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.

My neighbor has a vegetable garden on my land. How do I stop adverse possession without upsetting my neighbor?

Adverse possession is a way to establish title to real estate even though there is no deed to the property. A simple explanation is that the person has owned the property but can't locate the proper documents to establish title. So it does not allow the stealing of property as adverse possession requires some claim of title or right of ownership. Typically, the next door neighbor claims the property as annexed to their own. The use by the neighbor could be as simple as growing vegetables every year.

The elements of Adverse possession in Massachusetts are: Possession which is open and notorious, adverse to the interest of other owners, continuous for a period of 20 years or more and hostile to the interest of other owners. Possession means that the person claiming ownership entered and possessed the property. Adverse means that the possession was without the owners consent. Open means that the possession must be done in such a way that the owner should be aware and exclusive. In other words, not in secret and not used by the real owner. Mowing the lawn is generally not done in a way that excludes the owner from using the property. A vegetable garden can be exclusive. The use must also be hostile which means without the permission of the owner.

If there is a possibility of a claim of adverse possession, then it is a good idea to take steps to prevent the claim. However, you don't want to alienate the neighbor because then you won't get the free vegetables. There are several things you can do if a neighbor is using your land. The choices depend on your current relationship with the neighbor and the future relationship. You can hire a surveyor to place markers to define the boundary. You can post no trespassing signs on the property and send a letter to the neighbor. If the neighbor continues to use the property, you may have to sue him for trespass.

Since one of the elements of adverse possession is that the possession is hostile, then adverse possession can be stopped by giving permission before 20 years of usage has occurred. Permission may be verbal or a note delivered to the neighbor. However both of these can be issues at a trial if the neighbor forgets about the permission or lies. A better choice is to grant permission in a way that it can't be disputed at trial.

My preference is to record a license at the Registry of Deeds. Once a document is recorded at the Registry it is considered notice to the world and can't be disputed. If the permission is in a document recorded at the Registry then there won't be any factual contest at trial. There will be no dispute about what was said. A license is permission to use the property and is revocable at will.

If your neighbor is using a portion of your property you should consult a real estate attorney about granting a license and protecting against a claim of adverse possession in the future.