Monday, September 30, 2013

Exculpatory clauses in purchase and sale agreements.

The purchase of residential real estate may be the largest purchase a person makes in their life. The magnitude of this purchase and the potential for financial loss should cause a purchaser to proceed with caution. A recent case that discusses exculpatory clauses in purchase and sale agreements reinforces the need to get expert help from an attorney when purchasing real estate.

In Massachusetts, there are a number of standard form purchase and sale agreements. The most widely used form is the Greater Boston Real Estate Board form. This form has a clause that reads as follows:
"The BUYER acknowledges that the BUYER has not been influenced to enter into this transaction nor has he relied upon any warranties or representations not set forth or incorporated in this agreement or previously made in writing, except for the following additional warranties and representations, if any, made by either the SELLER or the Broker(s): NONE
This clause is called an exculpatory clause because it excuses the Broker from liability. Many Buyers think the Broker is working to protect the Buyer when in reality, the Broker is working to protect themselves.

In the recent case of DeWolfe, v. Hingham Centre, LTD, 464 Mass. 795 (2013), the Court addressed a case involving interpretation of this clause. In the DeWolfe case, the Broker had made a written representation concerning the zoning of the property in question. This representation turned out to be incorrect. The purchase and sale agreement had the exculpatory clause with the word “none” inserted. The Broker claimed that as a result of this clause, the Broker had no liability for the negligent misrepresentation. The Court ruled that because the representation was in writing, the exculpatory clause did not protect the Broker. As a result, the Buyer was able to successfully sue the Broker for damages as a result of the Broker's mistake.

The clear message from this case is that the exculpatory clause is valid and will protect the Broker from a lawsuit from the Buyer for oral or verbal misrepresentations. When signing a purchase and sale agreement, it is important that the Buyer insert any and all representations or statements made by the Broker if the content of the statement is important to the Buyer. I ask every Buyer if the Broker made any statements that if they turn out to be false will cause the Buyer to not purchase the property. The best practice is that any oral or written statements that are important to the Buyer should be inserted into the purchase and sale agreement.

Another lesson from this case is that Brokers can change the language of the exculpatory clause to exclude liability for written statements or representations by the Broker. Buyers should be vigilant to protect against the Broker eliminating liability for representations.

An experienced real estate attorney should modify this clause to continue liability if the Broker makes a misstatement about an important fact.

Monday, September 23, 2013

Parent coordinators help parents avoid court.

When parents separate or get divorced, they frequently have difficulty cooperating with the other parent. The hostility between the parents can make every decision concerning children a battle. Frequently, this inability to cooperate results in litigation as the only resolution is a decision by a judge. A low cost and quicker alternative to litigation is a parent coordinator.

A parent coordinator is a third party who makes decisions concerning children when the parents can't agree. It is a form of alternative dispute resolution but it is not created by state law. In Massachusetts, it is created by an agreement of the parties. In a written agreement, typically a divorce separation agreement, the parties spell out the powers of the PC and the rules by which the PC will function. The agreement is approved by a Judge and becomes an order of the Court. The agreement allows for either party to appeal a decision from the PC to a Judge. Usually, the PC has an initial interview with the parents and then resolves issues utilizing telephone calls and emails. While the PC charges by the hour, they usually charge less than an hour for most decisions.

Parent coordinators can help the parents make better decisions, save money, and eliminate stress. Consult an experienced family law attorney to incorporate PC provisions in your parenting agreement.

Tuesday, September 17, 2013

Divorce can be better if you don't do-it-yourself (DIY).

I previously wrote about the dangers of do-it-yourself divorce. This article is a little different in which I am writing about why people getting divorced should consider alternatives to DIY and the advantages to the alternatives.

Certainly there are some people that do very well with do-it-yourself divorce. In particular, people with short term marriages, no assets, no debts, and no children can manage a divorce themselves. In this situation, if both parties agree that they should get divorced, pay nothing to each other, that all property and debts have been divided and they never want to have anything to do with each other, they they should be able to do the divorce paperwork themselves. Also, people who can't afford attorneys may have no choice about the matter. They may not qualify for legal services representation and may be forced to figure out how to get divorced without lawyers. However, even people who ultimately do their divorces themselves have options and should take advantage of services that lawyers offer.

Many family law attorneys offer free initial consultations. In these consultations, lawyers may discuss pitfalls in proceeding without a lawyer and may also give guidance.

Massachusetts, and other states, now allow attorneys to provide limited representation. This means that people getting divorced can pay a lawyer to do a limited task. Just paying a lawyer to review an agreement may save a party years of overpayments or underpayments. This is a compromise between paying a lawyer to handle everything and not consulting a lawyer at all.

The more contentious the divorce, the greater the need for hiring a lawyer. Abraham Lincoln was correct when he uttered his famous quote. People negotiate differently when a third party does the negotiation. A lawyer should negotiate out of logic and not out of emotion. All too frequently, people who handle their own negotiations focus primarily or even exclusively on the emotions. It is not unusual for people to try to negotiate to get revenge on their spouse. Lawyers should avoid seeking revenge. Instead, lawyers should focus on the rights and obligations as established by the law. Merely having a third party negotiate can simplify and shorten the negotiations. Some people abandon their emotional need for revenge when they are not negotiating directly with their spouse. 

Lawyers guide clients through the family court system. Many people waste time and resources because they don't understand the proper procedures and concepts. It is not unusual for Judges to continue court hearings because do-it-yourself litigants are not prepared for the hearings. I have had many cases in which I have explained to opposing pro-se litigants the procedure or law and the case settled immediately.

Family lawyers can refer people to other professionals who can assist in the divorce process. Appraisers, therapists, mediators, insurance agents, financial advisors, accountants may all be necessary to move the parties through the divorce process. Additional documents may be needed as part of the divorce process. Documents such as wills, powers of attorney, deeds, documents to transfer assets may all be needed. It is not enough to require insurance coverage. The parties need to talk to an insurance agent to implement the requirements.

Do-it-yourself divorce may appear to be a good choice for many people.  However, before they finalize a divorce, they should consult a family law attorney.

Sunday, September 8, 2013

Alimony and Bankruptcy

Collecting alimony and child support in some cases is very difficult. So what is a person to do when the payor of alimony files bankruptcy? How do you collect the money? A recent case explains what can be done outside of bankruptcy court.

Alimony and child support are called “domestic support obligations” under bankruptcy law. These are treated as a protected category of debt under the bankruptcy code. The person filing bankruptcy must disclose the existence and status of domestic support obligations when filing bankruptcy. Failure to accurately provide this information may result in a dismissal of the bankruptcy.  Bankruptcy court must address any arrears for any domestic support obligations as part of the bankruptcy process. However, the recipient of alimony is not limited to trusting the filing by the debtor. They can take some actions. The ability to take actions is limited with severe sanctions for taking an improper action. Bankruptcy sanctions are aimed at the person who brought an action in state court and who asked the family court judge to take an action against the debtor.

In the recent case of In re Claudinei Desouza, Bankruptcy Case No. 11-40315-MSH (BAP 1st Circuit 2013) the recipient of alimony payments filed a contempt in family court. The contempt resulted in a finding that the debtor had failed to pay alimony and he was arrested and held in jail until he paid money as ordered by the state court. The Bankruptcy Appeals Court held that the spouse who filed the contempt violated bankruptcy law and was subject to sanctions for her actions. Specifically, the Court found that the spouse could not file a contempt and could not have the debtor arrested.

When a person files bankruptcy and owes alimony there are five things that can be done by the spouse or ex-spouse relating to alimony. Three of these are in state court and two are in bankruptcy court.

According to the Desouza decision, the following are three actions that a person can take in state court regarding alimony after the other spouse has filed bankruptcy: First, the person can ask state court to establish or modify of an order for alimony. Second the person can ask state court to collect alimony from property that is not property of the bankruptcy estate. Finally the person can ask the state court to withhold income that is property of the bankruptcy estate or other property of the debtor for payment of alimony.

In addition to the three actions that can be taken in state court, there are two actions that can be taken in bankruptcy court: An appearance can be filed listing the money owed for alimony and an adversary proceeding can be filed seeking the right to take other actions in state court such as filing a contempt.

Establishing an order for alimony can occur in a divorce proceeding or a modification of divorce action. Filing either of these actions or prosecuting them does not violate the automatic stay of bankruptcy court.

Collecting alimony from property that is not the property of the bankruptcy estate can be risky. The problem is to determine what property is not part of the bankruptcy estate. Any mistake can have serious consequences for the recipient of alimony. It is best to have the advice of a bankruptcy attorney before trying to determine what is included in the bankruptcy estate.

In Massachusetts, requesting Family Court to issue an order to withhold income for the purpose of paying alimony is not a simple matter if you can't file a contempt. Unlike child support, the Department of Revenue won't collect alimony and won't use their administrative powers to withhold income. The normal procedure in which to ask the court to order the collection of alimony is a contempt action. However, a contempt can't be filed without permission of bankruptcy court. An attempt to withhold income can be made in a divorce or modification action. Based on my experience in Massachusetts Courts, the court is unlikely to order such relief without a contempt action.

In most instances, it is best to seek remedies in both state court and bankruptcy court. Bankruptcy court requires that a person who files bankruptcy to file an affidavit that sets forth an obligation to pay alimony and to certify if the payments are current. The recipient of alimony has the right to file an appearance in bankruptcy court that details the same information. The proper form to use is B 281. If there is a difference between the filing by the debtor and the recipient of alimony, then the Trustee in Bankruptcy should take steps to determine the correct amounts. If the bankruptcy estate has assets, then the Trustee should take additional actions to pay the alimony. Form B 281 can be filed by a person or their attorney. Once filed, it gives the person the ability to participate in the bankruptcy proceeding.

The other action that can be taken is to file an adversary proceeding in bankruptcy court and ask the court for permission to take additional actions in state court. The bankruptcy code spells out when it is appropriate to file such an action. A bankruptcy attorney should be hired before starting an adversary proceeding.

When it comes to bankruptcy matters, state court won't provide bankruptcy advice and may take actions that are prohibited by bankruptcy law. This is a complicated area of law. I recommend that if the payor of alimony files bankruptcy that the recipient should consult an experienced divorce lawyer and perhaps also consult with a bankruptcy attorney.