7 minute read
Insight | Fall 2015
from Insight | Fall 2015
by NC REALTORS®
FORMS GUY
FORMS GUY: Sure, Speedy. The contract was revised effective July 1. Most of the revisions are to clarify what is already in the contract rather than change it in any substantive way. I’ll highlight two changes: one, changes to the fixtures paragraph, and two, changes to the parties’ responsibility for the payment of various owner association fees. Shall I take them in that order?
SPEEDY: Sounds good.
FORMS GUY: Okay, the substance of the fixtures paragraph is not very different from before, but the format looks very different because it has been reorganized into four subparagraphs to help the parties and their agents better understand the issues they need to address. For example, in the old version of the contract, there was a single blank where you identified items that were not owned by the seller, as well as items the seller did not intend to convey. In the new version, there is one place to identify items that are leased or not owned by the seller, and a separate place to identify items that the seller is not conveying. We hope that by breaking these out into separate subsections, it will remind users to identify both items not owned by the seller as well as fixtures the seller is not going to convey.
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SPEEDY: Okay, I get that. Are there any other changes to the fixtures paragraph?
FORMS GUY: Yes. In the laundry list of specified items that convey, we have added “mounting brackets for televisions and for speakers and all related hardware” and “security systems” as new items.
SPEEDY: Good. I had an issue with a TV mounting bracket last week. How about fuel tanks and fuel? I had a sale a while back where the seller sold propane fuel back to the provider, but the buyer claimed it belonged to her because it was still in the tank at settlement. As a result, the other agent and I ended up paying for the cost of the fuel in the tank.
FORMS GUY: The list of specified items that convey has been revised to clarify that the buyer will get whatever contents of a fuel tank that have not been used, removed or resold to the fuel provider as of settlement.
SPEEDY: So if the seller provides a receipt showing that the fuel has been sold back to the fuel provider, the buyer can not claim that the fuel in the tank belongs to the buyer?
FORMS GUY: That’s the idea.
NCAR’s lawyers write their weekly Q&As and those appearing in Insight based on calls they receive through the Legal Hotline. As a member of NCAR, you now have free, unlimited access to the Hotline! Have a legal question? Call 800-443-9956 or email ncarlegal@ncrealtors.org to get started.
SPEEDY: Can the seller use or remove all fuel in the tank before settlement?
FORMS GUY: The seller’s use, removal or resale of fuel in any fuel tank is subject to the seller’s obligation to provide working, existing utilities through closing or possession by the buyer. A new “Note” has been added at the end of Paragraph 2 to underscore that fact.
SPEEDY: What about the other change you mentioned?
FORMS GUY: The other change is the most significant change to the contract in my opinion. It has to do with the payment of fees charged by an owners’ association. Aside from regular and special assessments, the old version of the contract put the obligation on the buyer to pay all owner association fees and charges except any fee incurred by the seller in completing the disclosure statement. The new version attempts to allocate responsibility between the buyer and seller for the payment of the various fees that may be charged by an owners’ association or management company in a more balanced way.
SPEEDY: How do you mean?
FORMS GUY: In Paragraph 8(j) of the new version, the seller is responsible for paying any “transfer or similar fee.” That phrase is intended to cover any charge related to transferring or changing ownership records to a new owner, whether it’s called a “transfer fee” or something else. A “new owner set-up fee” would be an example of such a fee.
SPEEDY: I was a buyer agent in a sale recently where the HOA charged a “social membership initiation fee” and a “capital contribution fee.” Would the seller be responsible for paying those fees under the new contract?
FORMS GUY: No, assuming those fees are not related to transferring ownership to the new owner. If not, they should be the responsibility of the buyer.
SPEEDY: How about a charge for confirming that the seller is current on the seller’s association dues or assessments?
FORMS GUY: Under the new contract, that must be paid by the seller. Paragraph 8(j) says the seller shall pay “any fees required for confirming Seller’s account payment information on owners’ association dues or assessments for payment or proration.”
SPEEDY: How about information about an HOA that the buyer’s lender may require, such as the amount of the association’s reserves?
FORMS GUY: Under the new contract, the buyer is responsible for paying any fee charged by the owners’ association for information relating to a buyer’s due diligence. See Paragraph 6(a). Getting a loan is part of the buyer’s due diligence process, so a charge for information provided at the request of the buyer’s lender should be paid by the buyer.
SPEEDY: It sounds like it might be confusing trying to figure out who’s responsible for paying what!
FORMS GUY: The reality is that the variety of fees charged by owners’ associations and their management companies has proliferated, at least in certain areas of the state. The sum total of those fees can be quite significant in some instances. As I said earlier, the new version of the contract attempts to
allocate responsibility for the payment of those fees in a more equitable way than under the old contract. The lawyers and REALTORS® on the task force responsible for changes to the contract felt it is more appropriate for the seller to pay fees associated with the transfer of the property because the seller, as a member of the owners’ association, is in a better position than the buyer to be familiar with such fees or to obtain information about them from the association or its management company. In some situations it might be difficult to determine what a fee is supposed to be for and which party is responsible for paying it. In my view, both parties should seek to determine what fees are going to be charged by the owners’ association and/or the association’s manager as early in the process as possible. If the parties know what the fees are going to be, they can negotiate the transaction with those fees in mind to help avoid later misunderstandings.
SPEEDY: Okay, thanks Forms Guy. I’ve got to run because I’m a busy, busy man!
FORMS GUY: You’re welcome, Speedy. If you ever slow down a bit, there’s a detailed summary of all the changes to the contract on the NCAR website. Best wishes!
Contact Will Martin at wmartin@ncrealtors.org if you have a suggested discussion topic for Forms Guy.
