Zero-Sum Game?

October 21, 2016

How many times have you received or drafted a standard Florida Realtors/Florida Bar (“FRBR”) Contract with the General Repair Limit, WDO Repair Limit and Permit Limit labeled as “$0.00”? This happens more frequently than you might think. There are some that believe that by simply putting “$0.00” in the blanks the contract automatically converts to a FRBR “AS-IS” Contract. That is simply not the case for a few reasons:

Unlike the FRBR AS-IS Contract, the Standard FRBR Contract contemplates, among other things:

That a licensed home/pest inspector perform inspections on the Property pursuant to paragraph 12;
That certain items (as defined within the Contract) be free of leaks, water damage, or structural damage and in Working Condition;
That the Buyer specifically inform the Seller of any General Repair Items that are not in a condition required under Paragraph 12(b)(ii) by delivering written notice to Seller and upon written request by Seller a copy of the portion of the Professional Inspection report dealing with such items (failing which the Buyer waives the Buyer’s right to have such items repaired);
That the Seller have the General Repair Items estimated by a licensed individual or seek a second inspection;
That the Buyer deliver a copy of the WDO Inspection report to the Seller within the Inspection Period evidencing any WDO infestation or damage found;
That the Seller obtain an estimate for WDO damage with necessary corrective treatment (if any) with a copy delivered to Buyer;
That the Seller deliver cost estimates to the Buyer to remedy Permit Inspection Items. The As-IS Contract places the burden on the Buyer to obtain estimates for any open Permits but does require the Seller to provide non-monetary assistance in remedying; and
That the Seller retains the option to make repairs in excess of the Repair Limit.

With all of that said, the greatest misconception is that inserting $0.00 for the Repair Limit affords the Buyer the same right to terminate as does the As-IS Contract if the inspections reveal that the property requires repairs. That is not the case, and in fact, the converse may be true. Remember, the advantage to the As-IS form contract from the Buyer’s perspective is that the Buyer retains the unilateral right to terminate for any reason if the Buyer does not like the inspection results. Simply adding “$0.00” to the standard contract does not afford the Buyer the same unilateral termination rightsif the Buyer does not like the results of the inspection. In fact, if you represent a Buyer and allow the Seller to place $0.00 for the Repair Limit, you may be effectively giving the Seller control over whether repairs are to be made or not to be made, regardless of whether or not the Buyer wishes to proceed with the transaction after the Buyer’s inspections.

As always, if you have any questions about the use of the FRBR Contract or As-Is Contract, we urge you to consult with your real estate attorney.

Sincerely,

Berlin Patten Ebling, PLLC

Article Authored by Jamie 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.

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