Attractive Feature of AS IS Residential Contract

The Florida Realtors/Florida Bar AS IS Residential Contract for Sale and Purchase is the preferred form of Contract for many agents, in no small measure because of its very clear provisions on how and when a buyer may terminate a contract.  These terms are found in Paragraph 12 PROPERTY INSPECTION; RIGHT TO CANCEL.

Paragraph 12 is generally considered the place where Property Inspection rights are spelled out.  While this is accurate, 12(a) is also the place where a buyer can find the right to terminate the contract for any reason or no reason.  Specifically:

If Buyer determines, in Buyer’s sole discretion, that the Property is not acceptable to Buyer, Buyer may terminate this Contract by delivering written notice of such election to Seller prior to expiration of Inspection Period.

If, the property “is not acceptable to Buyer” – no reason is required – the choice to terminate is in “Buyer’s sole discretion” – the buyer needs no other consent or joinder.

There are only a few key conditions to observe:

  •          When can termination occur?
  •          How does a buyer communicate cancellation to a seller?  Is a writing required?
  •          Do you need seller consent?

1. When: The timing of the buyer’s right to cancel is defined in Paragraph 12. The buyer has up to 15 days, if the default date is used (less or more if a different number of days is inserted into the blank), to have the desired inspections performed. The buyer may terminate the contract for any reason, provided the termination is made prior to the end of the Inspection Period. This is a key date that should be noted at the time the contract is signed. A purported termination communicated after this date is ineffective and invalid.

2.How:  The prudent course is to effect a termination in writing.  Though not required, termination can be made in the form of a Release and Cancellation of Contract.  In my opinion, this is the most complete and effective form of termination. The Release and Cancellation of Contract form gives the required notice, provides mutual releases, and directs the holder of the deposit funds as to how they are to be disbursed.

In the alternative, though not as comprehensive, Standard O (from Section 18) of the contract, permits notice and delivery of a termination to be given by or to the attorney or broker (agent) representing the receiving party via mail, personal delivery, or electronic (including PDFs) media. An email from a buyer’s agent to the listing agent, clearly indicating the buyer’s intent to cancel before the end of the Inspection Period, is sufficient. Beware, however, that actual delivery of an email is going to be more difficult to prove in the event a seller tries to “avoid” or otherwise challenge a proper termination.

Buyers’ Agents: If your buyer chooses to terminate the deal, you should preserve proof that the notice was sent before the expiration of the Inspection Period. For example, save a copy of the email you sent to the listing agent indicating the date and time of the notification. Also, try to obtain an acknowledgement of receipt from the listing agent.

3.Seller Consent: Nothing in the AS IS contract requires the seller to approve or consent to the buyer’s cancellation. While an escrow agent may require the seller to execute a Release and Cancellation notice before returning deposit money (a prudent course of action), that does not affect the buyer’s delivery of a cancellation notice.

Remember, requirements vary depending on the form of contract used, so it is important to review carefully the contract you choose to determine when a party may cancel and what must be done to terminate effectively.

As always, should you have any questions, please contact your real estate attorney.

Sincerely,

Berlin Patten Ebling, PLLC
Article Authored by Mark Hanewich  mhanewich@berlinpatten.com

This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.

All rights reserved. This copyrighted material may not be re-published without permission. Links are encouraged.

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