Fact Pattern: A seller’s mother lives in a granny flat above the garage. The buyer and buyer’s agent have no idea that Granny lives there, because she was out of town when they previewed the property. The buyer and seller enter into a C.A.R. Residential Purchase Agreement (RPA) revised December 2022. Now that escrow is about ready to close, the seller says that Granny will be remaining in the granny flat after close of escrow.

Multiple Choice Question: Can the buyer demand that Granny vacates the premises before escrow closes? Pick the best answer:

A. Yes.
B. No.
C. It depends.
D. Unclear. 

Answer: The best answer is D. Unfortunately, this situation does not seem to be adequately addressed in the newly-revised RPA, as further discussed below. The parties should try to negotiate a mutually-satisfactory resolution, or they may have to bring the matter to mediation, arbitration, and/or litigation.

Buyer’s Problem: Whereas paragraph 7A of the RPA used to say that “Buyer intends to occupy the Property,” it has now been revised to says that only “the unit Buyer intends to occupy shall be vacant at the time possession is delivered to Buyer.” Paragraph 7A also says that “if the Property contains more than one unit, within 3 Days after Acceptance Buyer shall give Seller written notice of which unit Buyer intends to occupy.” This is a potential trap for the unwary. The buyer in this Fact Pattern did not give the seller any written notice within 3 days after acceptance. Of course, the buyer can try to argue that the buyer did not even know that Granny was occupying the granny flat. The buyer can also try to argue, among other things, that the granny flat is not really a separate “unit” for purposes of paragraph 7A.

Seller’s Problem: Paragraph 7A of the RPA as revised also states that “Seller shall disclose to Buyer if occupied by tenants or persons other than Seller, and attach C.A.R. Form TOPA in a counter offer if not part of Buyer’s offer.” The RPA, however, fails to address what happens if, as in the above Fact Pattern, the buyer and seller do not comply with the paragraph 7A requirements. The seller can try to argue that Granny has a preexisting one-year lease, for example, and that the buyer must take the property subject to the pending lease. The seller can also try to argue that paragraph 7A merely requires the seller to attach a TOPA form, which does not even require the seller to deliver the property vacant anyway. The TOPA states that, if the seller, despite a good faith attempt, is unable to remove any existing tenants by the close of escrow, the buyer can cancel the agreement, or take the property with the tenant remaining in possession (see paragraph 1A(2) of the TOPA).

Resolving this Situation Upfront: As the agent involved in this type of situation, we obviously do not want something like this to jeopardize the closing of escrow, especially at the 11th hour. When writing an offer, buyers and buyers’ agents should be mindful of any structures on the property that could be construed as a “unit” under paragraph 7A, and could be rented or occupied by someone other than the seller. The property may be a duplex, triplex, or other multi-unit property. But it could also just be a single-family home with a granny flat, guest house, accessory dwelling unit, junior accessory dwelling unit, converted garage, personal property mobilehome, or other structure (permitted or unpermitted) that may be rented or occupied by someone other than the seller. In those situations, if the buyer wants to occupy the entire property, you can insert in “Other Terms” (paragraph 3R) of the RPA as follows: “Concerning paragraph 7A, Seller must deliver all units vacant by removing all occupants at least 5 Days before COE (no Form TOPA).”

As for sellers and their agents, for any offers received on the RPA form, make sure to disclose in the Seller Counter Offer any tenants or occupants other than the seller, and attach the TOPA as needed. If a buyer has included the above-suggested language in “Other Terms,” the seller must comply with that requirement or counter it out.

Copyright© 2023 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 January 9, 2023. 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.