December 19th, 2022 at 2:49 pm
-Revised Residential Purchase Agreement (RPA): Various minor changes have been made to the RPA and other C.A.R. purchase agreements as follows:
1. Seller to Pay Commission (Optional): Despite a lot of buzz, a new optional paragraph 3G(3) will rarely be used at the present time. That paragraph allows a buyer to ask the seller to pay the buyer’s own obligation to pay the buyer’s broker (as set forth in a new “Seller Payment to Buyer’s Broker” form (SPBB)). Paragraph 3G(3) will rarely be used, unless all 3 of the following conditions are met: (1) Buyer and buyer’s agent have a written buyer-broker agreement; (2) Compensation owed under the buyer-broker agreement is more than what the listing agent is offering the buyer’s broker through the MLS or otherwise; and (3) Buyer wants to ask the seller to pay the difference.
2. Buyer’s Max Loan Points Added: A buyer’s loan terms in paragraphs 3E(1) and (2) now provide blank spaces not just to insert the maximum interest rate that a buyer is willing to pay, but also the maximum loan points to obtain that rate. If a buyer has a loan contingency, both spaces for the interest rate and points should be filled in, and not left blank. It’s unclear whether a blank space left blank means “zero,” “anything,” or something else.
3. Delivery of Occupancy to Buyer: For properties with more than one dwelling unit (including ADUs and garage conversions), paragraph 7A of the revised RPA only requires the unit that the buyer intends to occupy to be delivered vacant. The buyer now has 3 days after acceptance to inform the seller which unit the buyer intends to occupy. Additionally, if a Tenant Occupied Property Addendum (TOPA) is not attached to the buyer’s offer, the revised RPA now requires the seller to disclose if the property is occupied by tenants or anyone else other than the seller, and to provide a TOPA in a counter offer (see paragraphs 3M(3) and 7A). All that said, any buyer who wants all dwelling units to be delivered vacant could easily sidestep the above provisions by simply stating upfront in “Other Terms” (paragraph 3R) that, “Seller must deliver all dwelling units vacant by removing all occupants at least 5 Days before COE (no Form TOPA).”
4. Items Included in Sale: The old RPA already included “window coverings” (such as curtains and drapes), but the revised RPA now also includes “any associated hardware and rods” (see paragraph 9B(2)). Additionally, for smart home and other devices included in the sale, the revised RPA requires the seller to de-list personal accounts, and cooperate with any transfer of services to the buyer (see paragraph 9B(5)).
5. New Solar Advisory and Questionnaire (SOLAR): A seller is now required to disclose all known information about any solar panels or solar system (see paragraph 11M). A seller may use the new standard-form “Solar Advisory and Questionnaire” (SOLAR) for that purpose. The first part of the new SOLAR form is an advisory about solar panels. The second part is a list of questions for the seller to answer. The questions are formatted in the same manner as the Seller Property Questionnaire (SPQ).
6. Buyers Who Use “and/or Nominee”: Paragraph 23, which addresses the handling of a proposed assignment of the RPA by the buyer, has been expanded to include any nomination as well.
-Revamped Buyer Representation and Broker Compensation Agreement (BRBC): The 3 C.A.R. buyer-broker agreements (BRE, BRNE, and BRNN) have all been consolidated into one new BRBC.
1. Option for Exclusive Agreement: Buyers’ agents much check the box in paragraph 4B(2) to make the BRBC an “exclusive and irrevocable” agreement. An “exclusive” agreement generally means that you will be entitled to your compensation, even if another agent or no agent represents the buyer in buying a property.
2. Options for Cancellations: You can check the box in paragraph 4C(2) to require mutual agreement for any cancellation. Otherwise, if the BRBC is non-exclusive, either party can cancel the agreement immediately by giving the other party a notice to terminate, but if the BRBC is exclusive, it’s a 30-day notice to terminate (see paragraph 4C(1)). For cancellations, you can use the new Cancellation of Buyer Representation (COBR) form (which replaces the old TBA form).
3. Safe Harbor Clause Requirements: Under the old buyer-broker agreement, you could protect yourself during your safe harbor period for properties that you introduced to the buyer. Under the new BRBC, you can only protect yourself for properties with “Broker Involvement” (see paragraph 4E). “Broker Involvement” is defined in paragraph 4B(1) to include showing the property, submitting an offer, or even introducing the property to the buyer. However, merely sending the buyer a list of properties is not “Broker Involvement” without further documented action, such as, you had analyzed the property for the buyer, you assisted the buyer in acquiring the property, or you communicated with the seller’s side concerning your buyer’s interest. To protect yourself during the safe harbor period, give the buyer a Notice of Broker Involved Properties (NBIP) before the expiration or cancellation of the BRBC. The new NBIP replaces the old Notice of Identified Properties (NIP).
4. New Buyer Transactional Advisory (BTA): A new BTA will now be auto-bundled with the BRBC in zipForms.
-New Recommended Anticipated Broker Compensation Disclosure (ABCD): Buyers’ agents can use this form to disclose our brokerage’s compensation to our buyer-clients. The real estate broker industry is facing various legal challenges on a national level concerning the lack of disclosure to a buyer as to the compensation received by the buyer’s brokerage. To provide full transparency to your buyer-clients, you can use the ABCD to disclose our brokerage’s compensation. During showings, use the grid in the middle of ABCD form to disclose the offer of compensation for each property. At close of escrow, fill out the bottom section to disclose our brokerage’s “Final Compensation.” As an alternative to using the ABCD, you can provide your buyer-clients with copies of MLS Print-Outs that include the offer of compensation, and get your clients to sign and return an acknowledgment of receipt.
-“Appraisal Gap” Addressed in Counter-Offer Forms (SCO, SMCO, and BCO): The counter offer forms have a new paragraph 1C to address any “appraisal for less” contingency. As background, the current RPA allows a buyer to insert an “appraisal for less” contingency in paragraph 3L(2). To illustrate, a buyer can offer $1 million for a property, and yet limit the buyer’s own right to cancel under an appraisal contingency if the appraisal comes in below $900,000, for example, rather than $1 million (i.e. the “Appraisal Gap”). The revised counter offer forms provide in paragraph 1C that, unless otherwise agreed, the dollar amount of that Appraisal Gap shall remain the same, even if the final contract price is different from the offer price.
-Sort of New Non-Contingent Offer Advisory (NCOA): The new NCOA is very similar to the existing Market Conditions Advisory (MCA). However, the NCOA is more narrowly tailored to address the issues with non-contingent offers. You do not have to use the NCOA if you already use the MCA.
-Lease-Related Forms: First, the Residential Lease Agreement (LR) now has a new acronym “RLMM.” The term “Landlord” has also been replaced with the term “Rental Property Owner” in the RLMM, the Lease Listing Agreement (LL), and other lease forms. Second, C.A.R. has released a new Rental Property Owner Disclosure (RPOD) for an owner to advise the lease listing agent about various aspects of the property. The RPOD is formatted in the same manner as the SPQ. In addition to completing the RPOD, the owner should also provide the tenant with any legally-required disclosures, including any known material facts, by completing paragraph 38 of the RLMM. Third, the Move In/Move Out Inspection (MIMO) has been separated into 2 forms, namely the Move In Inspection (MII) and the Move Out Inspection (MOI). Fourth, various property management forms have also been revised (LRA, PMA, PMOI, and NRI).
-Discontinued Forms: C.A.R. will discontinue the publication of its vacation rental forms (VRL and VRA); its business-opportunity forms (BLA, BPA, and BDS); and its trust fund forms (TF, TAA, TAB, and TAP).
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 December 2022 Forms Release, as well as draft copies of the new forms and redline versions of the newly-revised forms.
Next Week: In observance of the holidays, there will be no Legal Tip next week.
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