General Property Repairs under the “Standard Contract”

Are the Property Inspection and Repair provisions in the “AS IS Contract” and the “Standard Contract” similar? 

Unequivocally, NO! The “Standard Contract” is the FloridaRealtors/FloridaBar Residential Contract For Sale and Purchase. It should not be confused with the “AS IS” Residential Contract For Sale and Purchase (both of which have been updated, revised, and approved by The Florida Realtors and The Florida Bar, version (10/21) © 2021). These two contracts contain special and distinctive provisions for property inspection and repair.

What are the Seller’s obligations to make general property repairs when using the “Standard Contract”? 

The first step in determining if any general property repairs (“General Repair Items” – Line 288) will be required is for the Buyer to have a professional inspector conduct a general inspection of the Property. Once a General Inspection report is complete, the Buyer must provide to the Seller, before the expiration of the Inspection Period, either:

  1. Written notice of any General Repair Items the Seller is obligated to repair or replace, or
  2. Provide a copy of the portion of the Professional Inspector’s written report dealing with such items

What happens next after the Buyer has made a written demand to make required repairs or replacements?

The Seller has ten days after receipt of the Buyer’s written notice or receipt of the Buyer’s General Inspection report to do either of three (3) things:

  1. Have the reported repairs to General Repair Items completed* at Seller’s expense, or
  2. Have repairs estimated by an appropriately licensed person and deliver a copy to the Buyer, or
  3. Have a second inspection made by a Professional Inspector, and provide a copy of the report and estimates of repairs to the Buyer

* This option requires that the Seller complete the repairs before the end of those ten days

What happens if the Seller’s second Professional Inspector’s report differs from the Buyer’s Professional Inspector’s report?

If the Buyer’s and Seller’s inspection reports differ and the parties cannot resolve the differences, the Buyer and Seller must choose and equally split the cost of a third Professional Inspector; whose written report shall be binding on the parties.

The cost to repair the General Repair Items exceeds the amount the Seller is contractually obligated to pay (the “General Repair Limit” – Line 144); can the Buyer terminate the Contract?

If the cost to repair General Repair Items exceeds the General Repair Limit, then within five days after a party’s receipt of the last estimate, there are only two (2) options:

  1. The Seller may elect to pay the excess by delivering written notice to the Buyer, or
  2. The Buyer may deliver written notice to the Seller designating which repairs of the General Repair Items the Seller shall make (at a total cost to the Seller not to exceed the General Repair Limit). It can also agree to accept the balance of the General Repair Items in their “as is” condition.

The only way to terminate a contract concerning General Repair Items is if neither party delivers the required written notice to the other, either party may terminate the Contract. This is the “who blinks first approach” that can span the whole 5-day period. For example, if the Seller does not give the written notice that it will pay the excess over the General Repair Limit, AND the Buyer does not give the written notice designating which repairs are to be made up to the General Repair Limit, accepting the rest “as is,” then the Contract can be terminated.

How should the General Repair Limit be completed when preparing the Standard Contract?

The purpose of the General Repair Limit is to put a cap on the amount the Seller is liable for paying. Consequently, the Buyer needs to make sure that the cap on the General Repair Limit is high enough to cover any potential repairs that the Buyer reasonably expects the Property may need after viewing the Property.

Should you encounter a situation where the cost of repairs exceeds the General Repair Limit, the Seller balks at covering certain General Repair Items, or have questions or concerns regarding the terms and provisions of the Standard Contract when it comes to inspections and repairs, we urge you to contact or consult with your local real estate attorney for additional guidance.

 

Sincerely,

Mark Hanewich, Esq. mhanewich@berlinpatten.com

Mr. Hanewich focuses his practice in the areas of commercial and residential real property transactions for individuals, business, and developers in all phases of real estate from acquisition through mortgage financing, development, sales, and corporations from entity formation, preparation of partnership and operating agreements, to oversight and preparation of documentation.

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