Typical 1031 Exchange Provider terms, Or not?

[Marcus Welson]

Hello everyone.

Newbie investor getting ready to sell first property. It appears I'll need a 1031 exchange to offset substantial capital gains. 

The Qualified Intermediaries I am vetting have provided their exchange agreements. I see a few red flags and just want to know if these are typical provisions and I'll be facing a "take it or leave it" scenario with ny intermediary I hire.

Please give me your thoughts, my gut says the QI wants overly broad protection from everything and that shouldn't include things like not verifying instructions are from me or for negligence or misconduct.

Sample Terms

1. Interpleader term that requires the QI to deposit funds with the court in case of disputes or 3rd party claims. I get this but the provision also requires the LLC that holds the property to submit to the local jurisdiction wherever the Qi files. LLC is a WY corp, so this would require waiving WY protections.

2. Exculpation/Limitation on Damages Clause. Again, this would be reasonable if limited to damages by third party, etc. However, it reads as a broad release, even for misconduct or negligence, especially if they were to make a mistake on a wire. "In no event shall Qualified Intermediary be liable or responsible to any person or entity with respect to any action taken or omitted to be taken by it under this Agreement or at the direction of Exchanger. Exchanger and not Qualified Intermediary shall bear any risk of loss while funds are being wired or transmitted to or from the Exchange Account. In any event, Qualified Intermediary's total liability to Exchanger shall be limited to proven direct damages in an amount not greater than the fee payable by Exchanger to Qualified Intermediary."

3. Indemnification clause indemnifies for everything except "material breach of this Agreement or its willful misconduct." This seems overtly narrow. What about sending a wire to the wrong place. Getting hacked and so on. 

4. "Right to Rely on Instructions; Exceptions.
Qualified Intermediary may act in reliance upon any instruction, instrument or signature it reasonably believes to be genuine from Exchanger, its officers, attorneys and other representatives, and Qualified Intermediary may assume that the person giving the instruction, instrument or signature is authorized to do so. To facilitate the flow of information, Qualified Intermediary may also provide information and documentation to third parties whom the Qualified Intermediary reasonably believes to be authorized by Exchanger to receive such matter. Qualified Intermediary shall have no obligation to inquire into the truth or evaluate the merits of any statement or representation contained in any notice, document or other communication reasonably believed to be from Exchanger, its officer, attorneys and other representatives. In connection with its duties, Qualified Intermediary shall be protected for acting or refraining from acting upon any written notice, request, consent, certificate, order, affidavit, letter, facsimile, email or other communication or document furnished to it under this Agreement and to have been signed or sent by Exchanger or any of its officers, attorneys, or other representatives, provided, however, that any instructions relating to disbursements of funds shall be subject to the provisions of Section 3.4 above and the Disbursement Instructions shall be signed by the taxpayer or submitted by the taxpayer online via the Software." This sounds like they have no duty whatsoever to verify information or instructions