So you’ve entered a contract to sell your property. There are some repairs to be done, some which require permits, but the Buyer is willing to pay for the work to be done. The Buyer really wants the home and agrees to pay for the permitting, the work, and the materials. But what happens when the closing gets delayed because the work is not complete before closing, or more work needs to be done after the initial project is started? Who is responsible for the delay, the additional work, and the costs associated with all of it? Well, if you’re a frequent visitor to Berlin Patten Ebling blogs, you know that the answer is often found in the language of the contract.
A typical clause in a real estate contract requires the Seller to “maintain the property, including, but not limited to, lawn, shrubbery, and pool, in the condition existing as of Effective Date, except for ordinary wear and tear and Casualty Loss.” When a Buyer and Seller agree to improve the condition of the property, at the Buyer’s expense, it is best to make it clear in the contract how that gets accomplished and what happens if it does not get done before closing. For example, even if the Buyer is paying for the repairs, like replacing an HVAC unit, the permits and the inspections by the County will all fall under the Seller’s responsibility, as the Seller is still the owner of the property. If the repairs will not be completed prior to closing, there should be specific terms about how the Buyers, as the owners of the property after closing, will get permits transferred to them taking into consideration the legally required timelines for the transfer of permits, usually thirty days.
But what happens if the sale does not close? The Seller could be left with unfinished work, at the request of the Buyer. While finishing the repairs or improvements may add to the value to the property upon re-listing it, that is not always the case. Further, the repairs could delay in re-listing the property causing the Seller to lose money. One way to lessen the potential impact on the Seller is to require the Buyer to pay a separate deposit for the agreed-upon repairs/improvements that will be returned to the Buyer or applied to the purchase price when the property goes to closing. In the event it does not close based upon the Buyer backing out of the deal, the separate deposit can be given to the Seller in order to finish the work that was started.
What do all of these “what ifs” have in common? A strategy to protect our client through preparation and proper paperwork. Every step in the sale and purchase of real property can come with obstacles. The important thing to do is try to anticipate potential pitfalls and draft a contract or appropriate addenda to ensure your client is as protected as possible in the event of a dispute, delay, or other issues with the closing. Should you have a request to make repairs or improvements to the property prior to closing, make sure you Contact a qualified real estate attorney to assist you in drafting an appropriate contract or addendum.
Sincerely,
Mark C Mann., mmann@berlinpatten.com
Berlin Patten Ebling, PLLC
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.
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