Fact Pattern: You are the buyer’s agent for a pending RPA sales transaction. The timeframes for all buyer contingencies have just expired. On Monday, March 1, the seller serves a 2-day Notice to Buyer to Perform (NBP) requiring the buyer to remove all contingencies. Later that same day, the seller delivers to the buyer an inspection report that the seller just received from a previous buyer who cancelled.

Multiple Choice Question: Which of the following statements best describes the buyer’s contractual rights? Pick the best answer:

A. The seller must now issue a new NBP before the buyer is required to remove any contingency.
B. The buyer now has 5 days to remove all contingencies.
C. The buyer has 2 days to remove all contingencies, including the buyer’s review of the recently-delivered inspection report.
D. The buyer has 2 days to remove all contingencies, except for the review of the recently-delivered inspection report. 

Answer: Answer A is most likely wrong. For any report delivered to a buyer after the buyer’s contingency period has lapsed, the buyer has 5 days to review that report and remove the “applicable contingency” (see paragraph 14B(3) of the RPA). Although “applicable contingency” is not specifically defined in the RPA, it is likely in this situation to mean the contingency pertaining to the inspection report only, and not all the other contingencies, such as the loan, appraisal, and inspection contingencies. Hence, the 2-day NBP served on March 1 should still be valid for requiring the buyer to remove all contingencies other than the contingency pertaining to the inspection report.

Answer B is wrong. As explained above, the buyer only has 2 days to remove all contingencies other than the contingency pertaining to the inspection report. As for the remaining contingency for the inspection report, the seller must first serve a new 2-day NBP to remove that particular contingency before the seller can cancel (see paragraph 14D(1)).

Answer C is wrong. The 2-day NBP served on March 1 does not pertain to the review of the inspection report, given that the buyer has 5 days, or until March 6, to review that report. After all, the seller cannot even serve an NBP to remove the contingency pertaining to the inspection report until March 4, or 2 days before the expiration of the 5-day timeframe (see paragraph 14E).

Answer D is the best answer. To avoid cancellation by the seller, the buyer should remove all contingencies by 11:59 p.m. on March 3, but the buyer can, if needed, carve out an exception in the Contingency Removal form for reviewing the recently-delivered inspection report.

-Thank you to Nicki Marcellino (La Jolla Manager) for suggesting this week’s legal tip.

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 March 1, 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.