Can’t Find a Date?
A buyer’s offer was conditioned on the sale and settlement of his other property and the buyer’s agent used the appropriate PAR addendum, which included the date by which his property was to be under agreement. In the event the buyer’s property was not under agreement by that date, however, the seller had a unilateral right to terminate the Agreement.
For some reason, the buyer’s agent inserted a note in the Special Clauses section of the Agreement of Sale that “settlement was to occur 60 days after buyer’s property comes under Agreement of Sale.” Despite buyer’s effort to sell, no one was interested. After six months, the buyer decided that he would prefer to terminate his purchase obligation and remain in his existing home. When he questioned his agent as to his right to terminate the Agreement, he was met with a blank stare. That is when the agent called the Legal Hotline.
The various contingencies for the sale and settlement of other property all provide a deadline for buyer’s property to be under Agreement of Sale. If a sale is not achieved by that date, only the seller can terminate the Agreement of Sale. Of course, there is a drop-dead date when either party can terminate the Agreement of Sale: the date of settlement. PAR’s Standard Agreement of Sale provides that nothing extends the date of settlement other than the mutual agreement of buyer and seller. So, if the form had been used properly, the buyer would have to continue his efforts to sell the property until the date of settlement in his purchase agreement. After that, he could terminate his obligation to purchase and happily remain in his home.
Unfortunately, the buyer’s agent tinkered with the Agreement of Sale by not including a date certain by which settlement was to take place. And the Special Clause created a floating settlement date which, in this case, was unlikely ever to be achieved. Technically, a buyer is obligated to continue marketing his property until it sells and then he has 60 days by which to settle on his purchase obligation. In a better market, where buyers are available, the seller is not likely to hold out hope that her buyer will eventually sell his property. But in today’s market, which is barely lukewarm, a seller may very well keep her buyer on the hook until either he sells his property or the date for settlement comes and goes. And, if there is no settlement date, does that mean that the buyer remains on the hook, obligated to offer and has to continue offering his property for sale for weeks, months or years?
This is but one example of how agents seek to avoid entering a specific timetable in the Agreement. Here is rule that is fairly simple: all blank spaces in the Agreement should be completed with a date or a number of days, as appropriate. Now, reread the previous sentence.
The advanced thinkers in the group may be questioning whether the original Agreement of Sale was ever enforceable, which called for settlement 60 days after the buyer’s property comes under agreement. Pennsylvania’s Statute of Frauds requires that all agreements for the sale of real estate include a settlement date. In this case, we had no specific settlement date, but rather a formula by which settlement could be calculated. It is an open question whether this calculable settlement date satisfies Pennsylvania’s Statute of Frauds, or whether the buyer could have escaped the agreement for its lack of a specific date. The preferred practice would have been for the buyer’s agent to have inserted a date certain in the original Agreement of Sale.
Copyright © James L. Goldsmith, Esquire, CALDWELL & KEARNS, P.C., 2012
All Rights Reserved
Jim Goldsmith is an attorney with Caldwell & Kearns and serves as general counsel to PAR. A substantial portion of his practice is dedicated to providing advice and counsel to real estate licensees. He and his firm represent and defend real estate salespersons and brokers in civil lawsuits and licensing claims across the Commonwealth. Jim also defends REALTORS® in disciplinary hearings conducted by the Real Estate Commission. He routinely counsels employers on employee relations issues and is one of the voices of the PAR Legal Hotline. He may be reached at www.realcompliance.com.