On December 14, 2021, C.A.R. intends to release its newly revised Residential Purchase Agreement (RPA), along with approximately 98 other new or revised forms. The 2021 RPA is a major reorganization. The standard-form agreement will be 16 pages, instead of the current 10 pages. The negotiable terms of the agreement will be set forth in a “Grid” in the first few pages of the agreement.

Many of the substantive provisions of the 2021 RPA remain the same as before, but here are some of the significant revisions: 

• Contract Acceptance Has Been Somewhat Redefined: Under the old RPA, contract acceptance generally occurs when the final offer or counteroffer is fully signed by both sides and personally received back by the party making that offer or counteroffer, or that party’s agent, depending on how the forms are completed. Under the new RPA, contract acceptance as well as delivery of other sales documents can be accomplished using that same method of personal receipt as described, or by the mere sending of a document to an agent’s “Designated Electronic Delivery Address” (DEDA) if such DEDA is identified in the Real Estate Brokers Section on page 16 of the RPA (as explained in the definition of “Deliver” in paragraph 25K of the RPA). You may not want to have a DEDA for yourself in that Brokers Section, because you may not want delivery of sales documents to be effective upon the other side merely emailing such documents to your DEDA, regardless of whether you or your client personally receive such documents.
• Confirmation of Acceptance Has Been Deleted: The old RPA’s Confirmation of Acceptance below the parties’ signatures has been deleted from the 2021 RPA and counteroffer forms. So to figure out if and when contract acceptance occurs under the 2021 RPA, hopefully the final signatures will be dated on the same day that the other side personally receives such signatures (assuming no DEDAs). If not, you should just contact the other side to confirm their receipt as needed.
• FHDS Should Be Agreed to Upfront: For properties in a high or very high fire hazard severity zone, California law generally requires a seller who falls under the TDS requirement to obtain documentation of compliance with the defensible space laws, unless the buyer agrees to do the work within one year after close of escrow (or if a local law pertains instead). Under the 2021 RPA, a seller has 7 days to give the buyer the Fire Hardening and Defensible Space Advisory, Disclosure, and Addendum (FHDS) (see paragraph 11D of the RPA). A buyer may refuse to sign the FHDS, e.g. perhaps by arguing, if true, that paragraphs 3Q(5) and (6) require the seller to pay for any government-required point-of-sale inspections, reports, and corrective/remedial actions. If the buyer refuses to sign the FHDS, the seller may serve a 2-day Notice to Buyer to Perform (NBP), and if the buyer still refuses, the seller may cancel (see paragraph 11G). Alternatively, to avoid any potential issues with the signing of the FHDS during escrow, a seller can simply require the buyer to agree to the FHDS upfront by inserting the following suggested language in the seller counteroffer (SCO or SMCO), and attaching the FHDS:

“Concerning paragraph 11D of the RPA, Buyer understands and agrees that Seller does not know whether Property complies with defensible space laws, and Seller shall 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).”

• Certain Seller Timeframes Have Been Shortened: Unless otherwise indicated, the 2021 RPA provides a seller with only 7 days after acceptance to install smoke alarms and carbon monoxide detectors, and to brace any water heaters (see paragraph 3N(4)). Moreover, if the seller’s failure to timely install such items causes the buyer to incur a lender reinspection fee, the seller is responsible for such fee (see paragraphs 10B(1) and (3)). Also, unless otherwise indicated, a seller has only 3 days after acceptance to pay any fees for ordering HOA docs, if applicable (see paragraph 3N(3)).
• Required Notices to Perform Before Certain Cancellations: Under the old RPA, a Notice to Perform must be served before either the buyer or seller cancels for one of the enumerated reasons in the agreement. The 2021 RPA has a new catch-all reason for a Notice to Perform. If either side wants to cancel due to the other side’s failure to perform any contractual obligation, the side that wants to cancel must first serve a 2-day Notice to Perform. However, a Notice to Perform is not required if a buyer or seller is cancelling based upon a contingency.
• Limited Remedies if Seller Fails to Remove Existing Tenants: Under the old RPA, a buyer may require a seller to remove any existing tenants before close of escrow. Under the new RPA, the buyer may check a box in paragraph 3M(3) to attach the new Tenant Occupied Property Addendum (TOPA). However, paragraph 1B of the TOPA merely requires the seller to try in good faith to remove the tenants, but if the seller is unable to do so, the buyer only has 2 options. Option 1 allows the buyer to cancel with the right to recover any out-of-pocket expenses presumably from the seller. Option 2 allows the buyer to proceed with the purchase with the tenants remaining in possession. As an alternative to using the TOPA, a buyer may require the seller to remove any existing tenants by simply inserting the following suggested language in “Other Terms” in paragraph 3R of the buyer’s offer: “Seller must deliver Property vacant by removing any tenants at least 5 Days before COE (no Form TOPA).”
• Other Changes: Many of the default rules have changed to better reflect the current real estate practice. Other changes include, but are not limited to, restricting assignments to 17 days (paragraph 23); allowing a seller to check the buyer’s loan status with the buyer’s lender (paragraph 5C(3)); and eliminating the need to attach an Representative Capacity Signature Disclosure (RCSD) (paragraphs 32B and 33B).

For more information including a draft copy of the 2021 RPA, visit C.A.R.’s December 2021 Forms Release webpage (password-protected for C.A.R. members only). C.A.R. also offers its members various legal webinars on the new RPA. They have a recorded one-hour 2021 RPA Overview, as well as a more extensive 8-hour RPA Spotlight Series.

Copyright© 2021 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 December 13, 2021. 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.