Real Cases in Real Estate By Andrea Lee Negroni, Esq. – May 29th, 2012 Update

Real Cases in Real Estate By Andrea Lee Negroni, Esq. – May 29th, 2012 Update

Real Cases in Real Estate is a weekly update on real estate law, with legal principles illustrated and explained by lawsuits from around the country. The topics are wide-ranging for appeal to a broad spectrum of readers including lawyers, homeowners, investors and the general public. Andrea Lee Negroni, a Washington DC attorney and legal writer with 25 years of experience in financial services and mortgage law, contributes the case summaries.

Followers of Real Cases in Real Estate will learn and be entertained by lawsuits involving nuisance, trespass, zoning violations, deed restrictions, title insurance, public utilities, mechanics liens, construction defects, adverse possession, foreclosure and eviction, divorce and marital property rights, tenants' rights, and more. Real Cases in Real Estate uncovers the unpredictable, amusing, and sometimes outrageous disputes between next-door neighbors, contractors and homeowners, condo boards and residents, real estate brokers and homebuyers, and zoning administrators and developers.

Each fully cited case summary highlights the essential law of the case and explains the principal legal theories and concepts relevant to the outcome. Plain language treatment makes Real Cases in Real Estate accessible to lawyers and laymen alike.

Whether you follow real estate law professionally or as a hobby, you'll find something new and useful every week in Real Cases in Real Estate.

Updates for the Week of May 29th, 2012

When an arbitration agreement in a refinancing transaction requires the signatures of both parties, the lender cannot force the borrower to arbitrate disputes if the lender doesn't sign the arbitration agreement

All State Home Mortgage offered to refinance the Maryland home loan of Francis and Eulene Daniel. In connection with the financing transaction, All State required the Daniels to sign an arbitration agreement. The arbitration provision stated that it became enforceable when signed by both parties.

The Daniels signed the closing documents, expecting their loan proceeds to be disbursed within three days (presumably, the three-day delay was due to the Truth in Lending right of recision for refinance loans). However, the lender never disbursed the loan funds. Instead, it reported a problem with the appraisal and attempted to change the terms of the loan to lower the principal amount, after the Daniels had signed the loan documents. The lender claimed the closing was a "courtesy closing" meaning that the loan was closed with a stipulation. The Daniels disputed this, and sued the lender for unfair practices and breach of its obligation to fund their loan. In response to their suit, the lender attempted to force the Daniels to arbitrate.

The language of the arbitration provision was fatal to the lender's cause. The lender argued that the requirement for the signatures of both parties was merely boilerplate language, or alternatively, that use of the term "both parties" meant that both borrowers, husband and wife, had to sign the arbitration provision. The Maryland Court of Special Appeals found these arguments unpersuasive. First, where the language called for the signatures of both parties, the contract was unambiguous, as there are two parties to a loan, the borrower and the lender. Second, to interpret the term "both parties" as meaning multiple borrowers, rather than lender and borrower, was illogical, because there could be a single borrower, or more than two borrowers in a single transaction.

The Daniels could not be required to arbitrate their claims against the lender because the lender failed to sign the arbitration agreement that it itself drafted so to require both parties' signatures.

Allstate Home Mortgage, Inc. v. Francis A. Daniel et al., 187 Md. App. 166, 2009 Md. App. LEXIS 73 (June 9, 2009) [enhanced version available to subscribers].

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