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PRDS REAL ESTATE PURCHASE CONTRACT (RDS) (05/13 revision) and ADVISORY Regarding Usage of the 05/11 version of the RDS
PRDS is pleased to announce the release of the May 2013 revision of the PRDS Real Estate Purchase Contract (RDS), and is grateful for the many helpful suggestions and recommendations submitted to the Forms Committee by PRDS forms users.
1. AVAILABILITY OF THE REVISED RDS FORM. The newly revised form will be available as follows:
a. "On-line" version. The online version is currently available as of June 30, 2013
b. "Print" version. PRDS forms stores will be receiving shipments and fulfilling orders in the next week to 10 days.
SUMMARY OF CHANGES MADE:
1. IMPORTANT: AB 1511 AND UTILIZATION OF THE PRIOR MAY 2011 PRDS PURCHASE CONTRACT FORM; THE PRDS "GAS PIPELINES" ADDENDUM. When purchase contract forms are revised, there often is a "grace period" during which it is acceptable for users to transition into utilization of the new version. As to the current revision, however, one new feature in particular warrants your immediate attention and use of the 05/13 RDS as soon as possible:
a. The "Gas and Hazardous Liquid Transmission Pipelines" advisory: In order for Sellers and brokers to benefit from statutory [AB 1511] disclosure-related protections pertaining to transmission pipelines carrying natural gas and other hazardous materials, we have incorporated into our newly revised purchase contract the necessary statutory language that affords this protection.
b. Since the effective date of AB 1511 is July 1, 2013, the protections provided for therein are available if users of the PRDS purchase contract either:
i. Begin using the new on-line contract version immediately, i.e., as of July 1, 2013, or
ii. Immediately include as part of the "accepted contract" a fully executed copy of the newly created and immediately available PRDS ADDENDUM TO PURCHASE CONTRACT: NOTICE REGARDING GAS AND HAZARDOUS LIQUID TRANSMISSION PIPELINES. [Note: this readily usable form addendum is available online at /download/PRDS_ADDM-Purchase-Contract.pdf]
2. A significant number of changes, enhancements, clarifications and modifications were incorporated into the 05/13 RDS revision. Highlighted here is a summary of the important changes:
a. Financing contingency [Para 2I]. Changes here make clear that (i) the Financing contingency is based on Buyer's obtaining a written lender's commitment for the loan(s) indicated, and (ii) the lender's decision re its loan commitment shall be based on its own determination of, among other criteria, appraised value (i.e., whether or not Buyer has elected to have Buyer's own appraisal contingency).
b. Appraisal contingency [Para 3]. We strengthen the proposition that Buyer's appraisal contingency, if elected, operates independently of any Financing contingency Buyer might have and is valid whether or not Buyer actually obtains a loan or is even seeking a loan.
c. Fixtures, Fittings and Personal Property [Para 5]. We delete the requirement (rarely resorted to) that items of personalty included in the sale be transferred "free of lien," emphasizing instead that Seller must deliver all warranties for "included items" and shall identify and disclose all items that are either leased or licensed to (i.e., not actually owned by) Seller.
d. Additional Contract Documents [Para 6]. We emphasize that selected addenda are made part of the Contract (i.e., included at the time of Acceptance) if their respective boxes are checked, they are submitted with the offer and are delivered to and signed by the parties.
e. Disclosure Documents [Para 10]. Here we tighten up language that determines what disclosure documents (e.g., TDS, Supplemental Seller Checklist, Natural Hazard Disclosure) need to be signed and what the process for completion shall be; we also define "fully completed" Lead Disclosure and SSC forms.
f. Government-mandated Reports, etc. [Para 12]. New. In addition to identifying smoke detectors, water heater strapping and CO detectors as statutorily mandated, we strengthen these requirements by making failure to comply a breach of the purchase contract as well as a violation of statute.
g. Property Condition/Inspection Contingency [Para 14]. We delete language that would otherwise legally "obligate" Buyer to conduct inspections. In so doing, we remove the theoretical specter of a suit for breach of contract against a Buyer who, for whatever reason, chose not to - - or failed to - - inspect a certain aspect of the Property; we retain the appropriately elective nature of Buyer inspections. We also clarify that, while a non-contingent Buyer shall nonetheless have inspection rights, these inspections shall not of themselves give rise to cancellation rights. We affirm that, even where Buyer hasn't elected to have Seller undertake structural pest control work, Buyer shall still have the right to order pest inspections.
h Structural Pest Control [Para 19]. We adjust a portion of the language relating to the deletion of pest control requirements from (or, alternatively, their inclusion in) the Purchase Contract.
i. Contingency Removal; Contractual Obligations [Para 21]. We more forcefully explain the consequences of contingency removal and introduce the concept of issuance of a "Notice to Perform" as a precondition to cancelling the Contract on account of Buyer's (or, as the case may be, Seller's) failure to properly perform (e.g., to remove contingencies in timely fashion, etc.). Para 21B shortens to three days the default time within which Seller has to respond to Buyer's request for repairs, etc. Para 21D addresses itself to the relatively rare circumstance of a Notice to Perform delivered to Seller on account of Seller's dilatory conduct. It is also made clear that at NTP is not appropriately used for failure to close escrow.
j. Repairs [Para 22]. We require written documentation supporting any repairs made during escrow by either party.
k. Seller's Obligation to Maintain Property [Para 23]. Language is expanded to require Seller's maintenance of "Included Items" (fixtures and included personalty) provided for in Para 5.
l. Gas and Hazardous Transmission Pipelines notice [Para 27N]. See discussion above. Effective July 1, 2013, this notice is expected to be incorporated in all real estate purchase contracts.
m. Capacities of Parties and Authority to Act [Para 27O]. In this sub-paragraph, the parties affirm their understanding that some of the signatories may be acting under a power of attorney or in some other representative or derivative fashion and, if so, must soon (as indicated, after Acceptance) present evidence of such authority. See also Para 31.
n. Designation of Buyer's Capacity [Para 31] Also new, this provision relates to the Buyer signatory authority and authentication of such authority. It also establishes acceptable means of delivery.
o. Designation of Seller's Capacity [Para 35]. This is the corresponding authority and authentication provision relating to Seller signatures and equivalents.
