Which contractual obligations survive closing?

QUESTION: I have a question about paragraph 18 of Standard Form 2-T. Titled “Survival,” it states that if any provision of the contract is required to be “observed, kept or performed” after Closing, it shall survive Closing and remain binding on the parties until fully performed. That provision seems inconsistent with paragraph 4(h) of the contract which states that “closing shall constitute acceptance of the property in its then existing condition, unless provision is otherwise made in writing.” When does paragraph 18 apply and what are some examples of obligations that survive closing?

ANSWER: Paragraph 18 does not negate the limitation on buyers imposed by paragraph 4(h). The fact is that virtually all obligations imposed on the parties by Standard Form 2-T may be performed prior to Closing. Those obligations do NOT survive Closing, unless the parties agree otherwise.

A common example of such an agreement is where the seller agrees to complete repairs to the property but is unable to complete those repairs prior to Closing. In that circumstance, the parties do have the option of reaching an agreement for the seller to complete specified repairs after Closing. If the parties agree to such an arrangement, it is crucial that their agreement be set forth in a written instrument prepared by an attorney that recites the consideration necessary to make the agreement legally enforceable. By virtue of paragraph 18, the obligation imposed on the seller by such an agreement would survive Closing.

There are other examples of obligations that survive Closing. In some cases, the parties agree that the seller may remain in possession after Closing and attach Standard Form 2A8-T as an addendum to their contract. That form imposes various obligations on the seller that relate to the period after Closing such as the obligation to maintain the property and repair appliances. That form also obligates the seller to vacate the property no later than the end of the term specified. These obligations survive Closing by virtue of the language of paragraph 18.

Another example is the situation where the property is damaged after the parties are under contract, and the buyer elects to proceed with Closing even though the property has not been fully repaired. Paragraph 11 of Form 2-T states that, in that circumstance, the buyer is entitled to receive, in addition to the property, the proceeds of any insurance claim filed by the seller. If those proceeds are received after Closing, the seller’s obligation to deliver them to the Buyer would survive Closing by virtue of paragraph 18.

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