November 18th, 2024 at 1:45 pm
Multiple Choice Question: What should you do? Pick the best answer:
A. Print out all the documents, and require the buyer to sign them before you hand over the keys to the property.
B. Recommend to the seller to serve a Notice to Buyer to Perform (NBP).
C. Advise the seller in writing that we are unable to get the buyer’s signatures.
D. All of the above.
Answer: Answer A is wrong (so Answer D is wrong too). The RPA does not allow a seller to require that the buyer signs the seller documents before the seller hands over the keys. Additionally, the keys must generally be given to the buyer “on Close of Escrow” (see paragraph 7F). In our day-to-day practice, the keys are usually handed over after we have already confirmed that escrow has closed. Yet, for the buyer’s signatures to be meaningful, we need them before escrow closes, not afterwards.
Answer B is the correct answer! The NBP is not just used to ask a buyer to remove contingencies. The NBP can also be used to, among other things, require a buyer to return signed copies of the seller documents (see paragraphs 11F and 14C(2)(vii) of the RPA). If the seller serves a 2-day NBP to sign documents, and the buyer fails to sign within those 2 days, the seller can cancel (but must return the deposit to the buyer).
Answer C is a great idea if the seller decides to close escrow without the buyer’s signatures on the seller documents. But it makes sense to first serve the NBP (as stated in Answer B). If the buyer still doesn’t sign the seller documents after the 2-day NBP, the seller could decide to take on the risk of closing escrow, instead of cancelling. In that situation, make sure to inform the seller in writing that: (1) You have not been able to obtain the signed documents despite your repeated attempts; and (2) It’s against your advice for the seller to close escrow without obtaining those signed documents or discussing the matter with the seller’s own attorney as the seller deems appropriate. Be sure to get the seller’s written acknowledgment of receipt of your advice.
-Thank you to Stephanie Payab (Encino Office) for suggesting this week’s legal tip!
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