A buyer recently entered into a contract with a long-fuse (6-month) closing, which she negotiated intentionally to accommodate the sale of her existing investment property and facilitate a forward tax deferred exchange. The relinquished property was in New York City, a jurisdiction famous for closings fraught with intrigue and delay. Turns out, our buyer was born under a lucky star, and her Brooklyn property sold and closed – by New York City standards – in record time.
Meanwhile, back in Sarasota, the seller’s agent had repeatedly stated that her client would be able to relocate quickly once the buyer’s New York property sold, so the buyer’s agent dutifully specified in the sale contract that the closing date would be “on or before X date.” However, when the rubber hit the road and the buyer tried to enforce an earlier closing, the seller – who was enjoying his last, sunny, Siesta Key beachfront summer– decided that the closing date specified in the contract would be just fine with him, and an early move just wasn’t in the cards what with all this nice weather and such…
The moral of this story is that a contract contingency with no triggering mechanism is just a bunch of empty words, the written equivalent of a dog that’s all bark and no bite. In order to create an enforceable contingency, the closing date provision should have read something like: “Closing shall be X date, although Buyer may elect an earlier Closing Date by giving Seller at least 10 days advance written notice of the earlier Closing Date.” Short, sweet, to the point, and entirely clear about how the buyer goes about selecting and enforcing an earlier closing.
The same holds true for other types of contingencies. Case in point, that old favorite “this Contract is contingent upon Seller providing a written real property disclosure within three (3) days of the Effective Date.” Hard to say what exactly happens if the disclosure is not provided – i.e., does the contract terminate? Does the buyer get the earnest money deposit back? Is there a review and termination period subsequent to provision? Who knows? There is no stated consequence if the disclosure is not provided, and if it is the buyer’s desire to have a right of termination if the disclosure reveals information not to buyer’s liking, there is nothing stated that gives the buyer this option. Once again, just a bunch of words that do nothing but make the contract drafter’s shortcomings painfully apparent.
Which all brings me back to the advice I give agents time and time again: your contract is your stock in trade, and if you don’t pay attention to what you’re writing and its practical effects, then you are doing your clients a disservice. Just as important, you could be opening yourself up to a malpractice claim depending on the importance of the contingency.
As always, I encourage you to consult with an experienced real estate attorney if you have questions about how best to structure your contract and any particular provisions where deposits, closings, and other key elements are involved.
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