Real Estate Litigation Explained: Top 5 Disputes and How to Avoid Them

The five most common real estate disputes are breach of contract claims, landlord-tenant conflicts, zoning and land use disagreements, construction claims, and boundary disputes. Understanding why each arises, and taking preventive steps early, can help property owners, tenants, developers, and investors avoid costly litigation.

Key Takeaways:

• Breach of contract is the most frequent subject of real estate lawsuits, and clearly drafted, legally enforceable agreements are the best defense.
• Documenting everything in writing and negotiating in good faith reduces the risk of landlord-tenant litigation.
• Zoning due diligence before acquiring or redeveloping property helps prevent compliance disputes.
• Arbitration clauses can resolve construction disputes faster and more cost-effectively than litigation.
• A licensed survey and a title search during due diligence help avoid boundary disputes.

Real estate transactions are complex endeavors involving numerous parties who often have very different interests. With so many moving parts, real estate disputes are common and can take a variety of forms. Common examples include breaches of contract, boundary disputes, and landlord/tenant issues. While many conflicts can be resolved through negotiation, lawsuits are sometimes unavoidable.

Real estate litigation can be complex, time consuming, and costly. Understanding how to navigate its challenges is essential for property owners, tenants, developers, contractors, investors, municipalities, and lenders.

Breach of Contract Disputes

Disputes involving real estate contracts are the most frequent subject of real estate lawsuits, which is not surprising given that most real estate deals involve several contracts and multiple interested parties. Additionally, the stakes are often high, with both time and money on the line.

In many cases, the contract itself will outline what happens in the event of an alleged breach. Issues that the agreement may address include what constitutes a breach, steps the parties must take to recoup their losses, what remedies are available, and whether the parties must first seek to resolve their dispute via mediation or arbitration.

Given that breach of contract disputes can quickly derail a deal, you should always work with experienced counsel to ensure that your real estate contracts are clearly drafted and legally enforceable. A well-drafted real estate agreement will clearly establish each party’s rights and responsibilities, which reduces the risk of disputes. A comprehensive contract will also address what happens when one party breaches the agreement, which can help avoid protracted litigation.

Landlord-Tenant Disputes

Landlord-tenant disputes are another common source of real estate litigation. Landlord-tenant law is a complex area of law that deals with the rights and duties of landlords and tenants. While the legal obligations of each party are generally set forth in the lease agreement, federal, state, and local laws can also impact landlord/tenant matters, particularly those involving residential leases. For example, New York and New Jersey both have state laws governing tenant rights, and many cities and counties have rent control regulations. On the federal level, the Fair Housing Act (FHA) prohibits housing discrimination based on race, religion, national origin, gender, family status, or disability.

There are steps that both landlords and tenants can take to decrease the risk of litigation. Many legal disputes can be traced back to a miscommunication. That’s why it is imperative to document everything in writing, including lease violations, amendments, extensions, and other key changes. Maintaining open lines of communication and participating in good-faith negotiation can also help avoid costly litigation.

Zoning and Land Use Disputes

Zoning regulations govern how land can be developed and what purposes the zoned land can serve. Zoning laws can also establish requirements for improving property, such as how tall a building can be, how far away it must be set back from property lines, and how much of the property it may occupy. Real estate disputes can arise when property owners seek to deviate from zoning requirements, local government denies a proposed land use, or parties disagree on the proper interpretation of a zoning regulation.

Because non-compliance with zoning regulations and other land use laws can lead to protracted litigation, it is imperative to understand and comply with all zoning laws and land use regulations applicable to your property. It is also important to do your homework. If you plan to redevelop a property, you should verify that local zoning regulations allow the property to be developed as intended. If acquiring property that is already developed, you should make sure that the use is permitted in the underlying zoning district, and all existing structures and improvements comply with existing zoning rules.

Construction Disputes

Construction disputes can occur at any phase of a construction project, from initial site preparation to construction completion. Breach of contract claims, such as failing to make a timely payment, failing to deliver agreed upon services, or failing to complete a project on time, are a frequent source of litigation. Construction claims are also frequently asserted for negligence, construction defects, and breach of warranty.

In many construction disputes, plaintiffs pursue financial compensation for their losses. In addition to monetary damages, they may also seek specific performance of what was agreed upon, such as the completion of a construction project. In cases involving unpaid labor and materials, plaintiffs may also seek additional remedies, such as liens and foreclosure.

Because construction litigation can be costly and time-consuming for everyone involved, parties should consider including clauses calling for disputes to be resolved through arbitration rather than litigation. In arbitration, the parties agree to resolve their disputes before a neutral arbitrator or panel of arbitrators. As compared to litigation, arbitration is often faster and more cost-effective. The parties can also select arbitrators who are professionally trained to hear construction-related disputes.

Boundary Disputes

A boundary dispute is a disagreement about the exact location of a property’s border, which can lead to further conflicts over land ownership, usage, or possession. Boundary disputes can result from inaccurate land surveys, confusing boundary descriptions in a deed, the lack of marked boundary lines, or an unknown arrangement between previous property owners.

Doing your research before completing a commercial real estate transaction can help avoid boundary disputes. The due diligence process should include retaining a licensed surveyor to physically locate the boundary of your property based on the legal description contained in your deed. A title search is also advisable as it will identify all recorded documents in the chain of title of your property, including any easements or deeds that could affect your ownership interest in the property.

If you and a neighboring property owner disagree over the location of property boundary lines, the location of an improvement, or the use of an easement, it is often possible to negotiate a resolution. If the dispute can’t be settled, a lawsuit may be required. In most cases, a quiet title action may be filed to resolve title issues, boundary disputes, and claims of adverse possession.

Resolving Real Estate Disputes: How Our Attorneys Can Help

Scarinci Hollenbeck’s commercial real estate attorneys handle both residential and commercial real estate matters across the New Jersey and metropolitan New York region. Our team takes a proactive approach to resolving real estate disputes, leveraging our legal knowledge, industry experience, and advocacy skills to achieve successful outcomes for our clients. For guidance on avoiding or resolving real estate disputes, contact Paul S. Grossman or another member of the firm’s Litigation Group.