Release Date: 07/11/2017
QUESTION: One of my listings is under contract and subject to a Contingent Sale Addendum (Form 2A2-T). The settlement date passed six days ago, and the buyers’ agent has just today sent me a notice of termination with a request to return the Earnest Money Deposit (“EMD”) to the buyers. I told the buyers’ agent that my sellers were entitled to the EMD and that they would not consent to the buyers’ receiving a refund.
The buyers’ agent argued that because our transaction was still within the 14-day delay window in the Offer to Purchase and Contract (Form 2-T) that the buyers time for terminating had not yet expired. Is the buyers’ agent correct?
ANSWER: No. Paragraph 1(b) of the Contingent Sale Addendum provides that “[i]f there is a Contract For Buyer’s Property, but the closing on the sale of Buyer’s Property has not occurred by the Settlement Date of this Contract, then Buyer may terminate this Contract within three days following the Settlement Date of this Contract.” Form 2A2-T states that TIME BEING OF THE ESSENCE applies to this provision. This means that strict compliance to the deadline is necessary for compliance.
Paragraph 13 of the Form 2-T is clear that the Settlement Date does not change when there is a delay. Instead, it explains that the Delaying Party can still close within 14 days as long as they are acting in good faith and with reasonable diligence toward Settlement. Because Form 2-T does not adjust the Settlement Date in the event of a delay, the three-day deadline in paragraph 1(b) of the Contingent Sale Addendum does not move. From the Settlement Date, a buyer therefore only has 3 days to terminate under Form 2A2-T.
Applying the foregoing to your case, the buyers have missed their ability to terminate and receive a refund of their EMD under the contingent sale addendum. Your seller clients are entitled to keep it. However, the expiration of the three-day period in the Contingent Sale Addendum did not affect the buyers’ right to close. Had the buyers not terminated, they could have attempted to complete the sale since the 14-day delay period had not yet passed.
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