Attorney panel warns commercial realtors the devil is in the details

prev
next

 Eric Starck of Miller Johnson (second from right) amuses the panel moderator Lawrence Duthler of Sun Title Agency (far left), and fellow panel members, left to right, Tom Cronkright, also of Sun Title; Ryan McNally, Kreis Enderle; and Steve Stawski of Stawski Law, PLC, at the October Commercial Alliance of Realtors Summit.

LEGAL NEWS PHOTO BY CYNTHIA PRICE

By Cynthia Price
Legal News

A panel of well-versed real estate lawyers sounded the warning to a room full of commercial realtors in early October that if the realtors and their clients want to prevail in a court dispute, they have to  pay attention to the details.

The panel took place as part of a day-long Commercial Summit held by the Commercial Alliance of Realtors  (CAR) of West Michigan in conjunction with the Michigan Realtors conference. The well-attended Oct. 2 “Commercial Summit,” held at McKay Towers, kicked off with the legal issues panel.

During the first phase of the panel’s presentation, an update about recent court decisions, Eric Starck of Miller Johnson said, “If it’s important to you or might become important — even if, for example, it says a document has to be delivered by certified mail, or if it says hand deliver — make sure you don’t do anything that would make the other party think that you’re OK with them having done it in a different way.”

Starck was discussing a recent Supreme Court decision in the case Majestic Golf v Lake Walden Country Club, which involved considerations of a merger between Lake Walden, a tenant, and landlord Waldenwoods Properties LLC.

The original lease contract said that Lake Walden Country Club “shall permit” easements through their leased part of the property, as well as an option to purchase. It further said that failure to comply with any part of the agreement, with 30 days’ notice, would result in termination of the lease. During the merger discussions, Waldenwoods included in a letter an official request for such an easement consent, stating that it was needed to get the township to agree to the overall merger plan.

Waldenwoods sold out to Majestic Golf, and Majestic Golf sent additional requests for consent to the easement. When Lake Walden failed to comply, Majestic Golf terminated the lease — all the while continuing negotiations with Lake Walden to buy the property.

Both parties sued. The trial court in Livingston County said that the failure to consent did not constitute a “material breach,” and the termination was not valid. The Michigan Court of Appeals?(COA) ruled this amounted to the trial court “rewriting” the contract, but when the Michigan Supreme Court made its decision, it revolved around one detail: whether the letter Majestic Golf had sent constituted valid notice of termination.

The justices said that it did not, and further that “there are genuine issues of material fact regarding whether Majestic Golf’s subsequent conduct constituted a waiver of its claim of default based thereon.”

Starck concluded his update by saying, “The only takeaway from this case is that if something’s in that contract and you want to enforce it, you need to follow the terms of the contract to a T.”

Steve Stawski of Stawski Law Office reviewed what he called “The Three Ps,” aspects of a real estate contract most courts would regard as “material:” the information the agreement contains regarding the Parties, the Property, and the Price.

Stawski took his Three Ps from a quote in the 1999 case Zurcher v. Herveat, in which courts consider just that: What is to be considered material in a purchase agreement? Do changes handwritten on an offer acceptance invalidate it if they do not concern material provisions? Do such handwritten changes constitute a counter-offer?

A jury at the trial court level found that there had been no valid contract, but the COA, stating, “For a response to an offer to be deemed an acceptance as opposed to a counteroffer, the material terms of the agreement cannot be altered,” sent it back to the trial court for their determination about whether the changes did  affect a material term (in this case, the price). 

All of the attorneys on the panel, which also included Tom Cronkright of Sun Title and Ryan McNally of Kreis Enderle, agreed that there were two lessons from court decisions: first, be very careful about the details of both contracts and behavior around contracts; and second, be as clear and explicit as possible when writing addenda to the standard purchase agreement form or when responding.

McNally advised, “If you have an objection make it as soon as you can, and make it as clear as you can.”

Starck, who is on the CAR West Michigan Forms Committee, which determines what will be in the standard forms, made the point that that committee reviews boilerplate language at least annually, but agreed that if exceptions need to be made, they should be explained in a straightforward manner. “It may come down to a box of 12 people who need to understand what you’ve said, so you just want to explain it in really clear terms.”

McNally also covered a case where marketing materials for a property indicated that it was super-clean environmentally, but it turned out that the sellers knew it was contaminated. The buyer said he had asked the seller’s agent outright if there were environmental problems, and the agent said no, but the seller disputed that. Ultimately, the court sided with the buyer, awarding damages, but the importance of the case to the audience was that the broker himself was sued (and lost).

The attorneys also discussed electronic communications, again advising the realtors to be really explicit about agreement between buyer and seller on what is acceptable to communicate in an electronic way. “Unfortunately I will

tell you that Michigan law is completely unsettled in this area,” Cronkright commented. 

The panel formed a coherent team, each attorney contributing from his own area of expertise, and covered an astonishing number of topics. Moderator Lawrence Duthler, also of Sun Title Agency — which sponsored the panel — provided cogent comments and additional pertinent information.