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Weekly Q&As

Can the buyer come onto the property after closing while the seller is still in possession?

Release Date: 08/08/2017

This email address is being protected from spambots. You need JavaScript enabled to view it., Martin & Gifford, PLLC

QUESTION: I represented the buyer on a transaction that has just closed.  The contract included a Seller Possession After Closing Agreement (form 2A8-T) that permits the seller to remain in possession of the property for 3 weeks.  The buyer wants to get the ball rolling on ordering new floor coverings throughout the house, but the seller is refusing to allow the buyer’s carpet man to come into the house to do measurements.  Can the seller refuse to allow the new owner to come onto the property she has just bought?

ANSWER: Yes. The Seller Possession After Closing Agreement is a type of lease that is governed by the laws relating to leases.  As a general proposition, if a lease does not provide to the contrary, the landlord has no right of entry upon the leased premises during the term of the lease.  If a landlord desires a right of entry for inspections, to make repairs or for other purposes, a provision should be inserted in the lease to that effect.  Unlike the Residential Rental Contract (from 410-T), the Seller Possession After Closing Agreement does not contain a provision that reserves a right of entry for the buyer/new owner; thus, your client likely does not have any right of entry without the seller’s consent. 

As prominently stated in the “Warnings” box at the top of the Seller Possession After Closing Agreement, the form “does not address important issues typically addressed in a residential lease drafted for a long-term occupancy.”  We are not saying that a long-term rental agreement should necessarily have been used in your situation instead of the Seller Possession After Closing Agreement.  In fact, the presence of a right-of-entry provision doesn’t guarantee a landlord a right of entry if the tenant refuses to allow it.  It would give the landlord a right to evict the tenant for breach of the lease, but in a short-term lease, how practical would it be to go through an eviction proceeding?

Your situation illustrates the fact that seller possession after closing and buyer possession before closing arrangements should be avoided if at all possible and, if absolutely necessary, limited to the shortest period of time possible.  The shorter the time period, the less likely a problem will arise like the one your client is encountering.

If a party to a transaction anticipates a need to access the property during a period of occupancy by the other party, they could attempt to negotiate the inclusion of a provision that would permit such access.  Such a provision should be drafted by an NC-licensed real estate attorney.

 

NC REALTORS® provides articles on legal topics as a member service. They are general statements of applicable legal and ethical principles for member education only. They do not constitute legal advice. The services of a private attorney should be sought for legal advice.

© Copyright  2017. North Carolina Association of REALTORS®, Inc. This article is intended solely for the benefit of NC REALTORS® members, who may reproduce and distribute it to other NC REALTORS® members and their clients, provided it is reproduced in its entirety without any change to its format or content, including disclaimer and copyright notice, and provided that any such reproduction is not intended for monetary gain. Any unauthorized reproduction, use or distribution is prohibited.

 

 

Does a client have to provide their information on the Notice Information page of the contract?

Release Date: 08/01/2017

This email address is being protected from spambots. You need JavaScript enabled to view it., Martin & Gifford, PLLC

QUESTION: In the updated Offer to Purchase and Contract (Form 2-T), a new note, outlined in blue, appears at the top of the Notice Information page. It says:

“NOTE: INSERT AT LEAST ONE ADDRESS AND/OR ELECTRONIC DELIVERY ADDRESS EACH PARTY AND AGENT APPROVES FOR THE RECEIPT OF ANY NOTICE CONTEMPLATED BY THIS CONTRACT. INSERT ‘N/A’ FOR ANY WHICH ARE NOT APPROVED.”

Does this note mean that a client now must provide their personal contact information to the other party? Also, does the form have to be printed in color now given the blue and red boxes throughout the new form?

ANSWER: The answer to both questions is “no.” The new note on the Notice Information page is not intended to override paragraph 21 of the contract. Paragraph 21 clearly states that “[a]ny notice or communication to be given to a party herein, and any fee, deposit or other payment to be delivered to a party herein, may be given to the party or to such party’s agent.” An agent may simply put “N/A” in any blank where their client’s information is requested on the Notice Information page if their client does not want to be contacted.

It is not necessary to print the new forms in color, but you may do so if you wish.

 

NC REALTORS® provides articles on legal topics as a member service. They are general statements of applicable legal and ethical principles for member education only. They do not constitute legal advice. The services of a private attorney should be sought for legal advice.

© Copyright  2017. North Carolina Association of REALTORS®, Inc. This article is intended solely for the benefit of NC REALTORS® members, who may reproduce and distribute it to other NC REALTORS® members and their clients, provided it is reproduced in its entirety without any change to its format or content, including disclaimer and copyright notice, and provided that any such reproduction is not intended for monetary gain. Any unauthorized reproduction, use or distribution is prohibited.

 

 

How should a power of attorney be signed?

Release Date: 07/25/2017

This email address is being protected from spambots. You need JavaScript enabled to view it., Martin & Gifford, PLLC

QUESTION:  I have been asked to list a property that is owned by an elderly couple. I'll call them Charles and Ann Jones. Charles is suffering from dementia. However, he signed a Durable Power of Attorney several years ago that authorizes Ann to enter into real estate transactions on his behalf. I want to make sure Ann signs my listing agreement properly as well as any subsequent documents such as an Offer to Purchase and Contract. How should Ann sign these documents on behalf of her husband?  

ANSWER:  In North Carolina, a power of attorney is defined as a written instrument granting power in an agent, usually referred to as an "attorney-in-fact", to transact business for his or her principal. A written power of attorney is considered an agency contract that creates a principal-agent relationship.

Powers of attorney are "strictly construed" which means that they grant only the powers enumerated in the writing. Brokers should review any power of attorney given to them to be sure it authorizes the named attorney-in-fact to engage in real estate transactions on behalf of the named principal.

North Carolina's statutes authorize powers of attorney to be signed one of two ways (see NCGS §§ 47-43.1, 47-115). Our recommendation is that the attorney-in-fact sign all real estate-related agreements by signing the principal's name, adding the word "by", signing the attorney-in-fact's name and, finally, adding "under POA". In your fact situation, the listing agreement and all subsequent agreements should be signed Charles Jones by Ann Jones, under POA. Signing in this fashion makes it clear that Charles is a party to the agreements.

An alternative, also considered acceptable, is for the attorney-in-fact to sign his or her name as attorney-in-fact for the principal. In other words, it is perfectly legal for your listing agreement to be signed: "Ann Jones, attorney-in-fact for Charles Jones". 

 

NC REALTORS® provides articles on legal topics as a member service. They are general statements of applicable legal and ethical principles for member education only. They do not constitute legal advice. The services of a private attorney should be sought for legal advice.

© Copyright  2017. North Carolina Association of REALTORS®, Inc. This article is intended solely for the benefit of NC REALTORS® members, who may reproduce and distribute it to other NC REALTORS® members and their clients, provided it is reproduced in its entirety without any change to its format or content, including disclaimer and copyright notice, and provided that any such reproduction is not intended for monetary gain. Any unauthorized reproduction, use or distribution is prohibited.

 

 

Can a buyer do a cash/loan switch-er-oo?

Release Date: 07/18/2017

This email address is being protected from spambots. You need JavaScript enabled to view it., Martin & Gifford, PLLC

QUESTION: In the latest version of the Offer to Purchase and Contract (form 2-T; copyright 7/2017), there’s a change in paragraph 5(a) I don’t understand.  Before the change, the buyer had to check whether they did or did not have to obtain a loan in order to purchase the property. Now the buyer has to check whether or not they “intend” to obtain a loan to purchase the property.  Why the change in wording?  Why does it matter whether the buyer says they don’t “have” to obtain a loan or they don’t “intend” to obtain a loan?  If they demonstrate they can pay cash, what business is it of the seller if the buyer ends up getting a loan?

ANSWER: First of all, we disagree that it doesn’t necessarily matter to the seller if a “cash” buyer ultimately gets a loan to pay for the property.  For example, assume a seller is evaluating two offers.  The first one is a “cash” offer and the second one involves financing.  The second offer is for more money, but the seller decides to accept the first offer because the first buyer demonstrates that they can pay cash for the property.  After the contract is signed, the buyer announces that they will be obtaining financing.  Although it’s true that the seller knows the buyer will be able to pay cash if there’s a problem with the loan, it’s also possible that had the seller known the first buyer would be seeking financing, they may have accepted the second offer for more money. 

The change will NOT prohibit a “cash” buyer from deciding to finance their purchase after contract formation, but it will prohibit a buyer who is acting in good faith from leading the seller to believe that they are going to pay cash when in fact they intend to get a loan. In our view, a buyer who misrepresents their intent to pay cash is arguably in breach of contract and subject to losing their earnest money deposit.  Of course, the buyer’s true intent may be difficult to prove, but it is hoped that the new wording will deter a conscientious buyer from using the loan representation in a way that is potentially misleading to the seller. 

 

NC REALTORS® provides articles on legal topics as a member service. They are general statements of applicable legal and ethical principles for member education only. They do not constitute legal advice. The services of a private attorney should be sought for legal advice.

© Copyright  2017. North Carolina Association of REALTORS®, Inc. This article is intended solely for the benefit of NC REALTORS® members, who may reproduce and distribute it to other NC REALTORS® members and their clients, provided it is reproduced in its entirety without any change to its format or content, including disclaimer and copyright notice, and provided that any such reproduction is not intended for monetary gain. Any unauthorized reproduction, use or distribution is prohibited.

 

 

Is the Contingent Sale Addendum subject to the 14-day delay period in Form 2-T?

Release Date: 07/11/2017

This email address is being protected from spambots. You need JavaScript enabled to view it., Martin & Gifford, PLLC

QUESTION: One of my listings is under contract and subject to a Contingent Sale Addendum (Form 2A2-T). The settlement date passed six days ago, and the buyers’ agent has just today sent me a notice of termination with a request to return the Earnest Money Deposit (“EMD”) to the buyers. I told the buyers’ agent that my sellers were entitled to the EMD and that they would not consent to the buyers’ receiving a refund.

The buyers’ agent argued that because our transaction was still within the 14-day delay window in the Offer to Purchase and Contract (Form 2-T) that the buyers time for terminating had not yet expired. Is the buyers’ agent correct?

ANSWER: No. Paragraph 1(b) of the Contingent Sale Addendum provides that “[i]f there is a Contract For Buyer’s Property, but the closing on the sale of Buyer’s Property has not occurred by the Settlement Date of this Contract, then Buyer may terminate this Contract within three days following the Settlement Date of this Contract.” Form 2A2-T states that TIME BEING OF THE ESSENCE applies to this provision. This means that strict compliance to the deadline is necessary for compliance.

Paragraph 13 of the Form 2-T is clear that the Settlement Date does not change when there is a delay. Instead, it explains that the Delaying Party can still close within 14 days as long as they are acting in good faith and with reasonable diligence toward Settlement. Because Form 2-T does not adjust the Settlement Date in the event of a delay, the three-day deadline in paragraph 1(b) of the Contingent Sale Addendum does not move. From the Settlement Date, a buyer therefore only has 3 days to terminate under Form 2A2-T.

Applying the foregoing to your case, the buyers have missed their ability to terminate and receive a refund of their EMD under the contingent sale addendum. Your seller clients are entitled to keep it. However, the expiration of the three-day period in the Contingent Sale Addendum did not affect the buyers’ right to close. Had the buyers not terminated, they could have attempted to complete the sale since the 14-day delay period had not yet passed.

 

NC REALTORS® provides articles on legal topics as a member service. They are general statements of applicable legal and ethical principles for member education only. They do not constitute legal advice. The services of a private attorney should be sought for legal advice.

© Copyright  2017. North Carolina Association of REALTORS®, Inc. This article is intended solely for the benefit of NC REALTORS® members, who may reproduce and distribute it to other NC REALTORS® members and their clients, provided it is reproduced in its entirety without any change to its format or content, including disclaimer and copyright notice, and provided that any such reproduction is not intended for monetary gain. Any unauthorized reproduction, use or distribution is prohibited.