On June 21, 2022, C.A.R. plans to roll out its biannual standard-forms update, including 6 new forms and 36 revised forms. Here are some of the highlights: 

Just One Line Added to Residential Purchase Agreement (RPA): There is just one minor change to the RPA and other C.A.R. purchase agreements. Paragraph 8B(3) of the RPA will now have a pre-checked checkbox to indicate that a new Fair Appraisal Act Addendum (FAAA) has been attached (which will be auto-bundled in zipForms). Given the recent major overhaul of the purchase agreements in December 2021, C.A.R. did not want to incorporate the FAAA language into the RPA itself, but they are likely to do so in the near future. See next item.

New Notice Under the Fair Appraisal Act (FAAA): The new FAAA form mentioned above will now be auto-bundled with the RPA in zipForms to comply with a new law that’s coming into effect. Starting on July 2, 2022, every contract for the sale of real property must include a Notice, as provided in the FAAA, stating that appraisals must be unbiased, objective, and not influenced by considerations of race, color, religion, and other discriminatory factors. The FAAA Notice also informs the buyer and seller that they can file a complaint about a biased appraisal with the lender and the Bureau of Real Estate Appraisers. The FAAA Notice is required, even if the buyer does not get an appraisal or does not have an appraisal contingency. The underlying law concerning the FAAA Notice imposes a new requirement on appraisers to comply with fair housing requirements to help prevent discrimination during the appraisal process of a real estate transaction.

Two Changes to Residential Listing Agreement (RLA): First, “Entity Sellers” including trusts, LLCs, and Powers of Attorney, can now sign the RLA (or other C.A.R. listing agreement) without using a separate Representative Capacity Signature Disclosure – Seller (RCSD-S) (see “Entity Sellers” box above the seller’s signature line). Second, the attorney fees provision in the RLA and other listing agreements has been revised. Before the revision, the RLA generally allowed the prevailing party in a lawsuit or other proceeding to recover attorney fees from the losing party. Because that attorney fees provision could incentivize sellers to pursue legal claims against us, the newly-revised RLA says each party is generally is responsible for their own attorney fees (see paragraph 18). However, as an exception, if a party refuses to go to mediation as required by the RLA, and then loses in a legal proceeding, the prevailing party in the legal proceeding will be entitled to recover attorney fees against the losing party (see paragraph 22A).

New “Use of Non-Standard Forms Advisory” (NSF) Form: Use this new form when your client is being asked to sign a form or other document that was not drafted by BHHSCP, C.A.R., or a local Association of Realtors. Common examples for using the NSF form include, among other instances, when your client, the buyer, is being asked to sign a sales contract or addendum prepared by the seller/builder of new construction, or by an REO lender, relocation company, or wholesaler; or when your client, either the buyer or seller, is being asked to sign something drafted by an attorney for the other side.

Backup-Buyer Option Added to Seller Multiple Counter Offer (SMCO): The box in paragraph 8 at the end of the SMCO (where the seller signs a second time to enter into a binding contract), has been expanded so that a seller can put a buyer in a backup position. The seller can simply check the box in paragraph 8B, and attach a Backup Offer Addendum (BUO), and the buyer can counter-sign both documents within 3 days (unless a different number of days has be inserted).

Revisions to the Fire Hardening and Defensible Space Disclosure (FHDS): First, the advisory about fire hardening and defensible space that was previously in paragraph 1 of the FHDS has been moved over to the Wildfire Disaster Advisory (WFDA). As a result, continue using the WFDA for any sales transactions, and only use the FHDS for a transaction for one-to-four residential units located in a high or very high fire hazard zone that is subject to the TDS requirement. Second, “yes” and “no” boxes have been added to paragraph 2 of the FHDS for a seller to indicate his or her awareness of certain fire hardening vulnerabilities for a property built before 2010. Third, concerning defensible space, a seller will generally be leaving paragraphs 3B and 3C as they are (unless the city or county has a law requiring defensible space documentation of compliance as a result of a sale). Fourth, to avoid any potential problems getting a buyer to sign the FHDS during escrow, a seller can require the buyer to agree to the FHDS upfront by inserting the following language in the seller counter offer (SCO or SMCO), and attaching the FHDS:

“Concerning paragraph 11D of the RPA, Seller will not pay for nor obtain any defensible space inspection or documentation of compliance before Close of Escrow. Buyer shall comply with such requirements after Close of Escrow (see attached FHDS).”

The above suggested language to insert in an SCO or SMCO has changed because the language in the FHDS has changed. Next week’s Legal Tip will provide you with updated comprehensive FHDS guidelines.

Two Fixes to Cancellation of Contract (CC): Given that paragraph 1 of the CC now only requires the signature of the party initiating a cancellation, the form has been tweaked to clarify that the non-cancelling party’s consent to a “proposed mutual cancellation” shall be his or her signature in paragraph 2 of the CC. Also, as we had expected, the CC now has a new checkbox in paragraph 2C(4) to allow parties to use the CC to cancel escrow, even if there’s no deposit in escrow.

Updates to Request for Repair (RR and RRRR): The “Seller’s Response” section in the RR has been somewhat reformatted, and now has an option in paragraph 1C for the seller to attach a Contingency Removal (CR) form. The release language in the RRRR used to absolve both the seller and brokers, but now only absolves the seller, because brokers are not parties to the RRRR. As a result, you no longer have to follow my prior advice to use the RRRR whenever possible, rather than the RR.

Updates to the Seller Property Questionnaire (SPQ): Paragraph 4 of the SPQ has been reworded to more explicitly advise a seller to disclose matters, regardless of how long ago they occurred. Paragraph 6A advises the seller that the manner of death (within the last 3 years) may be a material fact (except HIV/AIDS). Paragraph 9 now includes a question about flood insurance. Paragraph 18B now asks about any cannabis cultivation or growth.

Other New Forms: The above list is only a partial list of the new and newly-revised forms in C.A.R.’s June Forms Release. Other new forms include the Defensible Space Decision Tree (DSDT) for instructions on filling out the FHDS (but the DSDT is very difficult to understand); the Designated Electronic Delivery Address Amendment (DEDA) (released February 2022); the Mixed Use Purchase Addendum (MU-PA) (to be attached to an RPA or RIPA); and the Commercial Seller Property Questionnaire (CSPQ) (good to use but not contractually required by the CPA at this time).

Source: More information is available on C.A.R.’s Standard Forms webpage (password-protected for C.A.R. members only). The C.A.R. webpage includes a Quick Summary Guide of the June 2022 Forms Release, as well as draft copies of the new forms and redline versions of the newly-revised forms.

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 June 20, 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.