Condition of Property at Closing
QUESTION: I represent sellers who have their home under contract. The buyers conducted a walk-through, discovered several nail holes in the walls where my clients’ pictures were hung, and are now demanding that my clients fill those holes, paint the walls and then professionally clean the entire house. The buyers have said that if my clients refuse to do those things, they would be in breach of the Contract and the buyers would have no obligation to complete their purchase. Are they correct?
ANSWER: The buyers are not correct.
NCAR’s Offer to Purchase and Contract (form 2-T) contains very specific provisions regarding when buyers have the right to terminate a Contract. For example, Paragraph 4 (f) gives buyers the right to terminate a Contract for any reason or no reason during the Due Diligence Period.
The Contract also specifies a few circumstances that enable buyers to terminate the Contract after the Due Diligence Period ends without themselves being in breach of the Contract. The seller’s failure to materially comply with any of the seller’s obligations under Paragraph 8 of the contract is one such circumstance (see Paragraph 8(n) and the warning at the end of Paragraph 4). Another such circumstance is the non-satisfaction of the contingency set forth in paragraph 11 of the Contract. Paragraph 11 states that the buyer’s obligation to complete the transaction is contingent on the property being “in substantially the same or better condition at Closing as on the date of (the) offer, reasonable wear and tear excepted.” The word “substantially” is important because it means that the buyers’ performance of the contract will only be excused if the change in the condition of the property is material. While determining whether a change in condition is substantial or material may be difficult in some cases, it is clear that nail holes in the walls would not be considered a substantial or material change under any circumstances. If the buyers refuse to close because of nail holes, they will likely be found to be in breach of the Contract.
Form 2-T does not require sellers to either professionally clean the property or freshly paint the walls prior to Settlement. Therefore, unless the buyers have extracted a separate written agreement from the sellers to clean or paint the property, they have no legal basis to condition their performance on either action.
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