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Written by Dallin Wall
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I’m on the board of our investor’s association in Salt Lake City which means being involved in the selection of speakers for our upcoming meetings. This month we scheduled Richard who is an attorney who works with an investment and property management group.
I really liked Richard’s attitude. He classifies himself as an adventurer and to illustrate told the story of his first horseback ride when he nearly had his head torn off and managed to survive the experience with only a few bruises and the wind knocked out of him. Rather than walking away in fear, he indicated that he started referring to himself as a horseback rider. I like that spirit of adventure and find that many entrepreneurs share that same spirit.
That is not, however, how Richard conducts his law practice or advises his clients. In this regard, he advises conservatively, educates people to responsibilities and potential liabilities and carefully interprets legal and contractual obligations. Included in his presentation was an explanation of a contract that gave me a new interpretation and a reason to provide additional cautions to you in all of your contractual dealings.
For most people, the interpretation of a contract is an agreement between two parties. For example, a real estate purchase contract is signed by a seller and a buyer and is a contract between these two parties. As long as this contract does not violate any laws, then there should be no interest from outside parties in regard to the contract.
Well, that isn’t the way it works. Any potential injury of rights created by the contract for any person or organization or stemming from the implementation of the contract is subject to either lawsuit or legal action. This can include existing recorded or unrecorded ownership interests in the property, those with usage agreements or other rights involving the property, lien holders and mortgage or trust deed holders, county, city or other governmental organizations and departments, and numerous private individuals, and law enforcement.
I was surprised by a couple of points that Richard made. Many investors utilize stated income asset agreements in the purchase of investment properties. It is often necessary when one is self-employed. The common understanding is that you can state what you wish that will entitle you to the loan and the lender realizes this and so do you. That is an incorrect interpretation. Virtually all stated income and stated asset loan agreements include a clause that indicates that the information provided is factual. When you sign those papers you are in effect taking an oath that the information you have provided is factual.
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