The Punch-less (List)

The day you have been waiting for has come.  You were just notified that your new condominium is ready for inspection and closing is set a few weeks out.   You immediately line up an inspector to assist in vetting your Unit.   Within moments after your inspection is completed, you are provided with a laundry list of unfinished, damaged, and/or non-functioning items (i.e., the “Punch List”).  Also some of the condominium amenities will not be completed by the time of your closing. You are a bit shell shocked.  You immediately call the Developer in a tizzy and they inform you they do not agree with all of the items on the Punch List.  They proceed to let you know that they will get to most of the items on the Punch List prior to closing but possibly after.  You instinctively call your real estate attorney to see how to best resolve these issues prior to closing.

Your attorney informs you that unlike the Florida Association of Realtor Residential Contract for Sale and Purchase or “As Is” Residential Contract for Sale and Purchase forms which are traditionally used for resales, your Developer prepared construction contract requires you to close without the requirement to remedy all items on the Punch List or complete all amenities, and the Developer can determine the reasonableness of the items to be repaired.  You then ask if you can push the closing date out or require the Developer to escrow an amount at closing to cover the items on the Punch List.  Unfortunately, your attorney reminds you that you were so excited when negotiating your contract that you did not want to go toe to toe with the Developer on these issues in fear of losing your Unit (and many Developers will not allow delayed closings for Punch List items anyway).

Your attorney informs you that you should proceed to closing in order to protect your deposit and hope that all Punch List items are resolved prior to the Closing Date.  As you probably could have suspected, not all Punch List items were fixed on the Closing Date and the Developer informs you that it could take weeks, if not months, to fully finish the Unit or complete the amenities.  So, what could you have done differently?

  1. Research the Developer and Builder.  Review other projects they have built in the area.  See if there are lawsuits or complaints online.  You can also ask local building officials if they are aware of any complaints.
  2. Address the Punch List issues up front.  Try to determine if the Developer will be agreeable to:
    • Finalize the Punch List items prior to closing.
    • Allow for an escrow holdback at closing.
    • Limit the timeframe in which Developer has to complete the Punch List items.
    • Allow for the project architect to be the determining authority in the event there is a conflict between Buyer and Developer on the reasonableness of a Punch List item.
    • Delay closing until the project amenities are complete and able to be used.
  1. Ask the Developer if they require that the Builder complete Punch List items in a specific timeframe.  Most Developers and Builders have a separate agreement that address construction related matters and punch list issues.
  2. Periodically obtain updates from the Developer or request an informal walk through during construction.  Developers usually will provide periodic updates but may be less likely to allow a Buyer on the property due to insurance issues.

Keep in mind that most Developer contracts are generally one sided and for good reason.  They are making a significant investment under the governance of lender guidelines.  Most of the good/reputable Developers are willing to work with Buyers to not only strike a balance on the issues above but also to accommodate Buyers when issues arise.  We have been fortunate to represent many of those Developers.

Should you have any questions regarding the foregoing, we urge you to consult with your real estate attorney.

Sincerely,

Berlin Patten Ebling, PLLC

Article Authored by Jamie A. Ebling, Esq.  jebling@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.

All rights reserved. This copyrighted material may not be re-published without permission. Links are encouraged.

www.berlinpatten.com 

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