Resolutions for the New Year Hurry Up / Rush Closings

It’s that time of year again where folks take a few moments to reflect on the past year, and how each might make the next year better.  In this regard, I thought back on some of the transactions I encountered where a small change in the Contract preparation might have saved a lot of angst in having to later prepare an Addendum to Contract to correct what might otherwise have been a “standard” fill-in-the-blank.

This week’s blog is particularly relevant to “Hurry Up” or “Rush” transactions where customary Due Diligence periods are shortened, abbreviated, or otherwise affected by fast approaching Closing Dates. The preparer of the Contract must not “draw a blank” when it comes to filling in the blanks on the Contract.

What I’m alluding to is Paragraph 9(c) of both the AS IS and the Standard FloridaRealtors/FloridaBar form contracts*.  The first line of Paragraph 9(c) provides: “At least ____ (if left blank, then 15, or if Paragraph 8(a) is checked [a cash transaction], then 5) days prior to Closing Date (“Title Evidence Deadline”), a title insurance commitment issued by a Florida licensed title insurer . . . (“Title Commitment”) . . . shall be obtained and delivered to Buyer.”  Typically, this line is left blank and defaults to 15 days prior to Closing if a financed transaction, and 5 days prior to Closing if a cash transaction.

Paragraph 9(d) allows the buyer to obtain a Survey “on or before the Title Evidence Deadline”, that is to say, by the same deadline that the Title Commitment is due (15 days prior to the Closing Date if a financed transaction, and 5 days prior to the Closing Date if a cash transaction).

Under Paragraph 18.A.ii of the Contract, the “Buyer shall have 5 days after receipt of the Title Commitment to examine it and notify Seller in writing specifying defect(s), if any, that render title unmarketable.” This is known as the Title Objections Date.

Slightly different from the Title Commitment, under Paragraph 18.B., the buyer is required to deliver to the seller a copy of the Survey together with written notice of encroachments, setback line violations, easements, or other violations, that are disclosed on the Survey.  This Survey Objections Date is “within 5 days after Buyer’s receipt of [the] Survey, but no later than Closing.”

Ordinarily, the default dates (15 and 5, respectively), work swimmingly.  However, problems arise when a transaction is a “RUSH” – one where Closing is 15 days or less from the Effective Date of the Contract. If the preparer of the Contract is not careful, the Title Objections Date and/or the Survey Objections Date could fall on the same day the Contract is signed (possibly before!) – providing no opportunity for the buyer to have the title searched or the property surveyed.

Putting aside the riverboat gamblers who elect not to have title searched or the property surveyed (both of which we emphatically urge buyers to have done; in fact, title insurance is not available without a title search and only limited without a survey, nor is this office able to handle such a transaction), buyers need a reasonable opportunity to have the title searched and the property surveyed, AND an opportunity to review the results with enough time to make informed decisions on how best to proceed.

Generally speaking, a title search can be completed in 3-5 days (often sooner, particularly if we request “RUSH” service).  However, a survey usually takes longer – 7 to 10 days (sometimes sooner).  If “RUSH” service is requested on a survey there is going to be a premium added to the cost, and “RUSH” service is subject to a surveyor’s availability – it is not guaranteed.

Accordingly, when circumstances dictate that a Closing MUST BE completed, if even possible, on very short notice, it would be prudent to insert a number onto the blank line in Paragraph 9(c) that permits at least 1 day prior to the Closing Date to have the title searched AND the survey completed and reviewed for objections.

As always, should you have any questions with regard to Title and/or Survey Objections Deadlines, we urge you to contact one of the attorneys at Berlin Patten Ebling, or consult with your local real estate attorney, for additional guidance.

* the FR/BAR Residential Contract For Sale and Purchase, and the “AS IS” Residential Contract For Sale and Purchase (approved by The Florida Realtors and The Florida Bar)

 

Sincerely,

Berlin Patten Ebling, PLLC

Article Authored by Mark C. 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.

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