As you know, a few weeks ago we did a blog post regarding the Demand to Close Escrow (DCE) and its proper use. While most of our posts result in some questions from you to your managers, this one created more buzz than usual and a couple of consistent questions that I thought were worth discussing.

First, we were asked numerous times whether the DCE can be give before the scheduled close of escrow date, or whether you have to wait until that date to give one. The answer to this question can be confusing since the documents available to answer it seem to contradict themselves. First, in the DCE itself, in paragraph 1B, close can be demanded for a certain date which is “at least 3 Days After receipt of this Demand to Close Escrow but no earlier than the agreed upon Close of Escrow date.” This last clause, of course, implies that the DCE can be given before the scheduled close date. In the Purchase Agreement, on the other hand, in paragraph 14E states as follows: “Before Seller or Buyer may cancel this Agreement for failure of the other party to close escrow …” on time, they must give the DCE. Of course, since the only way to know whether the other side has failed to close on time is to wait for that date, then this clause implies that you should wait until the scheduled close of escrow, at the earliest, to give a DCE. So, which is it: before or after. In our view, the better answer is to follow the RPA and wait until the scheduled close date before giving a DCE. First, the only agreement between buyer and seller is the RPA, not the DCE. So, in our view, it should govern. Further, it is also true that you can never be sure if someone will not close on time unless you give them the chance to do so. So you cannot give a notice for “failure” to do so without waiting. While we may have a lot of hints that the other side will be late, and while we may be proven right most of the time, there are instances where things change and we are surprised. So be safe and wait. At that point, no one will be able to attack your DCE as having been improperly served.

Next, a number of questions related to the situation where you get to the scheduled close of escrow and the buyer’s contingencies have not been removed. In that case, I was asked, do you first need to give a Notice to Perform and let that time run before giving a DCE. The answer here, in my mind, is much simpler: You can immediately give a DCE. I say that because it is not necessary for any contingencies to be removed for the escrow to close. In theory, you can let them all run through the escrow and still close as scheduled. While as a seller’s agent you should never do that, it is possible pursuant to the contract. So, if you get to the close date, and the buyer is late, your seller may give a DCE and ignore the open contingencies. The buyer has an independent duty to close as scheduled.

As always, please contact your manager with any questions they may have. Your manager will, of course, contact us when necessary.