With Florida’s insurance requirements becoming more stringent, Berlin Patten Ebling has seen an increase in roof replacements occurring during the closing process. For this blog, let’s use the following example: Buyer and Seller agree to include language in the additional terms section of the Contract that requires the Seller to replace the roof prior to closing. In this example, Buyer is purchasing with a conventional loan. With a roof replacement or re-roof, there are typically three things that need to occur in order for the Seller to convey marketable title with a re-roof: 1) the payment of the roof work; 2) the signing and the recording a Notice of Termination of Notice of Commencement; and 3) the closure of any and all permits associated with the roof work.
1. Payment
The work for the roof replacement will need to be paid in full. Some roofing companies will allow Seller’s to pay for the work from their closing proceeds while others require payment immediately upon completion of the work.
2. Notice of Termination
Before the roof replacement can begin, a Notice of Commencement (“NOC”) must be completed by the property owner (Seller) and recorded in the Public Records. The NOC affects title to the property as it provides lien rights for all contractors, subs, and materialmen who conducted work on the property and provided a notice to the owner. In order to provide marketable title to the Buyer and properly insure a mortgage, the NOC will need to be terminated at closing. To terminate the NOC, the Seller must sign and record a Notice of Termination of Notice of Commencement (“NOT”) alongside a final contractor’s affidavit. The contractor’s affidavit will state that all work has been completed and all work has been paid in full. Both the NOT and contractor’s affidavit are recorded at closing.
3. Closure of Permits
Presuming any necessary permits were pulled with the city or county, the Seller must close the permit(s) prior to closing. It is important to note that the AS IS Contract does not require a Seller to close out open permits prior to closing. When a re-roof is being completed during the closing process, it is prudent for additional language to be added to the AS IS Contract requiring the Seller to close out any open permits prior to closing and to bear any costs associated with the closure of the permits. A permit will be closed out once the work has been completed and the work has been inspected by an appropriate governmental authority to verify it was done correctly.
4. Miscellaneous
Berlin Patten Ebling has run into instances where lenders have specific requirements for re-roofs. On a recent closing, a lender required the re-roof to be completed 10 days prior to closing. With a traditional 30 to 45 day closing, this lender’s strict requirement further delayed the closing. When the Buyer is utilizing a loan to purchase a Property, make sure to discuss any requirements with the Buyer’s lender prior to going under contract.
As always, if you have any questions about the nuances of a roof replacement occurring during a closing, please be sure to contact your trusted real estate attorney.
