May 1st, 2017 at 9:42 am
Question: What should the buyer do to prevent the seller from cancelling? Select the best answer:
A. Remove all contingencies.
B. Remove all contingencies, except the SPQ.
C. Remove all contingencies, except the reports/disclosures contingency.
D. Advise the seller that the NBP is defective.
E. Both C and D.
Answer: The best answer is E. As background, the RPA does not specifically address this situation where a seller serves a NBP to remove all contingencies, even though not all disclosures have been given to the buyer. According to the RPA, a seller must provide all reports and disclosures within 7 days after acceptance (see paragraph 14A). If, however, the seller is late, the buyer has 5 days after receipt of an item to review it and remove the “applicable contingency” (paragraph 14B(3)). Moreover, the seller cannot serve a NBP until 2 days before the expiration of the applicable timeframe “to remove a contingency” (paragraph 14E).
In this situation, Answer A, removing all contingencies, is not a good answer, because the buyer is not required to do so, plus he or she may end up disapproving something in the SPQ. As for Answer D, a buyer looking to buy more time before removing contingencies can try arguing that the entire NBP is defective and must be served again. But this approach may backfire given that the buyer has an obligation to act in good faith and the NBP is valid for everything other than the SPQ.
As for the remaining answers, the RPA specifically allows the buyer 5 days to review the delayed SPQ and remove the “applicable contingency.” There is no “SPQ contingency.” It’s called a “reports/disclosures contingency” (see paragraph 14B(1) of the RPA and paragraph 2.A.6. of the Contingency Removal form). Hence, Answer C is a better reading of the RPA than Answer B. To avoid any misunderstandings going forward, the buyer can also inform the seller’s side that the NBP is defective as to the applicable reports/disclosures contingency (i.e., both Answers C and D).
-Thank you to Silvia Portugal-Singh (Pasadena Office) for suggesting this week’s legal tip.
Copyright© 2017 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 1, 2017. 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.
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