In honor of Thanksgiving, we have a holiday themed fact pattern. Buyers and Sellers are set to close on a property the Monday after Thanksgiving. On Thanksgiving, the Sellers have their friends and family over for one last holiday dinner in the house. Sellers also decide this will be the first year they try to fry a turkey. Unfortunately, frying the turkey doesn’t go well and the palm trees catch fire. On top of that, one of the guests gets a little rowdy and belly flops into the beautifully maintained shrubbery in the back yard. The property is now left with burnt trees and ruined shrubs, just in time for closing.
The Buyer and Seller now wonder whether the FR/BAR contract contemplates unplanned events like these. Luckily, the contract does include a few sections to help us navigate what to do in the event of last minute damage to the property.
The first contract section to take a look at is “Property Maintenance”, Section 11 of the FR/BAR contract. This section requires that the Seller maintain the property in the condition existing as of the effective date. So, if a guest ruins the shrubbery or if the shrubbery becomes significantly overgrown, this continuing maintenance requirement would provide protection for the Buyer.
The next contract section that may apply is “Risk of Loss”, Section M of the FR/BAR contract. This section of the contract addresses damage due to casualty loss such as fire. If there is a casualty loss after the effective date of the contract, the Seller bears the cost of restoration up to 1.5% of the purchase price. If the required restoration cost is above 1.5% of the purchase price, Section M allows the Buyer to take the property as is with the 1.5%, or to cancel the contract and receive a refund of their deposit. For purposes of our fact pattern, it is worth noting that there is a small carve out in this section limiting Seller’s obligation with respect to tree damage to the cost of pruning and removal as opposed to full tree replacement. So in our fact pattern, the Buyers may end up with a few less palm trees in the back yard if the cost of removal is below the cost of replacement for the Seller.
As you can see, the FR/BAR contract can help us to resolve unique scenarios and last minute damage issues. However, these sections can be difficult to navigate and interpret. If you run into a scenario where you think that one of them may apply, it is important to speak to your local real estate attorney.
We wish you and your family a Happy Thanksgiving!
Sincerely,
Berlin Patten Ebling, PLLC
Article Authored by Jessica Featherstone, Esq. jfeatherstone@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.
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