August 5th, 2019 at 9:55 am
Legal Answer: Use the AEA form. An “addendum” is generally understood to be an attachment to an agreement that supplies additional terms to that agreement. The general idea is that an addendum is created at the same time as the agreement itself. An amendment, on the other hand, is a revision to a preexisting agreement. As for timing, an amendment is generally created after the parties have already entered into an agreement.
For many years, however, C.A.R. only offered an ADM addendum form, and no amendment form. So before 2018, agents generally used the ADM form for an amendment to an existing agreement because they had no other choice. An amendment on the ADM addendum form that clearly set forth the parties’ intention to revise their existing agreement is very likely to pass legal muster anyway, because the law generally looks at substance over form.
But with the release of the AEA in December 2017, you should use the AEA, rather than the ADM, when your client is proposing to the other party a change to an existing agreement. The reason is the AEA has an expiration date, whereas the ADM does not. If the other side doesn’t respond to your client’s proposal for change, the proposal written on an AEA will be automatically withdrawn after 3 days (unless another timeframe is inserted). One advantage of the expiration date is that it puts a little pressure on the other side to respond quickly. Another advantage is that it protects your client who generally does not want the other side to try to accept the proposal many weeks down the road when circumstances may have changed. –By Stella Ling, BHHS Attorney.
Escrow Question: Why is it that when we ask an escrow officer to put together an escrow amendment for an existing agreement, some escrow officers will agree to do it, whereas others will not?
Escrow Answer: That is just a difference in practice between one escrow officer and another, or maybe even the difference between escrow companies in one community, and those in another community. Additionally, some escrow officers may draft an escrow amendment to accommodate the client’s wishes because the officer may not realize the availability of certain C.A.R. forms (like the AEA or ETA). Also, if a buyer is getting a loan, experienced escrow officers generally know that the lender may require a C.A.R. form which formally revises both the contract and the escrow instructions, and not just amended escrow instructions. Alternatively, for an all-cash transaction (no lender), the escrow officer may go ahead and draft an escrow amendment to accommodate the parties. –By Rachel Andersen, Escrow Officer with The Escrow Firm.
Legal/Escrow Question: Does it make a difference if a revision is on a C.A.R. form or an escrow amendment?
Legal/Escrow Answer: Generally speaking, no, other than lender requirements (as discussed above). C.A.R.’s Residential Purchase Agreement (RPA) is also Joint Escrow Instructions if acknowledged by the escrow officer at the bottom of page 10. Upon such acknowledgment, a revision using a C.A.R. form is both a revision to the contract as well as a revision to the escrow instructions. In contrast, an escrow-drafted escrow amendment may technically only revise the escrow instructions, not the contract itself. However, putting aside lender requirements, a judge or arbitrator is likely to treat an escrow amendment as a valid revision to the contract. –By Stella and Rachel.
-A big thank you this week to Rachel Andersen (Escrow Officer and Branch Manager of our affiliate The Escrow Firm, Inc. in San Diego).
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