RRT compatible with MCOCA

The Standard Forms Committee decided earlier this month to approve and publish a revised Repairs/Corrections Required by Third Parties Addendum to the Agreement of Sale (PAR Form RRT). The revisions make Form RRT more compatible with new point-of-sale procedures following the passage of amendments to the Municipal Code and Ordinance Compliance Act.

If you don’t remember, MCOCA sets guidelines that all municipalities must follow if use and occupancy permits are required prior to a sale (for a more in-depth review of MCOCA and its application, check out this article). Before these amendments, standards differed by municipality and were often a source of frustration for buyers and sellers. MCOCA requires that a municipality issue one of three types of use and occupancy permits for a property, depending on the nature and severity of ordinance violations found, which allows the transaction to continue to settlement.

The old Form RRT was meant to address the point-of-sale inspection process under the old system, where the parties either updated the property to the satisfaction of the municipality prior to settlement or the buyer would put a sum of money into an escrow account for the cost of the repairs. Now that a permit must be issued and there is no need to delay settlement to account for repairs, some wording in Form RRT was changed to accommodate the new practice.

Now, Form RRT is worded in a way which presumes that municipally-required repairs or improvements will be done after settlement, and that a buyer understands that he or she will take whichever type of use and occupancy permit is issued by the municipality. It also makes a distinction between municipally-required repairs and those which are mandated by a mortgaee or insurer (which are not in the jurisdiction of MCOCA). Typically, mortgagees and insurers will want improvements made prior to settlement; if that is the case, new language in Form RRT makes it clear that asking a buyer to sign a pre-settlement possession agreement is not, in and of itself, an unreasonable requirement.

To review the new form for yourself, check out the draft available on the Standard Forms page of PARealtor.org, filtered by “2018 revisions.” And make sure you take a look at the revised Guidelines for Preparation and Use for a more detailed explanation of how to use the form in different circumstances.