The revisions to the approved forms were adopted in June 2015 (with a further amendment to CBS1 approved December 2015) and will become mandatory January 1, 2016. The Real Estate Commissioners have indicated that the moratorium on revisions to the forms will continue until January of 2019, unless there are statutory changes, court decisions, or attorney general opinions warranting earlier revisions.
Here is a brief overview of some of the changes one will find in the 2016 Contract:
- The Contract is not assignable, unless otherwise stated in Additional Provisions (Section 2.2), Assignability). Previously the Contract could be assigned by the Buyer without the Seller’s consent.
- There is no longer any need to decide whether an item is a fixture to be included in the sale of the Property. The sale now includes the listed items. This section also revises and adds to the items which may be owned by the Seller, such as solar panels (Section 2.5.1 Inclusions). If the item is leased, (solar panels for example), these must be listed under the Due Diligence Documents in Section 10.
- Seller concessions were rewritten for additional clarity. This concession is not limited to closing costs and prepaid items. The Buyer may use the concession for anything permitted by the Buyer’s lender (Section 4.2).
- An appraisal is now defined and may include certain lender requirements, replacements, removals or repairs necessary to the property, as a condition for the property to be valued at the Appraisal Value (Section 6.1).
- An appraisal resolution deadline date has been added to meet the requirement for the Appraisal Resolution Deadline in Section 188.8.131.52 (Section 3, Dates and Deadlines).
- If a lender imposes any requirements, replacements, removals or repairs to be made to the Property, the Seller will have the right to terminate the Contract, unless prior to termination, the parties have entered into a written agreement regarding the Lender Requirements, or the Lender Requirements have been completed or the Buyer has waived the satisfaction of the Lender Requirements in writing (Section 6.3).
- For title insurance, the sub-section on Owner’s Extended Coverage (OEC) has been revised with a statement that the Title Insurance Company may require a New Survey or New ILC to provide OEC (Section 8.1.3) The same section confirms that the Buyer has a right to object to the title commitment under Section 8.4.
- The Title Advisory section has been revised to include the statutory notices for Surface Use Agreements, Oil and Gas Activity and Additional Information on these activities (Section 8.7.1 through section 8.8).
- The terms, “New ILC, New Survey” replaces “Current ILC, Current Survey” and now includes a previous ILC or survey which may be certified and updated to a date after the contract date (Section 9.1.1 through 9.3) This section clarifies whether the Seller or Buyer will order a New ILC or New Survey and pay for the cost. Buyer may select a different New IlC or New Survey, if there is not additional cost to the Seller, or waive the New ILC or New Survey prior to the Seller incurring any cost (Section 9.2).
- Title will be conveyed subject to any special assessment, if the improvements were not installed as of the date of the Buyer’s signature on the Contract, whether assessed prior to or after the Closing (Section 13).
- The section on Causes of Loss and Insurance has been revised. If the Seller receives an insurance pay-out, the Seller must make reasonable efforts to repair the property before the Closing. If the Seller has not received the insurance proceeds prior to Closing, the parties may extend the Closing to have the repairs made or, at the option of the Buyer, the Seller must assign the insurance proceeds to Buyer at Closing (if acceptable to the insurance company and Buyer’s lender), or enter into a written agreement requiring the Seller to escrow at Closing, from Seller’s sale proceeds, the amount the Seller has received and will receive due to such damage, not exceeding the total Purchase Price, plus the amount of any deductible that applies to the insurance claim (Section 19.1).
- The section on Default and Time of Essence has been clarified to state that all dates and deadlines in the Contract are strict and absolute (Section 21). If Buyer is in default and the choice for Specific Performance is checked, the Contract now states that the parties agree that the Earnest Money is not a penalty, and the amount is fair and reasonable (Section 21.1.1). If Liquidated Damages applies to any default by the Buyer, the section has revised to state that the Seller may cancel the Contract. In addition, if the Seller retains the Earnest Money, this will not release the parties from all obligations under the Contract (Section 21.1.2).
- In the section on Mediation, a mediated settlement is binding only after the parties have agreed in writing to the settlement. The requirement for mediation does not prohibit either party from filing a lawsuit and recording a lis pendens affecting the Property, before or after the date of written notice requesting mediation (Section 23).
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© Copyright, 2015, by Land Title Guarantee Company