have no skin in the gamecan step back and go, here's
(08:01):
what I think it is objectively.
Reid (08:04):
When it comes down to the reports because there's so much
that's part of a property thatyou just won't see, you
Jim (08:11):
know,
Reid (08:11):
you think about latent water leak, for instance, you
might have water that'strickling down the interstices
of the walls.
And you wouldn't see that on theface.
It doesn't show on the paintuntil it really starts to rot
but Many inspectors haveinfrared cameras.
They would disclose they wouldshow you any moisture or water
leaks within the propertySimilarly, you know if you're
(08:34):
doing a deal and you don't knowwhat the value is You get an
appraisal that says it's youknow, this property should be
going for twenty or thirtythousand dollars less But not
only have you paid for, theappraiser's time, but you want
to save yourself a pile of moneyand giving yourself a strong
position to negotiate the
Jim (08:49):
Yep.
And I think having worked withsome inspectors before, they go
places that I wouldn't normallygo and they have the knowledge
that I wouldn't have,
Reid (08:56):
I don't have the physique for that anymore.
Jim (09:00):
So when looking at a seller, we talked about the
disclosure and how to take that.
But what are the legalconsequences for a seller who
fails to disclose materialdefects of a property?
Reid (09:13):
the downside can be dramatic.
So if you're selling a propertyand.
You know that back in 2005 whenall the hurricanes came through
town, that property flooded, andyou don't indicate that on your
seller's disclosures, then if abuyer subsequently experiences
problems with that, whether it'srot or subsequent flooding that
(09:37):
they could have known about.
It could have anticipated ifthey knew the property flooded
in the past.
Your damages don't just run tothe cost to make it right, but
you could be on the hook for.
A lot.
There's punitive damages arecapped at treble compensatory
damages.
So let's say it costs 50, 000 tofix a defect.
(09:59):
But, you knew about that and youfraudulently failed to disclose
it.
A court can find you liable for150, 000 punitives as well as
the cost of an attorney's fee.
Suddenly a fix that was 50, 000.
Palatable during the contractand negotiation phase
subsequently becomes like thecost of another house.
most homeowners are notinspectors.
(10:20):
Most homeowners are notcontractors.
And the burden to prove thatsomeone knew or should have
known about a defect andaffirmatively failed to disclose
it is a pretty high bar.
So when buyers come to me andsay, Hey, there's a plumbing
problem in my new house and, itwasn't disclosed to me by the
seller.
I said, okay.
(10:42):
And what do we do?
We have any evidence or do youthink you can find any evidence
that the seller knew about that?
without that collateralevidence, because you very
rarely get direct evidence offraud, nobody writes an email to
their banker saying, Oh, Ideceived these people because I
covered up the evidence withoutthat circumstantial evidence,
it's pretty obvious.
It's a pretty high bar is thethe bar is either, either
(11:07):
intentionally conceal the defector you you made representations
with, reckless disregard for thetruth and falsity of the
statement.
If you just, it's a very highbar to clear to get that fraud,
that specific intent necessaryto get those damages.
Oftentimes, simple negligencemight get you there, but I don't
(11:30):
whenever I'm talking about thecost of a lawsuit, that's got to
be a financial choice.
When i'm thinking about what itcosts to get relief from a court
i'm thinking about that comparedto the cost of fixing Because
there's no guarantee that theseller still has money after a
transaction is done
Jim (11:50):
So I think what i'm hearing is On major issues, flooding
came through like with HurricaneDebbie, and it wasn't disclosed.
That's something we should talkabout and possibly investigate
further.
Or, your home inspector mightfind that and that's something
you negotiate before you close.
Reid (12:05):
Absolutely.
Jim (12:07):
Right.
Reid (12:07):
So if it comes to it and you find out that.
Your roof was unpermitted.
The cost of a new roof is you'relooking at 20, 25, 000,
sometimes a lot more dependingon the size of your house.
That's worth asking for.
Hey, Mr.
Seller, when you have this roofdone, you didn't pull any
permits and it wasn't inspected.
So I need to throw a new one onthere in order to not get
(12:29):
violations.
that's the kind of thing I wouldpush for him.
I push might even push prettyhard for it.
When the rubber hits the road,whether or not you want to drop,
10 or 15, 000 to get the sellerin front of a judge, that's a
that's a financial decision,because at the end of the day, a
(12:49):
judgment in court is not moneyin your pocket.
It's just the right to collect.
So I always, one of the things,the expressions we have around
the offices.
It's better to have a good lifethan a good case.
Jim (13:03):
How should a property owner handle boundary disputes or
challenges within easements ontheir property?
Reid (13:07):
The answer is the worst lawyer answer in the world.
Depends on who is asking.
As far as a boundary disputewith Your neighbor.
it's the nexus of legal realityand real politics, because if
(13:27):
you sue your neighbor, you getto live next to the guy you sued
until one of you moves.
Which is not fun.
The answer I would have isdepends on the nature and
depends on who's asking.
If you're talking about let'ssay there was a seller has a
utility easement crossing themiddle of the property and it
completely derails yourconstruction plans.
(13:48):
Because, FPL wants the right tothrow power line across
Jim (13:51):
for free.
Reid (13:51):
That's a title claim, especially if it wasn't
disclosed in the corollarydocuments.
Title insurance claim is Myhouse, I have lost the value of
my purchase by X dollars becauseof this recorded easement.
I need to be compensated and theunderwriter looks at that and if
they can't terminate or relocatethe easement to make it better
(14:13):
for you, then they pay you thevalue of your claim, which is
the depreciation in value forwhat you expect to be purchased
and paid for and
Jim (14:20):
what
Reid (14:21):
The you would also, I would submit probably have a
Davis claim against the sellerbecause that, the defect in
title that was known to theseller, but unknown to you
becomes an issue.
And the seller is not aroundanymore.
So you're not pissing off theneighborhood.
If it came, if we're talkinginstead about the location of
offense, that's the much morecommon one.
(14:42):
My neighbor's got the ugly sideof the fence facing me and he
built it on my, over on myproperty.
That's a conversation I've hadwith a lot of people.
The first thing I would suggestis, all right get a survey and
make sure you're right.
Because sometimes that causesthose conversations to go away.
I never hear from him again.
And I was like I guess on hisside of the property, if it
(15:04):
turns out they're right, I thinkthe best thing to do is just
have everybody sit down for anice conversation.
I've entertained a couple ofthose in my office to say, hey,
it sounds like there's a fenceon your side of the yard.
Maybe drop something up andsays, okay, we acknowledge that.
This sense is on this property.
Nobody's, nobody's pursuingadverse possession or anything
(15:25):
like that.
Generally anxiety about adversepossession, just an escalation
of existing neighborhoodtensions.
Maybe there's something elsethat's in that.
Guys, I understand that you'relooking at 8 inches of boundary
line and, soil shifts over time.
Maybe this property was on yoursand there was a flood or
(15:47):
something.
I don't know.
or maybe the fencing guy is nota licensed surveyor.
He's certainly not.
Keep in the forest for thetrees, remembering that it's
better to have a neighborhoodwhere people like you than eight
inches of dirt on one side ofthe fence.
Jim (16:05):
Let's talk about that a little more and what that is and
how that impacts people.
Reid (16:09):
Yeah, absolutely.
It explains it's a shorthandfrom a Florida Supreme Court
case, where they ruled that theseller property who Conceals.
Knowledge of a latent defectfrom a buyer is liable for the
damages that result in, and Ibelieve including tentative
damages in the event, if you'reable to establish that intent,
(16:33):
The requirement of some,affirmative acts to conceal the
defects of knowledge orconstructive knowledge of the
Jim (16:41):
defense
Reid (16:42):
like new or should have known this was a problem that
you didn't say anything about itand a latent defect that isn't
immediately apparent.
The latency of a defect is.
Something that you can't seewhen you walk into a house and
you say, Oh, that stove is onits face, let's.
That is an obvious defect.
Jim (16:59):
house, but maybe access to the lake behind you ran through
the yard and nobody told you.
Reid (17:04):
That would be a defect that, if you thought you were
buying the clean title with noeasements whatsoever, and it
turns out, your neighbor has theright to to skinny dip in your
pool.
This is a little bit hyperbolic,but beach access is a real one
that comes up a lot and thatdoes and that does get litigated
and argued about.
There's been a couple of casescome through Sarasota just
(17:25):
recently, especially the, pardonme, related to the Longboat Key.
There's a couple of beachaccesses there that's owned by
Sonoma.
Latent defect that causes nodamage is not something you
would litigate.
Frankly, it's not something thatwould come to light in the first
place because it didn't causeany problems, but that's one of
the elements.
(17:46):
every lawyer loves tests.
The seller's knowledge thelatency of the defect the
causation of harm in the actualdamages.
that's the four steps torecovery.
And if you can't get all ofthose.
Then you don't get damages.
So it's important to think aboutall of them when you're trying
to decide whether or not to buyor sell it.
Alright, let's
Jim (18:05):
talk a little bit about maybe some real estate myths and
misconceptions.
Reid (18:10):
Oh God bless, Get it
Jim (18:12):
Yes.
Reid (18:12):
Get it in writing.
If you get anything out of thispresentation, verbal agreements
are worth the paper they'reprinted on.
Jim (18:19):
Yes.
Reid (18:19):
Harold, there's so this statute of fraud is is what
controls this in Florida.
This.
Section of clauses is a catchall term that covers a bunch of
different areas of law, whichsays that agreements aren't good
in the absence of a writteninstrument.
And the Florida statutes areexplicit about this, is that A
(18:41):
an agreement for for the saleand purchase of real property
must be in writing, signed bythe parties.
It doesn't need to be notarized,but it needs to be in writing.
It needs to be signed and itneeds to contain material terms
to a a contract that doesn'thave if I say to you, Jim, I am
willing to sell you my propertyon Arlington street for 1M.
(19:02):
And you say great and I text youjust confirming that I'll sell
Arlington for one milliondollars and you say Acknowledged
in receipt you can argue thatWe're inferring material terms,
inferring a reasonable timelineinferring a standard closing
costs and yeah but if you camedown to a lawsuit if you tried
(19:25):
to sue me and say hey Really?
He promised to sell theArlington for a million bucks I
say, yeah, when I'm done withthe place, 30 years from now, or
yeah, but you're going to coverthis, that, and the other, and 6
percent for my wheelchair,whatever.
the court would generally findthat there wasn't a meeting of
the minds.
that's what the FAR BARcontracts do.
The as is and the residentialcontracts for sale and purchase
(19:47):
of real estate.
FAR BAR contracts are soimportant because they are
facially neutral, because theycontain all of the necessary
ingredients, all the secretsauce you need to sell and
purchase a property, andeverybody knows them.
You can't be a realtor inFlorida if you don't know the
(20:07):
promulgated contract.
And as a result and they getrevised.
They get regularly revisited asnew stuff comes up.
Like you talked about the condoassessments in the wake of the
tragedy over at Surfside.
There's a whole bunch of newstuff in the condo disclosures
regarding milestone inspectionsand structural reports.
the biggest red flag I have forpurchasers and sellers of real
(20:27):
estate is trying to enforcestuff that never made it into
the contract and creepy customcontracts.
Jim (20:38):
and I think that's why when people look at a contract and
it's 21 pages and they're like,yeah, I read it, here you go,
that covers all those nuancesthat you just talked about, Hey,
when is this going to happen?
Where is it going to happen?
What are the terms of thecontract, what are the
contingencies or what are theouts for anybody who wants them
or what are the specific terms?
Utilizing something like that'sbeen formalized and structured
(20:58):
really protects everybody that'susing it because everybody knows
what's supposed to go on.
Reid (21:03):
Yeah.
And on
Jim (21:06):
a custom contract, you're like you didn't mention this or
what's the fallback on this?
Reid (21:11):
If a lot of like wholesale investors and.
These, flippers as they'recalled they love to have these
two page contracts and they'relike, look, it's real simple.
It's money for property, everysingle one of those is a get out
of jail free card for thewholesalers whenever they want
(21:33):
on the contract and they get alltheir money back and you get
nothing.
And there's a complete absenceof really important material
terms like, Hey, if this buyerdefaults on the contract, what's
my recourse?
What can I do?
If the escrow agent discovers atitle defect, what happens then?
And yeah, the FAR BAR contractseems daunting to the layperson.
(21:57):
This 15 page contract, because,I'm worried it's, it's going to
lock me into something I don'twant.
The thing is, contracts, the asis bar in particular, is is
broadly buyer friendly.
And it's it allows the sellerto, to have certainty that, all
right, after the inspectionperiod, and after the
(22:17):
contingency has expired, I knowI'm getting a sale out of this.
And the contingency periods arelisted right there page page
two.
Yeah,
Jim (22:26):
gives a little surety to either side, you can go in
going, Hey, sign the contract,but I get to check everything.
And once you've checkedeverything, the seller says,
we're going forward.
Reid (22:35):
Happy days.
Yeah.
And verbal agreements.
God bless, if somebody makes youa verbal agreement then I would
go about your day until you seesomething in writing backing it
up.
And if what in writing is, doesnot say FARBAR on it, I would
run down the street to yourfavorite local lawyer and say,
this guy gave me an offer, butit's on a weirdo custom
(22:57):
contract.
If your lawyer's worth is saltor her salt what you, what they
should do is call up and say,Hey, dear creepy investor, we'll
be happy to help you with thiscontract on a Florida to Far Bar
form.
Jim (23:10):
I think the other area that this comes in, and I had this
discussion with somebodyearlier.
Which is interesting is whenyou're in the middle of
negotiation, counter offers averbal counter offer or an email
really isn't going to cut ituntil you see the contract.
So you may think you've gotsomething coming in, but until
that contract comes back,everybody signed, there's
(23:30):
nothing.
Reid (23:33):
Unsigned contract is no good.
There's an active conversationabout missing initials and I
take the middle of the roadapproach to that.
If you change a material termthat is a counteroffer that
negates the initial documentuntil that portion is signed.
However, if I get a contractthat has, no changes to the
(23:57):
material terms is signed by bothbuyers and sellers, but say the
buyer does an initial page 8 forwhatever reason.
It just wasn't populated on thedocument.
I've had a lot of questions fromrealtors as to whether or not
that changes the effective dateor whether or not that's a fully
executed contract.
The contract signed at the endby the parties intending to be
(24:18):
found constitutes an effectivecontract, but you should still
chase down that initial just sothere's no argument or
disagreement regarding thepages, the language on that.
Jim (24:32):
What do you think in your experience as a lawyer dealing
with the legal aspect of this isthe biggest misconception people
have about real estate law?
Reid (24:42):
Oh let's see, it's it probably shares a lot of the
same DNA as the as the verbalcontracts.
I would say the biggestmisconception people have
brought my office is is whenthey're going through the
contract process.
And they bring that somethingextra to the closing table, I'll
sit down, I've got the wholecontract, all the agenda, I
(25:05):
built closing documents for themto review, email that to them, a
coin toss, whether or not theylook at it or not.
They sit down and they saywhere's my extra five thousand
dollars for the furniture andi'd say What they were walking
through the property and theytold me I was getting an extra
5k Great, Okay, cool.
Did they write that downanywhere?
Jim (25:25):
Yeah, so
Reid (25:26):
oftentimes a lot of what my job is reconciling the
expectations of the party whowent through this whole contract
process and then all theseconversations with realtors,
lenders, sellers,representatives, whatever and
distilling that into the legaldocuments that say how much
you're paying and what you'regetting.
(25:46):
And that's where, I rested thefulcrum of that transaction,
trying to balance thosecompeting interests.
Jim (25:54):
Fantastic.
Reid, thank you so much forcoming on here today.
30 minutes goes by quick withoutrealizing it.
There's so much to dig into.
We'll go into my next set ofquestions because I think we
only got through four, but worthit.
Reid (26:08):
Oh, God bless.
Let me tell you, and to anyoneelse watching, It is really my
pleasure to help peopleunderstand these complicated
and, lengthy verbal agreementsand these long written
agreements, distilling them intoplain language is really joyful
for me.
I grew up, I was working in ametal shop when I was a
teenager.
(26:28):
I thought I was going to be acarpenter when I was a young
adult.
So I'm going from thatbackground to the practice of
law has really left with me.
A deep appreciation for peoplewho don't do this every day for
people who really just wanted toexplain in plain English what
they're signing up for and whatthey're getting.
(26:48):
So I'm happy to help Jim.
I look forward to our nextmeeting.
Jim (26:52):
Absolutely.
Thank you.
Okay.
Cool.
And good morning to the Suncoasttoday.
I am.
It's my pleasure to have ReedMcCullough on.
He is the epitome of yourneighborhood lawyer.
He's been in the area for quitea while, been practicing law for
11 years, focused on realestate, and he makes the complex
palatable when we're talkinglaw, maybe palatable is the
(00:23):
right word, and brings a littlebit of passion to this passion.
So welcome, Reed.
Thanks for being here.
Reid (00:28):
Jim, thank you so much for having me.
I really appreciate getting thechance to share what I do and
what I've been working on latelywith you.
Jim (00:36):
Fantastic.
I know when we look at realestate law and real estate in
general, the experts can reallycontribute quite a bit because
most people will do two, three,four transactions in a lifetime
and you might do that in a week.
So there's a lot of insight thatcan be gained from.
Just what and what's going on.
So I've got a little bit of listof questions.
Hopefully we can walk throughsome of these and we can expand
(00:59):
on them and see what kind ofinsight can you bring to the
table on that to help theaverage person is going through
this transaction.
All right, first one, let's talkHOAs, homeowner associations.
Every HOA is a little different.
There's a lot in there, but whatshould buyers know about
purchasing a property within anHOA and how can they avoid
(01:19):
potential legal disputes withthe association?
Reid (01:23):
Absolutely.
When people are thinking aboutbuying, they're doing one of two
things.
They're applying to a homeownerassociation or a condo
association which share a lot ofthe same DNA.
But their authority is derivedfrom two different statutes.
Jim (01:37):
great editor,
Reid (01:39):
Fantastic.
If you're applying to homeownersassociations, what you should.
expect is a comprehensivefinancial disclosure.
many people are broadsided bythe depth to which the
associations want to ensure thatthey can collect money So often
you see bank statements, creditchecks, criminal background
(02:01):
checks and fees that must bepaid up front.
This is 1 of the biggest thingsI see people flood when they're
coming to the closing table isthat they've done all their due
diligence.
They got the property appraised.
The lender is happy.
But, they just never turned inthat 150 check to the condo
association or the homeownerassociation, and as a result,
(02:22):
the homeowner association hasn'tdone anything.
1 of the biggest things I wouldadmonish people is not just to
have your financial stuff readyfor the for the bank or for the
lenders to buy it.
But also to make sure that thecommunity knows who you are and
that they've got your check for100 or 150 bucks that they need
to do their research on to makesure you're not accredited.
Jim (02:43):
Okay, so that's something particularly your agent should
be making sure that you're awareof what's going on.
So what else in an HOA?
What kind of power do they haveand what kind of limit do they
have when you've moved in?
And hey, I want to paint myhouse purple.
Reid (02:58):
Ah, yes.
The rules and restrictions.
So part of every contract forsale in an HOA comes with
certain sellers disclosures,which include copies of the HOA
rules and regs.
Generally the managers of HOAs,even if you are an owner in the
community will answer somelimited questions for you.
(03:20):
So your plan is to.
Let's say you want to move inand build a shed or detached
garage they'll give you thebroad strokes as to what you can
and can't do within the rules,
Jim (03:31):
right?
Reid (03:32):
I would caution any prospective buyer that's looking
to make significant exteriormodifications that it is like
navigating the landmineminefield park, the Many
associations have architecturalreview committees, which are
like municipal government inmany respects, and that they
have promulgated rules that theywant the community to follow in
(03:55):
terms of how it looks and feel.
And they have plenary power tosay, no, it doesn't really fit
the spirit of the communitywhich sort of leads you down the
road of starting a purchase bysuing your HOA, which is not a
great place for anyone to be.
I generally discourage lawsuitsagainst associations in all but
(04:18):
the most extreme circumstances.
Jim (04:21):
You like that neighborhood for a certain reason or for a
certain aesthetic and they wantto maintain that same thing.
So it's good and bad, I guessthat it's going to prevent
people from changing it.
Reid (04:32):
There are some changes in recent years.
To allow for superseding rulesto override nature.
For instance, Governor DeSantislast year signed some
legislation that allowshomeowners to provide hurricane
protection.
For their houses.
And the HOA isn't really allowedto argue with you about, your
(04:54):
storm shutters or the style ofyour hurricane impact windows,
for instance so there has beensome retraction of power from
the HOAs in favor of the stateand in favor of the individual
homeowners, but by and large,fighting with an HOA is almost
always an uphill battle.
I generally stack up the costagainst, the cost of buying a
(05:18):
comparable property somewhereelse.
Jim (05:20):
And then to your point, you have certain rights.
You want to protect your housefrom damage.
That's great, but you can'tleave them up year round.
They're going to make sure thatwe have that aesthetic when
there's not something imminent.
Reid (05:33):
correct.
Jim (05:33):
Okay.
Let's slide over to disclosuresand misrepresentations.
How can buyers ensure they arefully formed about a property's
history before closing?
Reid (05:43):
Oh, that's a great question.
The, by and large, you what I,what that means is that unless
the unless the seller is alsothe builder.
There's and, there's beencontinuity of ownership.
So new construction, you've gota pretty comprehensive idea of
what's going on with theproperty, but after that 1st
(06:05):
owner, you're generally yougenerally have to take someone's
word for it.
If they accept the sellerdisclosures and you say, okay.
You checked not applicable or noknowledge to many things I've
seen most sellers disclosuresand I find that the best you can
do is your own research, Iwouldn't recommend anyone buy a
(06:26):
property without a, aninspection.
And even if you're buying cash,it's worth it.
Sometimes it's worth getting anappraisal too.
Especially if you're consideringlike a for sale buying owner
transaction where nobodyinvolved knows the nature of the
property or the nature of themarket conditions, it's worth,
(06:46):
obviously, first and foremost,it's worth having the advice of
a licensed realtor to guide yourvaluation and your estimates to
help you prepare that offer.
When you're considering thenature of the property you're
buying, the physicalcharacteristics, I generally
treat seller's disclosures asabout worth the paper they're
printed on.
(07:06):
In my personal purchases in thepast, I always do, to the nth
degree, my own inspections, myown walkthroughs.
Sometimes worth even taking acontractor to think about making
improvements to property, takinga contractor to those inspect
inspections to say, okay, Jimfrom ABC contracting companies
here, he's going to tell me whathe thinks, the interior
(07:27):
renovation is it's going to needto update this 1950s kitchen.
I always, when it comes toseller's disclosures and how to
really get a feel for theproperty you're buying.
The number one thing you can dois to hire your own racer.
Jim (07:41):
Okay.
So when you're looking at apurchase, that's going to be,
could be several hundredthousand to a million plus
spending a thousand dollars oninspection and appraisal is a
pretty smart investment goinginto it.
Third party that somebody that'snot invested.
They have no skin in the gamecan step back and go, here's
(08:01):
what I think it is objectively.
Reid (08:04):
When it comes down to the reports because there's so much
that's part of a property thatyou just won't see, you
Jim (08:11):
know,
Reid (08:11):
you think about latent water leak, for instance, you
might have water that'strickling down the interstices
of the walls.
And you wouldn't see that on theface.
It doesn't show on the paintuntil it really starts to rot
but Many inspectors haveinfrared cameras.
They would disclose they wouldshow you any moisture or water
leaks within the propertySimilarly, you know if you're
(08:34):
doing a deal and you don't knowwhat the value is You get an
appraisal that says it's youknow, this property should be
going for twenty or thirtythousand dollars less But not
only have you paid for, theappraiser's time, but you want
to save yourself a pile of moneyand giving yourself a strong
position to negotiate the
Jim (08:49):
Yep.
And I think having worked withsome inspectors before, they go
places that I wouldn't normallygo and they have the knowledge
that I wouldn't have,
Reid (08:56):
I don't have the physique for that anymore.
Jim (09:00):
So when looking at a seller, we talked about the
disclosure and how to take that.
But what are the legalconsequences for a seller who
fails to disclose materialdefects of a property?
Reid (09:13):
the downside can be dramatic.
So if you're selling a propertyand.
You know that back in 2005 whenall the hurricanes came through
town, that property flooded, andyou don't indicate that on your
seller's disclosures, then if abuyer subsequently experiences
problems with that, whether it'srot or subsequent flooding that
(09:37):
they could have known about.
It could have anticipated ifthey knew the property flooded
in the past.
Your damages don't just run tothe cost to make it right, but
you could be on the hook for.
A lot.
There's punitive damages arecapped at treble compensatory
damages.
So let's say it costs 50, 000 tofix a defect.
(09:59):
But, you knew about that and youfraudulently failed to disclose
it.
A court can find you liable for150, 000 punitives as well as
the cost of an attorney's fee.
Suddenly a fix that was 50, 000.
Palatable during the contractand negotiation phase
subsequently becomes like thecost of another house.
most homeowners are notinspectors.
(10:20):
Most homeowners are notcontractors.
And the burden to prove thatsomeone knew or should have
known about a defect andaffirmatively failed to disclose
it is a pretty high bar.
So when buyers come to me andsay, Hey, there's a plumbing
problem in my new house and, itwasn't disclosed to me by the
seller.
I said, okay.
(10:42):
And what do we do?
We have any evidence or do youthink you can find any evidence
that the seller knew about that?
without that collateralevidence, because you very
rarely get direct evidence offraud, nobody writes an email to
their banker saying, Oh, Ideceived these people because I
covered up the evidence withoutthat circumstantial evidence,
it's pretty obvious.
It's a pretty high bar is thethe bar is either, either
(11:07):
intentionally conceal the defector you you made representations
with, reckless disregard for thetruth and falsity of the
statement.
If you just, it's a very highbar to clear to get that fraud,
that specific intent necessaryto get those damages.
Oftentimes, simple negligencemight get you there, but I don't
(11:30):
whenever I'm talking about thecost of a lawsuit, that's got to
be a financial choice.
When i'm thinking about what itcosts to get relief from a court
i'm thinking about that comparedto the cost of fixing Because
there's no guarantee that theseller still has money after a
transaction is done
Jim (11:50):
So I think what i'm hearing is On major issues, flooding
came through like with HurricaneDebbie, and it wasn't disclosed.
That's something we should talkabout and possibly investigate
further.
Or, your home inspector mightfind that and that's something
you negotiate before you close.
Reid (12:05):
Absolutely.
Jim (12:07):
Right.
Reid (12:07):
So if it comes to it and you find out that.
Your roof was unpermitted.
The cost of a new roof is you'relooking at 20, 25, 000,
sometimes a lot more dependingon the size of your house.
That's worth asking for.
Hey, Mr.
Seller, when you have this roofdone, you didn't pull any
permits and it wasn't inspected.
So I need to throw a new one onthere in order to not get
(12:29):
violations.
that's the kind of thing I wouldpush for him.
I push might even push prettyhard for it.
When the rubber hits the road,whether or not you want to drop,
10 or 15, 000 to get the sellerin front of a judge, that's a
that's a financial decision,because at the end of the day, a
(12:49):
judgment in court is not moneyin your pocket.
It's just the right to collect.
So I always, one of the things,the expressions we have around
the offices.
It's better to have a good lifethan a good case.
Jim (13:03):
How should a property owner handle boundary disputes or
challenges within easements ontheir property?
Reid (13:07):
The answer is the worst lawyer answer in the world.
Depends on who is asking.
As far as a boundary disputewith Your neighbor.
it's the nexus of legal realityand real politics, because if
(13:27):
you sue your neighbor, you getto live next to the guy you sued
until one of you moves.
Which is not fun.
The answer I would have isdepends on the nature and
depends on who's asking.
If you're talking about let'ssay there was a seller has a
utility easement crossing themiddle of the property and it
completely derails yourconstruction plans.
(13:48):
Because, FPL wants the right tothrow power line across
Jim (13:51):
for free.
Reid (13:51):
That's a title claim, especially if it wasn't
disclosed in the corollarydocuments.
Title insurance claim is Myhouse, I have lost the value of
my purchase by X dollars becauseof this recorded easement.
I need to be compensated and theunderwriter looks at that and if
they can't terminate or relocatethe easement to make it better
(14:13):
for you, then they pay you thevalue of your claim, which is
the depreciation in value forwhat you expect to be purchased
and paid for and
Jim (14:20):
what
Reid (14:21):
The you would also, I would submit probably have a
Davis claim against the sellerbecause that, the defect in
title that was known to theseller, but unknown to you
becomes an issue.
And the seller is not aroundanymore.
So you're not pissing off theneighborhood.
If it came, if we're talkinginstead about the location of
offense, that's the much morecommon one.
(14:42):
My neighbor's got the ugly sideof the fence facing me and he
built it on my, over on myproperty.
That's a conversation I've hadwith a lot of people.
The first thing I would suggestis, all right get a survey and
make sure you're right.
Because sometimes that causesthose conversations to go away.
I never hear from him again.
And I was like I guess on hisside of the property, if it
(15:04):
turns out they're right, I thinkthe best thing to do is just
have everybody sit down for anice conversation.
I've entertained a couple ofthose in my office to say, hey,
it sounds like there's a fenceon your side of the yard.
Maybe drop something up andsays, okay, we acknowledge that.
This sense is on this property.
Nobody's, nobody's pursuingadverse possession or anything
(15:25):
like that.
Generally anxiety about adversepossession, just an escalation
of existing neighborhoodtensions.
Maybe there's something elsethat's in that.
Guys, I understand that you'relooking at 8 inches of boundary
line and, soil shifts over time.
Maybe this property was on yoursand there was a flood or
(15:47):
something.
I don't know.
or maybe the fencing guy is nota licensed surveyor.
He's certainly not.
Keep in the forest for thetrees, remembering that it's
better to have a neighborhoodwhere people like you than eight
inches of dirt on one side ofthe fence.
Jim (16:05):
Let's talk about that a little more and what that is and
how that impacts people.
Reid (16:09):
Yeah, absolutely.
It explains it's a shorthandfrom a Florida Supreme Court
case, where they ruled that theseller property who Conceals.
Knowledge of a latent defectfrom a buyer is liable for the
damages that result in, and Ibelieve including tentative
damages in the event, if you'reable to establish that intent,
(16:33):
The requirement of some,affirmative acts to conceal the
defects of knowledge orconstructive knowledge of the
Jim (16:41):
defense
Reid (16:42):
like new or should have known this was a problem that
you didn't say anything about itand a latent defect that isn't
immediately apparent.
The latency of a defect is.
Something that you can't seewhen you walk into a house and
you say, Oh, that stove is onits face, let's.
That is an obvious defect.
Jim (16:59):
house, but maybe access to the lake behind you ran through
the yard and nobody told you.
Reid (17:04):
That would be a defect that, if you thought you were
buying the clean title with noeasements whatsoever, and it
turns out, your neighbor has theright to to skinny dip in your
pool.
This is a little bit hyperbolic,but beach access is a real one
that comes up a lot and thatdoes and that does get litigated
and argued about.
There's been a couple of casescome through Sarasota just
(17:25):
recently, especially the, pardonme, related to the Longboat Key.
There's a couple of beachaccesses there that's owned by
Sonoma.
Latent defect that causes nodamage is not something you
would litigate.
Frankly, it's not something thatwould come to light in the first
place because it didn't causeany problems, but that's one of
the elements.
(17:46):
every lawyer loves tests.
The seller's knowledge thelatency of the defect the
causation of harm in the actualdamages.
that's the four steps torecovery.
And if you can't get all ofthose.
Then you don't get damages.
So it's important to think aboutall of them when you're trying
to decide whether or not to buyor sell it.
Alright, let's
Jim (18:05):
talk a little bit about maybe some real estate myths and
misconceptions.
Reid (18:10):
Oh God bless, Get it
Jim (18:12):
Yes.
Reid (18:12):
Get it in writing.
If you get anything out of thispresentation, verbal agreements
are worth the paper they'reprinted on.
Jim (18:19):
Yes.
Reid (18:19):
Harold, there's so this statute of fraud is is what
controls this in Florida.
This.
Section of clauses is a catchall term that covers a bunch of
different areas of law, whichsays that agreements aren't good
in the absence of a writteninstrument.
And the Florida statutes areexplicit about this, is that A
(18:41):
an agreement for for the saleand purchase of real property
must be in writing, signed bythe parties.
It doesn't need to be notarized,but it needs to be in writing.
It needs to be signed and itneeds to contain material terms
to a a contract that doesn'thave if I say to you, Jim, I am
willing to sell you my propertyon Arlington street for 1M.
(19:02):
And you say great and I text youjust confirming that I'll sell
Arlington for one milliondollars and you say Acknowledged
in receipt you can argue thatWe're inferring material terms,
inferring a reasonable timelineinferring a standard closing
costs and yeah but if you camedown to a lawsuit if you tried
(19:25):
to sue me and say hey Really?
He promised to sell theArlington for a million bucks I
say, yeah, when I'm done withthe place, 30 years from now, or
yeah, but you're going to coverthis, that, and the other, and 6
percent for my wheelchair,whatever.
the court would generally findthat there wasn't a meeting of
the minds.
that's what the FAR BARcontracts do.
The as is and the residentialcontracts for sale and purchase
(19:47):
of real estate.
FAR BAR contracts are soimportant because they are
facially neutral, because theycontain all of the necessary
ingredients, all the secretsauce you need to sell and
purchase a property, andeverybody knows them.
You can't be a realtor inFlorida if you don't know the
(20:07):
promulgated contract.
And as a result and they getrevised.
They get regularly revisited asnew stuff comes up.
Like you talked about the condoassessments in the wake of the
tragedy over at Surfside.
There's a whole bunch of newstuff in the condo disclosures
regarding milestone inspectionsand structural reports.
the biggest red flag I have forpurchasers and sellers of real
(20:27):
estate is trying to enforcestuff that never made it into
the contract and creepy customcontracts.
Jim (20:38):
and I think that's why when people look at a contract and
it's 21 pages and they're like,yeah, I read it, here you go,
that covers all those nuancesthat you just talked about, Hey,
when is this going to happen?
Where is it going to happen?
What are the terms of thecontract, what are the
contingencies or what are theouts for anybody who wants them
or what are the specific terms?
Utilizing something like that'sbeen formalized and structured
(20:58):
really protects everybody that'susing it because everybody knows
what's supposed to go on.
Reid (21:03):
Yeah.
And on
Jim (21:06):
a custom contract, you're like you didn't mention this or
what's the fallback on this?
Reid (21:11):
If a lot of like wholesale investors and.
These, flippers as they'recalled they love to have these
two page contracts and they'relike, look, it's real simple.
It's money for property, everysingle one of those is a get out
of jail free card for thewholesalers whenever they want
(21:33):
on the contract and they get alltheir money back and you get
nothing.
And there's a complete absenceof really important material
terms like, Hey, if this buyerdefaults on the contract, what's
my recourse?
What can I do?
If the escrow agent discovers atitle defect, what happens then?
And yeah, the FAR BAR contractseems daunting to the layperson.
(21:57):
This 15 page contract, because,I'm worried it's, it's going to
lock me into something I don'twant.
The thing is, contracts, the asis bar in particular, is is
broadly buyer friendly.
And it's it allows the sellerto, to have certainty that, all
right, after the inspectionperiod, and after the
(22:17):
contingency has expired, I knowI'm getting a sale out of this.
And the contingency periods arelisted right there page page
two.
Yeah,
Jim (22:26):
gives a little surety to either side, you can go in
going, Hey, sign the contract,but I get to check everything.
And once you've checkedeverything, the seller says,
we're going forward.
Reid (22:35):
Happy days.
Yeah.
And verbal agreements.
God bless, if somebody makes youa verbal agreement then I would
go about your day until you seesomething in writing backing it
up.
And if what in writing is, doesnot say FARBAR on it, I would
run down the street to yourfavorite local lawyer and say,
this guy gave me an offer, butit's on a weirdo custom
(22:57):
contract.
If your lawyer's worth is saltor her salt what you, what they
should do is call up and say,Hey, dear creepy investor, we'll
be happy to help you with thiscontract on a Florida to Far Bar
form.
Jim (23:10):
I think the other area that this comes in, and I had this
discussion with somebodyearlier.
Which is interesting is whenyou're in the middle of
negotiation, counter offers averbal counter offer or an email
really isn't going to cut ituntil you see the contract.
So you may think you've gotsomething coming in, but until
that contract comes back,everybody signed, there's
(23:30):
nothing.
Reid (23:33):
Unsigned contract is no good.
There's an active conversationabout missing initials and I
take the middle of the roadapproach to that.
If you change a material termthat is a counteroffer that
negates the initial documentuntil that portion is signed.
However, if I get a contractthat has, no changes to the
(23:57):
material terms is signed by bothbuyers and sellers, but say the
buyer does an initial page 8 forwhatever reason.
It just wasn't populated on thedocument.
I've had a lot of questions fromrealtors as to whether or not
that changes the effective dateor whether or not that's a fully
executed contract.
The contract signed at the endby the parties intending to be
(24:18):
found constitutes an effectivecontract, but you should still
chase down that initial just sothere's no argument or
disagreement regarding thepages, the language on that.
Jim (24:32):
What do you think in your experience as a lawyer dealing
with the legal aspect of this isthe biggest misconception people
have about real estate law?
Reid (24:42):
Oh let's see, it's it probably shares a lot of the
same DNA as the as the verbalcontracts.
I would say the biggestmisconception people have
brought my office is is whenthey're going through the
contract process.
And they bring that somethingextra to the closing table, I'll
sit down, I've got the wholecontract, all the agenda, I
(25:05):
built closing documents for themto review, email that to them, a
coin toss, whether or not theylook at it or not.
They sit down and they saywhere's my extra five thousand
dollars for the furniture andi'd say What they were walking
through the property and theytold me I was getting an extra
5k Great, Okay, cool.
Did they write that downanywhere?
Jim (25:25):
Yeah, so
Reid (25:26):
oftentimes a lot of what my job is reconciling the
expectations of the party whowent through this whole contract
process and then all theseconversations with realtors,
lenders, sellers,representatives, whatever and
distilling that into the legaldocuments that say how much
you're paying and what you'regetting.
(25:46):
And that's where, I rested thefulcrum of that transaction,
trying to balance thosecompeting interests.
Jim (25:54):
Fantastic.
Reid, thank you so much forcoming on here today.
30 minutes goes by quick withoutrealizing it.
There's so much to dig into.
We'll go into my next set ofquestions because I think we
only got through four, but worthit.
Reid (26:08):
Oh, God bless.
Let me tell you, and to anyoneelse watching, It is really my
pleasure to help peopleunderstand these complicated
and, lengthy verbal agreementsand these long written
agreements, distilling them intoplain language is really joyful
for me.
I grew up, I was working in ametal shop when I was a
teenager.
(26:28):
I thought I was going to be acarpenter when I was a young
adult.
So I'm going from thatbackground to the practice of
law has really left with me.
A deep appreciation for peoplewho don't do this every day for
people who really just wanted toexplain in plain English what
they're signing up for and whatthey're getting.
(26:48):
So I'm happy to help Jim.
I look forward to our nextmeeting.
Jim (26:52):
Absolutely.
Thank you.
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