Practice Tip. If the Buyer does not want to perform any inspections that are not named above, it is recommended that the Buyer initial “Waived” to make it clear that the lines were intentionally left blank. Practice Tip: There is only one line to elect and one line to waive this contingency. If more than one item is listed under other and the parties would like to remove one, the item to be removed should be crossed out and initialed. It might be clearer to simply address this change in an addendum to the Agreement. Existing Conditions There is a space to list any items that are to be excluded from any of these “blanket” inspection contingencies. The Sellers may want to consider excluding any items/systems that have already been disclosed as faulty. For example, if the Seller has disclosed that a hot water heater needs to be replaced, that defect should be considered by the Seller in setting an asking price and by the Buyer when making an offer. Including it in the list does not mean the Buyer cannot inspect for it, but it does mean that the Seller does not have to negotiate over it in a report/as part of a Written Corrective Proposal. The Seller should consider listing all defects so the Buyer does not attempt to negotiate the offer based on an inspection report detailing a defect that was already disclosed. Subparagraph (D): Notices Regarding Property & Environmental Inspections Clients should be directed to these Notices when they are deciding whether to elect or waive any certain inspection. These Notices provide a small description of some less-common issues that may arise and direct them to agencies which can give them more information. Paragraph 13: INSPECTION CONTINGENCY Subparagraph (A): Contingency Period The Contingency Period that applies to all inspections elected in Paragraph 12 is established in Paragraph 13(A). The default Contingency Period is 10 days, though the parties can agree to a different length if desired.
Practice Tip. If the Property consists of several parcels, or if there is the possibility of confusion regarding the boundaries of the Property, prepare an addendum to the Agreement that attaches a copy of the legal description taken from the last recorded deed, a proposed deed, or the legal description prepared by an attorney. Make sure that the legal description is in fact the correct and current description of the Property being sold. Attaching a proper legal description of the Property will help ensure that there is no dispute regarding the description of the Property to be transferred. Practice Tip: Property identifiers may have different names in different counties. Use what works in your area (e.g. Parcel Number, Property Identification Number, Tax ID Number). Business Relationship Blocks The Business Relationship (Buyer’s Relationship with PA Licensed Broker and Seller’s Relationship with PA Licensed Broker) boxes on the front page of the Agreement are used to identify the Brokers and Licensees involved in the transaction and to describe their business relationship to the parties involved in the transaction. Each block is divided, left and right, into a Broker section (left) and a Licensee section (right). Note: The Real Estate Licensing and Registration Act (RELRA) requires that Brokers identify: (1) the capacity in which they are engaged in a transaction; and (2) whether the Broker or any licensee affiliated with the Broker has provided services to any other party in the transaction. The information provided in the Business Relationship Blocks provides the appropriate business relationship information. Paragraph 25(D), is included to satisfy the second part of that requirement.
Practice Tip. Use a specific date by which all parties have to accept or reject the offer – do not simply fill in a time period (e.g., “3 days”) as might be used in other sections of the Agreement. Subparagraph (B): Time is of the essence It is important to explain that “time of the essence” means that all dates and time limits within the Agreement -- inspections, replies, etc. -- must be met to avoid being in default of the Agreement. Note: Be aware that the Contingency Period in all of the inspection contingencies is the time for the Buyer to conduct inspections and to submit a written decision (acceptance, termination, corrective proposal) to the Seller. Failure to act on inspection results within this time period may result in a waiver of the inspection contingency and acceptance of the Property by the Buyer. (See Paragraph 11, Waiver of Contingencies).
Practice Tip. If the parties wish to use the default time periods in the locations where blanks are provided it is not absolutely necessary to fill in the blank, but best practice would be to do so anyway. Even with a default provided, it is inadvisable to proceed with an Agreement that has any unfilled blank lines, especially considering that a misunderstanding over one of these time periods could cause major problems in the transaction. Note: There are some provisions in the Agreement that are required by law (e.g., Department of Transportation, Zoning, Coal Notice) that should not be modified. Paragraph 6: ZONING Pennsylvania law requires that the Agreement contain the zoning classification of the Property unless it is in an area that is zoned primarily or exclusively for single-family homes. If the Property is zoned to permit anything other than a single family dwelling, the zoning classification must be stated in the Agreement or the Buyer will have the right to void the contract. If the zoning classification is not primarily or exclusively residential, insert the zoning classification in the space provided. The language of the Agreement directs you to use the local zoning ordinance as your source for this information. Be careful to avoid using municipal directories or the Seller’s representations, which may not be accurate. Confirm the classification with the municipality at the time the Property is listed, and perhaps again at the time of sale. If there is any question regarding permitted uses, have the Buyer contact the municipality directly. Practice Tip: Because zoning is often referred to by a letter/number combination that may mean different things in different municipalities, it is generally advisable to include a short description of the types of permitted uses as well.
Practice Tip. Boilerplate consequential damages waivers often include a laundry list of excluded damages, such as lost profits, that are written as additional to the exclusion of consequential damages. This has the potential to go beyond the intentions of the parties, as lost profits in some circumstances qualify as the proper measure of direct damages. An easy fix is to reference lost profits, etc. as a parenthetical subset of con- sequential damages. The drafters of the Uniform Commercial Code generally followed the framework from Hadley30 and added extensions and refinements that are beyond the scope of this discussion. Of particular note, however, is the following, per White & Xxxxxxx: “[W]henever a defective component part causes an accident that damages an entire product, a large part of the total damage may be consequential.”31 In addition, some commentators believe (and the author agrees) that a significant portion of the damages that flow from a breach of con- fidentiality is likely to be consequential.32 It is important to note that not all courts would agree with the foregoing framework. Some courts seem to be moving away from the Xxxxxx approach and have stated, for example, that market-measured damages (that is, the difference between the value of the thing as promised and the value of the thing as actually provided) are the proper measure of direct damages and everything else is either con- sequential or indirect damages.33 Seen in light of the foregoing definitions, an exclusion of conse- quential damages may seem unfair to the aggrieved party—quite 30. WHITE & XXXXXXX, supra note 8, § 11:7. 31. Id. § 11:8, at 989 n.7.
Practice Tip. If the Buyer decides to make application for an FHA loan after signing the Agreement, lender practice is generally to provide the notice, then ask that the Buyers re- execute the Agreement of Sale to meet the requirement that the notice be provided prior to the Agreement being signed. If your Buyer is asked to amend the form to reflect a new execution date, remember that this new date may change all the timelines previously established in the Agreement unless an addendum states otherwise. Be sure to consult with both parties (and your broker) to be sure that everyone understands how this issue will be handled.
Practice Tip. To prepare an Agreement that is contingent upon the sale and settlement of other Property owned by Buyer, include an addendum stating that the provision concerning Seller’s right to terminate based on sale and settlement of other property does not apply. PAR Form SSP (Sale & Settlement of Other Property Contingency), Form SSPCM (Sale & Settlement of Other Property Contingency with the right to Continue Marketing), and Form SSPTKO (Sale & Settlement of Other Property Contingency with Timed Kickout) all have the appropriate language. If Buyer’s current Property is already under an Agreement, use Form SOP (Settlement of Other Property). Note: Lenders will often issue an approval with conditions (e.g., “This commitment conditioned upon borrower providing copies of income tax returns.”). The language in this provision provides that Buyer has 7 days from the deadline — not the date the approval is received — to clean up any of these contingencies. Buyers are encouraged to leave at least 7 days between the deadline and Settlement Date to allow for the operation of this provision; leaving at least 10 days is even better, as that permits time to provide appropriate notice for settlement or to clear up any remaining issues before settlement. Further, this provision in the Agreement provides an incentive to lenders to issue a second “clean” approval letter once contingencies are met, to help Seller know that the conditions have actually been removed. Seller has the right to terminate the Agreement until the time Buyer provides them with the loan approval. Until Seller terminates, Buyer is still obligated to seek financing. If financing is not received by the Settlement Date, the Agreement expires. The Settlement Date cannot be extended except by written agreement of the parties. Remember that Buyer is under an obligation to submit a valid mortgage application and has a general duty to cooperate in the processing of that application. If an inability to obtain financing is due to action or inaction by Buyer that violates these obligations, Buyer may be in default.
Practice Tip. When faced with an opposing party insisting on an inappropri- ate exclusion, try to change the language so that only damages that should not be recoverable anyway under contract are be- ing excluded—such as punitive or non-foreseeable damages, or damages that cannot be proven with reasonable certainty.
Practice Tip. If Xxxxx is a veteran, make sure the name on the Agreement matches the name on the discharge eligibility. SELLER(S): Starting next to the word “SELLER(S),” insert the name or names of Seller(s). Practice Tip: Do not use terms such as “all registered owners” or “owners in title.” The registered owners are not necessarily the only ones who must sign agreements and deeds to convey legal title (e.g., spouses of owners under certain circumstances). In the case of a cooperative sale where the Broker for Buyer does not have the proper names of all Sellers, leave the lines blank and ask the Broker for Seller to insert the proper names before approval. Buyer and Seller should each include their mailing address in this box. It is very important that both parties place a mailing address in the Agreement. It is generally necessary to communicate with the other party during the course of a transaction, and having the address and contact numbers properly filled in can make this communication considerably easier, especially where one party is not represented by a broker. Both parties should communicate with another through their agents, but it may be necessary for the Buyer to contact the Seller directly about condominium documents. Property
Practice Tip. Under the Home Inspection Law, Home Inspectors may provide repair estimates, but only as a range of costs with the source of the estimate being identified, and accompanied by a statement that the parties should consider consulting with a contractor who performs the type of repairs involved. Keep in mind that you may wish to provide time to obtain outside estimates if you consider that they may be perceived as being more reliable than estimates provided by a home inspector; providing a reliable estimate as a Buyer may make it easier to negotiate for repairs or a credit. Note: The Buyer should be sure that requested repairs would be compliant with relevant codes and other requirements. The Agreement provides that if the Seller performs according to the terms of a Written Corrective Proposal, the Buyer cannot try later to hold the Seller liable for non-compliance. Note: The Seller can address each Written Corrective Proposal as it comes in, or can hold each of them and formulate a response once all of the proposals have been received. Once the Buyer submits a Written Corrective Proposal, the Seller has two options: (1) accept all of the terms of the Buyer’s Proposal or (2) negotiate. Following the end of the Contingency Period, Buyer and Seller have the number of days stated in Paragraph 13(B)(3)(a), five days being the default, for a Negotiation Period. During this time, the Buyer and the Seller are encouraged to communicate, either verbally or in writing, to negotiate the terms of a mutually acceptable written agreement.
