Don’t Forget Those Addenda!

When drawing up a real estate contract, there are many times when items outside of the four corners of the FAR/BAR need to be dealt with. While the contract does have the Additional Terms section (paragraph 20) for those matters, it is important not to forget about the standard FAR/BAR addenda. These addenda are designed to cover ancillary matters thoroughly with additional protections contemplated given the particular situation.

For properties that are in a homeowner’s association or condo association, most everyone uses addendum A. Condominium Rider and B. Homeowners’ Association/Community Disclosure as a matter of course. Oftentimes however, the other addenda are forgotten about when their utilization could be a timesaver and add extra protections one might not contemplate when writing in Additional Terms. Furthermore, as the language in the approved addenda was drafted by attorneys, real estate agents should rely on these addenda as much as possible, as most scenarios are covered in the many options. By utilizing these addenda, the agent avoids drafting language which could be deemed the practice of law without a license.

For example, a party may add the need for a pre or post-occupancy agreement in Additional Terms, but what may not be covered is who is paying for preparation of the agreement, what the rental terms are, deposits requirements, if any, maintenance responsibilities, and so on. The Pre-Closing Occupancy Rider (T) and Post-Closing Occupancy by Seller (U) allow the contract to be fully executed while giving extra time for a detailed agreement to be written up within a few days that is acceptable to the parties, allows selection of who is paying, specifies the basic terms of the occupancy term and monthly cost, if any, and so forth.

Another example of a helpful addendum is Addendum V. Sale of Buyer’s Property. Not only does this addendum raise the issue that the buyer needs to sell another property in order to purchase the subject property, it clearly makes the contract contingent upon such sale so that the buyer does not risk breaching the contract and losing their deposit in the event their home does not sell. It also lays out the specifics of when the contingency will expire and when notice needs to be given that the contingency has been met or cannot be met.

These couple of examples are some of the more common that we see, but there are many scenarios that come up where one of the standard addenda could be used to cover the particular situation sufficiently and competently to protect yourself or your client. If a scenario arises in the negotiation of a contract that is not covered by the contract itself, always check the addenda list first to see if something is there that will cover the situation, before attempting to customize language on your own. If you do use a contract addendum, be sure to check the box on the last page of the contract that the corresponding addendum is attached. If you do not check this box and an addendum is executed by all parties referencing the contract it will still be effective, however checking the box both notifies all parties including the closing agent that the addendum exists and it also prevents later issues.

Always contact your local real estate attorney for input on what addendum might be most appropriate for any given situation, and if one doesn’t exist, for customized language to be added to the Additional Terms section.

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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