Editor’s note: this article was updated on Oct. 15, 2020 to reflect changes to the Agreement of Sale.
As a real estate professional on top of your game, you are undoubtedly aware that when a property is located within a condominium or other planned community, the seller has to provide certain documents, including a certificate of resale, copies of the declarations or restrictive covenants, bylaws and rules and regulations governing the association to the buyer before settlement. A buyer then has either five or seven days (depending on the applicable law) to review the documents and make a decision on whether or not to go forward with the purchase. During this review period, the buyer can terminate the agreement of sale for any reason whatsoever at no penalty, AND the buyer gets their deposit money back. That’s why it is so important to give the documents to the buyer earlier, rather than later in the transaction.
Knowing what documents to provide is pretty straightforward. Knowing when to provide them can be a bit more confusing, but always remember that sooner is better than later. HOW do you provide these documents?
There are basically two ways to deliver the resale documents to a buyer. You either give the documents to the buyer directly, or you give them to the buyer’s agent. If the buyer is represented by a buyer’s agent, then you know under the NAR Code of Ethics you are prohibited from having direct communications with the buyer. The buyer’s agent may, however, with the buyer’s approval, give specific authorization to the listing agent to deliver the resale documents directly to the buyer. Allowing a listing agent to deliver the documents directly to a buyer does not relieve the buyer’s agent of her responsibilities to the buyer to review those documents, but that is an article for a different day.
Under most circumstances the listing agent will provide copies of the resale documents to the buyer’s agent. The listing agent will want to get the documents to the buyer (or the buyer’s agent) as quickly and efficiently as possible so their seller can sooner breathe more easily about the transaction closing.
Oftentimes questions arise about when the time begins to run on the buyer to review the documents. Though there could be an argument that the clock should start when the buyer’s agent receives the documents, the law does note that the buyer’s right to terminate is based on the buyer’s receipt of the relevant documents. And since 2010, the PAR Agreement of Sale has noted that communication to a buyer agent is not sufficient for these documents.
Both the listing agent and the buyer’s agent should memorialize delivering the document. For the listing agent, it can be as simple as keeping a copy of a cover letter that accompanied the documents, or having the broker/agent/receptionist sign a receipt confirming they received what the listing agent says he delivered. The buyer’s agent should use the Receipt of Documents (“ROD”) Form. Used consistently, the ROD will establish the date from which the buyer has to consider the resale documents.
Two quick notes to buyer’s agents:
First, do not attempt to manipulate the process to delay delivery to your buyer. Though the Agreement (and the law) say that the buyer’s right to terminate doesn’t start counting down until they actually get the documents, as an agent you’re generally required to deliver relevant transactional documents promptly. Sitting on them for a period of time to extend your buyer’s right to terminate is potentially a legal and/or ethical problem.
Second, it is probably not enough to simply drop off the documents with your buyer and walk away. You should take time, at the very least, to review what the documents are (not necessarily what they contain) and to emphasize the importance of reviewing the documents before the time limit expires. The association documents exchanged in a resale are critically important to both the buyer and the seller and should be shared as soon as practical.