Does sellers involved in a dispute over the inspection contingency and inspection results sound familiar?
Recently engaged by the sellers, we negotiated a resolution quickly and the transaction settled. However, what I read in the Agreement of Sale when my clients hired me surprised me. Under Additional Terms was written: “Sellers may terminate this agreement if they have not entered into a fully executed agreement to purchase residential real estate within 14 days of this agreement.” The settlement date on their sale was 80 days out. The timing seemed to work, and the language seemed fairly tight. But was it? Test yourself and identify the problems or read on.
Under the language at issue, if the sellers aren’t in an agreement to purchase replacement property by the date given, do they have to immediately exercise their right to terminate their agreement to sell? What if the sellers want to keep their buyers on the hook while they continue their search for a replacement home beyond the 14 days? Can they wait to terminate their sale a week or a day before settlement on their sale? It isn’t clear. Nothing should be left to implication. The language should be complete.
Further, there were no additional terms delaying the onset of the buyers’ due diligence period beyond the initial 14 days when the sellers could unilaterally terminate. If the sellers had terminated and if the buyers had incurred costs for inspections, are buyers entitled to reimbursement? Again, the agreement is silent.
And what if the sellers are under agreement within the 14 days only to find their purchase agreement subsequently terminated because of their due diligence inspections or the denial of a mortgage?
You can easily see why our standard agreement is 14 pages. The authors considered the “what ifs” to assure that when the unanticipated occurs parties aren’t fighting over what each claims was implied by the language. In other words, anticipate the unanticipated and prepare an agreement that offers guidance or better yet, avoid the unlicensed practice of law and engage a qualified attorney to draft language that sufficiently protects the parties.