Seller obligation to deliver deed no later than settlement

QUESTION: One of my listings went under contract a month ago. The night before the settlement date, the closing attorney’s office contacted me and asked me for the seller’s deed. My client and I had never discussed the deed requirement. We both assumed the buyer’s attorney would handle it. Due to the short notice, my client was unable to deliver a deed by the settlement date. The buyer was fully prepared to close and is now alleging that my client has breached the contract and that the buyer is entitled to terminate the contract and recover damages. Is he correct?

ANSWER: Arguably yes. Paragraph 8(g) of the Offer to Purchase and Contract (Standard Form 2-T) states in part: “Seller shall execute and deliver a GENERAL WARRANTY DEED for the Property in recordable form no later than Settlement.” A court considering a buyer’s claim for damages might well regard the failure to comply with that obligation as a material breach of the contract that would entitle the buyer to the remedies described in paragraph 23(b).

While the seller may seek to delay Settlement so that a deed could be prepared, it is not at all clear that the seller is entitled to a delay. Paragraph 12 of Form 12-T states: “This paragraph shall apply if one party is ready, willing and able to complete Settlement on the Settlement Date but it is not possible for the other party to complete Settlement by the Settlement Date.” The buyer has a strong argument that since it was definitely possible for the seller to have a deed prepared prior to closing, the seller may not avail himself of the delay afforded by paragraph 12.

Listing agents should keep in mind that while it is customary in North Carolina for the buyer’s closing attorney to provide limited services for the seller, including preparing a deed, sellers cannot assume that those services will be performed by the buyer’s attorney. To avoid a problem, listing agents should discuss the seller’s obligation to deliver a deed with their clients once a contract is signed, and make sure that appropriate arrangements are made, either with the buyer’s attorney or someone else, to timely meet that obligation. The Professional Services Disclosure and Election Form (Standard Form 760) specifically includes “Seller Document – Deed Prep” on the line relating to attorney services. Use of that form by listing agents is highly recommended.

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