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Weekly Q&As

Who pays owner association “transfer fees?”

Release Date: 09/06/2016

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

QUESTION: I’m representing a buyer who is closing on a property that has an owner’s association.  I am trying to figure out who is responsible for the payment of a “transfer fee” that’s being charged by the association’s management company.  I’ve reviewed the Offer to Purchase and Contract (form 2-T) and I don’t see any reference to transfer fees on the Contract anymore.  Who is supposed to pay it, my buyer or the seller?

ANSWER:  Assuming that what is meant by the term “transfer fee” is a fee for updating the association’s records to reflect the transfer of the property from the seller to the buyer, the fee is the seller’s responsibility in our opinion.

To understand the basis for our answer to your question, it is important to understand the way in which the latest version of the Contract (released July 2016) assigns responsibility for the payment of the various fees imposed by owner associations and their management companies when a property regulated by the association is bought and sold. 

According to the Contract, the buyer is responsible for the fees that are listed in paragraph 6(b).  These include fees for providing information required by the buyer’s lender and fees charged for the buyer’s future use and enjoyment of the property. 

The seller’s responsibility for association fees is addressed in paragraph 8(j).  In addition to being responsible for fees required to confirm the status of seller’s account regarding dues or assessments, and fees for completing the Disclosure Statement and resale or other certificates relating to a sale of the property, the seller is responsible for fees “…other than those fees required to be paid by Buyer under paragraph 6(b) above.” In other words, any fee not allocated to the buyer in paragraph 6(b) is the seller’s responsibility under the “catch-all” provision in paragraph 8(j)(ii). 

Applying this framework to your question, in our view a fee for updating the association’s records to reflect the change in ownership is not covered under paragraph 6(b) and therefore is the responsibility of the seller.

You are correct that the term “transfer fee” has been taken out of the Contract.  This was done primarily to avoid potential confusion with the term “transfer fee” as defined in a statute that prohibits the practice of including in an association’s governing documents fees that are payable in perpetuity to the association’s developer on all transfers of property in the development.  

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  2016. 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 a contract terminated if the buyer and seller exchange competing termination forms and cannot agree on who gets the due diligence fee?

Release Date: 08/30/2016

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

QUESTION: During the due diligence period, my seller received a Form 390-T signed by the buyer stating that the buyer would receive both the earnest money deposit and the due diligence fee on termination. My client disagreed with the due diligence fee portion of the buyer’s 390-T, and responded by sending the buyer a revised 390-T signed by the seller stating that the buyer would only receive the earnest money deposit on termination.

It seems like the parties both agree as to termination and who gets the earnest money, and I just received another offer. Is the contract terminated? Do I need to advise my client to seek legal counsel before he signs the new offer?

ANSWER: We don’t believe the contract is terminated yet based on your facts. Paragraph 6 of Form 390-T states: “This Termination of Contract and Release shall be effective on the date that it has been signed by all of the Parties.” Even though both parties have signed the same form, they disagree about the terms on which they will agree to terminate the contract. This means that both forms are merely an offer from each side to terminate, and unless one of them signs the other’s form, then the offer remains unaccepted.

Although paragraph 5 of Form 390-T only addresses disbursement of the EMD, the buyer has modified it to provide for a refund of the due diligence fee as well.  That’s okay, but unless and until the parties are on the same page regarding all terms of their agreement to terminate, their contract hasn’t been effectively terminated in our view.

You might want to inform the buyer’s agent that the buyer has no right to a refund of the due diligence fee absent a breach of the contract by your client; and if they continue to delay termination, they will risk losing their earnest money deposit as well. As for your client, Standard of Practice 1-7 requires you to advise them to seek legal advice before accepting the second offer, unless the acceptance of the second offer is contingent on the termination of the existing contract.

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  2016. 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.

 

 

What do I need to know about the FAA's new drone rule?

Release Date: 08/23/2016

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QUESTION: have heard that there is new federal rule regarding drones that is taking effect soon. What do need to know about that rule?

ANSWER:  In late June, the Federal Aviation Administration announced a new "Small Unmanned Aircraft Rule" which goes into effect on August 29, 2016. Under that rule, drones weighing less than 55 pounds will be able to be used for commercial purposes without first obtaining a "Section 333 waiver" from the FAA. This change will make it easier for brokers to use drones in the marketing of their real estate listings. However, brokers should know that many federal and state-imposed restrictions remain on the use of drones for commercial purposes.

Under the new rule, a pilot's license will no longer be required to operate a drone. Instead, drone users need only obtain a "Remote Pilot Certificate with a Small UAS Rating". This Certificate is less expensive and less time-consuming to obtain than a traditional pilot's license. To obtain one, a drone user must meet several eligibility requirements, including taking and passing an initial aeronautical knowledge test. The FAA estimates that the cost to obtain a Remote Pilot Certificate will be $150.00.

The new rule includes many restrictions on when and how drones can be used. For example, drones may only be operated during daylight hours. The person operating the controls must be able to see the drone at all times. Drones may not be operated over a person who is not directly participating in the drone operation, unless that person is under a structure or in a vehicle that will provide protection in the event of an accident. The drone's maximum groundspeed is limited to 100 miles per hour. A drone may not be operated more than 400 feet above ground level, unless it is within a 400 feet of a structure.

The new FAA rule does not address any of the privacy issues associated with drone use. However, state law continues to include several prohibitions: under NCGS §15A-300.1 (b)(2), drones may not be used to photograph a person without that person's consent.

An operator permit from the NC Division of Aviation is still required for all commercial drone operations in North Carolina. Details on the permitting process can be found on the NC Department of Transportation's website here.

 

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  2016. 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.

 

 

Are bathroom wall mirrors fixtures?

Release Date: 08/16/2016

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QUESTION: I recently attended a training class on the latest forms changes. The trainer said that bathroom wall mirrors are now fixtures regardless of how they are attached.  Is that so?  Why are bathroom wall mirrors now being treated differently from other mirrors?

ANSWER: “Bathroom wall mirrors” has been added to the laundry list of items specified as fixtures in paragraph 2(b) of the Offer to Purchase and Contract (form 2-T).  That part of the Contract now reads in relevant part, “all bathroom wall mirrors and all attached wall and/or door mirrors.” 

The change was made due to the prevailing expectation that bathroom wall mirrors will stay with the property regardless of the manner in which they are attached.  Perhaps that’s because there’s a universal expectation that a bathroom will have a mirror (or mirrors).  Thus, any bathroom wall mirror will now be considered a fixture even if it’s hung like a picture and easily removable.  Any other mirror will be considered a fixture only if it is attached to the wall in a more permanent way.

Of course, the parties may change the contract to provide otherwise.  For example, if the seller wants to take a bathroom mirror, the mirror should be listed in paragraph 2(d) as an item that will not convey.  Or, if the buyer wants the gilt-framed mirror hanging on a hook above the mantel in the living room to stay, the mirror should be listed as an item of personal property in paragraph 3.

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  2016. 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 client make changes to the pre-printed language on a NC REALTORS© form?

Release Date: 08/09/2016

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

QUESTION: My client received an offer from a buyer on a Standard Form 2-T, and before signing, my client crossed out paragraph 13 (“Delay in Settlement/Closing”) on the form. I told him not to, but he would not listen. The buyer initialed the change when he received the 2-T back. The transaction has been moving forward, however, the closing is scheduled for next week and the lender does not look ready to close. My client does not want to give an extension. Is this sale dead if we do not close on the scheduled date? Was my client allowed to cross out paragraph 13?

ANSWER: Your transaction is not dead if you do not close on the scheduled closing date. Paragraph 13 of the Offer to Purchase and Contract (Standard Form 2-T) not only gives the buyer a 14 day grace period, it also provides the seller with the right to terminate the sale in the case of a buyer’s delay beyond the grace period. Since your client crossed out all of paragraph 13 and did not specifically make “time of the essence” regarding Settlement, he will only be able to terminate the contract under North Carolina case law if the buyer does not close within a “reasonable” time. What constitutes a reasonable time is completely undefined and depends entirely on the particular circumstances.

Your client was allowed to cross out paragraph 13 of the standard form. Hopefully you were able to keep a writing, such as an email, to show that you told him not to delete any part of the form. Under the NC REALTORS© Forms Policy, “[r]evisions to the format or pre-printed content of any Transactional Form are prohibited.” However, this policy is meant to prevent parties or agents from changing the content of the form in such a way that the change is not apparent to other parties or agents involved the transaction. Deletions such as the one your client performed are obvious and provide documentation of the change such that everyone can be on notice.

You should know, however, that you do not have the same freedom as your client when it comes to making changes to the Standard Form 2-T. The purpose of this form is to define the legal rights of the parties to the real estate transaction. As an agent, and not a party to the contract, you are prohibited from practicing law under N.C.G.S. § 93A-6. If you were to make changes to the form, or even just recommend changes to your client, you could be violating the license law. Not every change to the Standard Form 2-T would be considered such a violation, but you should act cautiously in these kinds of circumstances and seek your own legal advice first. And, if you are part of a bigger firm, be sure to consult your firm’s internal policy on changes to forms.

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  2016. 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.