Fact Pattern: In last week’s Legal Tip, we addressed a seller’s right to get the buyer’s loan status directly from the buyer’s lender under paragraph 5C(3) of C.A.R.’s Residential Purchase Agreement (RPA). This week is a follow-up question. Let’s say that you are the listing agent for a pending sales transaction. You are not getting a straight answer from the buyer’s agent as to the status of the buyer’s loan. You contact the buyer’s lender directly under paragraph 5C(3) of the RPA. But the buyer’s lender refuses to discuss the matter with you, absent the buyer’s written permission. You even show the lender paragraph 5C(3) of the RPA, but to no avail. You then ask the buyer’s agent for the buyer’s written permission, but the buyer refuses to give it.

Multiple Choice Question: Under these circumstances, can the seller serve the buyer with a 2-day Notice to Buyer to Perform (NBP)? Pick the best answer:

A. Yes, because the buyer has failed to perform.
B. No, because the RPA only allows the seller, not the listing agent, to get the buyer’s loan status from the buyer’s lender.
C. No, because the RPA does not require the buyer to provide the lender with written permission.
D. No, because the RPA does not allow the seller to serve an NBP for this particular reason. 

Answer: Answer A is the correct answer, as explained by the following process of elimination of the other multiple-choice answers.

Answer B is wrong. Paragraph 5C(3) of the RPA specifically allows either the seller or the seller’s “Authorized Agent” to contact the buyer’s lender to determine the status of the buyer’s loan.

Answer C is most likely wrong. It’s actually true that the RPA does not specifically require the buyer to provide the lender with the above-described written permission. However, under paragraph 5C(3), the buyer has given the seller’s side the authority to contact the buyer’s lender to determine the buyer’s loan status. It would be difficult for a buyer to successfully argue that the buyer has complied with that requirement under paragraph 5C(3) if the lender still needs the buyer’s written permission to discuss the loan status with the seller’s side. Every contract in California includes an unwritten requirement for the parties to act in good faith and deal fairly with one another.

Answer D is also most likely wrong. The RPA specifically allows a seller to serve an NBP if the buyer does not take certain actions, such as “perform any additional Buyer contractual obligation(s) included in this Agreement” (see paragraph 14C(2)(xi) of the RPA). Again, as with Answer C, it’s true that the RPA does not specifically require a buyer to give the lender written permission to discuss the loan status with the seller’s side. However, the buyer has contractually promised that the seller’s side has the authority to get the loan status from the buyer’s lender. The seller’s side in this particular situation is unable to get that loan status from the buyer’s lender as promised. The seller should be allowed to serve an NBP requiring the buyer to provide that “authority to get the loan status from the buyer’s lender,” which is a buyer contractual obligation.

-A big “thank you” for suggesting this week’s legal tip goes to Diane Montgomery (Manager of our Mission Viejo and Laguna Niguel offices).

Copyright© 2024 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 May 6, 2024. 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.