We've Got Your Back

James L. Goldsmith, Esquire

You want applause? Announce at your next local association board meeting that PAR is working to reduce the number of pages of the Standard Agreement of Sale. It will not fail.

In truth, such efforts are under way. PAR's Standard Forms Committee is well into its efforts to tame the beast! Perhaps there will be a "merger" of Option 1 and Option 2 or the consolidation of the five inspection contingencies into a single provision. The work should take about a year and it is too early to tell whether it will produce a shorter form. Either way, I promise a better form.

The trade-off of going to a shorter form is that we risk loosing liability protection offered by so many of the words presently in use. We could remove most of the text found on the backs of the pages and still have an enforceable, solid Agreement. The downside is that you will have greater exposure to a malpractice suit.

This leads me to the thrust of this article: the back of each page of the Agreement is important, and bears careful review with your client, particularly when you represent the buyer. (Reread the last sentence, initial it and give a copy to your broker . . . )

A few examples will help you understand how these back pages protect you from malpractice suits; they are all taken from cases I am currently defending. The first involves the purchase of a home in a neighborhood by a couple with three children, all under the age of six. Only after moving into the home did they learn that their neighbor is an adjudicated sexual predator. The seller and listing broker owed no duty to the buyer: the information was publicly available via sources other than the seller and listing broker. The buyers assert that their agent is liable even though Megan's Law states that real estate licensees are under no duty to determine and disclose the presence of predators. The theory of liability asserted against the buyer agent is that, while the agent had no duty to discover/disclose, she was duty-bound to advise the buyer how they could determine the presence of predators. The buyers of course testified that had they had this ability explained to them, they certainly would have determined the status of the neighbor and would not have purchased the property. Now, they are looking to their agent to reimburse their closing costs and make up the loss they suffered after selling their house at a discount. Among the defenses offered on behalf of the buyer agent is the fact that Megan's Law and the ability to research the presence of adjudicated predators are fully explained in the Agreement of Sale on the back of page 1.

Another client found his defense on the back of page 2 of the Agreement. On the top of this page it discusses boundaries and quantum of land and makes clear that reference to the acreage or other measurements of the quantum of land are estimates only. It advises buyers to obtain surveys if they seek to determine precisely where boundaries are located or the exact amount of land being purchased. You can imagine the impact on the jury when this language was enlarged on a placard and placed on an easel before them!

I've also used the reverse of page 2 to demonstrate that my client put her buyer on notice of the possibility of indoor mold contamination and the means by which he could determine whether that contamination existed; and the reverse of page 6 to establish that the buyer was aware of their right to have a lead-based paint hazards evaluation of the property. And there have been many more occasions when the notices provisions have come to the aid of a listing or selling agent.

The notices on the reverse pages are good, but they don't guarantee success in the courtroom. The parties may claim that you never reviewed these notices or discussed their content. These provisions are important enough to be included in the Agreement for a reason. Don't shirk your responsibility (consider this a responsibility you owe yourself) to review these in some detail with your client or customer.

I've heard it argued that the computer generated forms are better because they are printed sequentially and no printing is found on the reverse side of another page. Also, the computer generated forms have initial lines so that you can, by having your client initial the pages, confirm your client's review each page. Of course, there is no reason why those of you who use the pre-printed forms cannot have your client initial the corners of the reverse pages for the very same reason.

A shorter form is a worthy objective. A better form that provides adequate protection, however, is paramount.