Fact Pattern: You are the buyer’s agent for a pending sales transaction using the newly revised 12/21 C.A.R. Residential Purchase Agreement (RPA). The parties did not alter any of the 17-day timeframes on page 2 of the “Grid” in the RPA. At the end of the 17-day contingency period, the buyer removed all buyer contingencies. The buyer then requested the seller’s consent to the buyer’s assignment of the contract to a third party. The buyer submitted the request using a properly-completed C.A.R. Assignment of Agreement Addendum (AOAA) with all pertinent documents attached.

Multiple Choice Question: Can the seller reject the assignment? Pick the best answer:

A. Yes.
B. Yes, as long as the seller’s rejection is reasonable.
C. Yes, unless the buyer is requesting an assignment to the buyer’s own trust or wholly-owned entity.
D. No. 

Answer: Answer A is likely to be the best answer. The newly-revised RPA has many more provisions concerning a buyer’s assignment as compared to the old RPA. One of the new provisions is paragraph 3K in the “Grid” on page 2 of the RPA. Paragraph 3K gives the buyer 17 days after acceptance to request an assignment (unless the buyer inserts another timeframe). Two other new provisions are set forth in the ninth and tenth sentences under “Assignment” in paragraph 23 of the RPA. Those provisions state that, if a buyer does not request an assignment “within the time specified in paragraph 3K” (i.e., the first 17 days), the seller’s rejection of a buyer’s assignment “shall be deemed reasonable.”

Answer B is wrong. According to the third sentence in paragraph 23, a seller cannot unreasonably withhold consent to an assignment. However, as mentioned above, under the ninth and tenth sentences in paragraph 23, a seller’s rejection of any assignment request submitted after the initial 17 days “shall be deemed reasonable,” regardless of whether such rejection is, in fact, reasonable.

Answer C is likely to be wrong, but the RPA is not altogether clear. It is true that the first sentence in paragraph 23 states that a buyer “shall have the right” to assign the contract to the buyer’s own trust or wholly-owned entity in existence at the time of such assignment. Hence, it’s at least possible for a buyer to successfully argue in arbitration or litigation that this first sentence gives the buyer an “absolute right to assign” to the buyer’s own trust or entity.

However, the first sentence does not specifically negate the ninth and tenth sentences in paragraph 23 that allow a seller to reject any assignment request made after the initial 17 days. Courts and arbitrators are likely to interpret the first, ninth, and tenth sentences of paragraph 23 to all be part of a harmonious whole. Additionally, the first sentence does not appear to be an “absolute right to assign” anyway. If, for example, any assignee fails to deliver a prequal/preapproval letter, the seller can terminate such assignment after first serving a Notice to Buyer to Perform (see the seventh and eighth sentences in paragraph 23).

Practice Tip: Buyers’ agents are well-advised to warn your clients upfront to avoid the ambiguities created by paragraph 23 by submitting any assignment request to the seller within the first 17 days after acceptance.

Copyright© 2022 Berkshire Hathaway HomeServices California Properties (BHHSCP). All rights reserved. Any unauthorized reproduction or use of this material is strictly prohibited. This information is believed to be accurate as of January 24, 2022. It is not intended as a substitute for legal advice in individual situations, and is not intended to nor does it create a standard of care for real estate professionals. Written by Stella Ling, Esq.