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Accordingly, every buyer entering into a purchase agreement must make some provision to address potential title and survey concerns. Naturally, this further lengthens what in many cases is a particularly drawn out process, so the seller may wish to require additional fees or deposits. When the future use of the property is identical to the prior use, there is often little reason for concern. 3. Appraisal: The buyer won’t be obligated to buy the home if the appraisal value is lower than the asking price. Purchaser shall exert due diligence in pursuing, applying for and obtaining such a commitment. For additional information, please contact Jim Schleiffarth, Schleiffarth Law Firm LLC, St. Louis, MO, (314) 315-4117, [email protected]. Copyright ©2020 MH Sub I, LLC dba Nolo ® Self-help services may not be permitted in all states. B) contingency clause. Buyers and sellers should consider the following issues when drafting contract language governing zoning contingencies and related provisions. As you can see, there is a lot to consider in just this clause. A final concern is what happens if the contingency expires and the seller desires to continue the approval process in order to make the property more attractive for a successor purchaser. This article explores Buyer’s justified interest in carving out as many “escape clauses” as possible while counterbalancing Seller’s desire to keep Buyer committed to closing and moving the process towards completion. "Purchaser’s obligations under this Agreement are contingent upon its securing the following approvals from __________: __________ (the “Approvals”) with respect to the Property. With proper forethought and investigation into land use matters, buyers and sellers can avoid being shackled to a contract that turns out to be a vastly different deal than the one they bargained for. In a Seller’s perfect real estate world, the signing of the purchase agreement would be the end of negotiation and the end of Seller’s concern with the property. Often, this contingency will spell out the terms of the required financing to keep the buyer from getting locked into a deal even if financing only comes at unreasonable rates. Submitted by tharris on March 7, 2013 - 9:48am. Public hearings, which typically are held both at the planning commission and legislative body level, require thirty-day notice or more, prior to which there may be other deadlines as staff review the proposal and make a recommendation to the elected body. Some examples: 1. When you add this up, you are looking at a minimum of 150 days or 5 months. Some buyers waive inspections in favor of the results from a pre-contract inspection, even though, for example, a separate inspection by a pest specialist did not take place. The buyer should have an inspection period that affords the buyer an opportunity to answer these questions, as well as provisions that obligate the seller to provide documentation regarding any outstanding proffers or other restrictions that may impact the property. "Purchaser’s obligations under this Agreement are contingent upon its receipt of a satisfactory report regarding the environmental conditions directly and/or indirectly affecting the Property. This article is for informational purposes only and should not be construed as legal advice with respect to any particular party, property, transaction or circumstances. Purchaser shall have no less than___ days following the execution of this Agreement to obtain and review this report. Our firm has a long history in the area of land use and planning, representing landowners and developers before planning and zoning commissions and city councils, and, in some cases, representing government entities. Without them, most buyers and sellers would be unable to find the common ground necessary to mutually commit to the transaction. If an environmental conditions contingency is demanded by the purchaser, Seller should seek to limit Buyer’s discretion in determining the satisfactory nature of the Phase I report. If you feel any of them will help to enhance or clarify your contractual position, consult the real estate attorney on your team and evaluate changes to make consistent with your state law. This … Inspection Contingency. Maybe the most common contingency clause in a real estate agreement concerns financing. If the contract allows the buyer to pursue an outright rezoning of the property, the seller should ensure that this is the final contingency, and should offset this risk with additional deposits from the buyer when all other contingencies have been satisfied. Contingent on Use: for example, if the Buyer intends to use the property as a home office, or as a multi family residence, the contract can be made contingent on compliance with local zoning restrictions which pertain to that property. This … Otherwise, the buyer’s only remedy would be to terminate the contract. Whether the buyer is entitled to pursue an amendment or a permit, both processes place the timeline of the transaction at the mercy of the local jurisdiction’s administrative and legislative processes. The exact terms of the contract will differ as they must be agreed upon by both buyer and seller. This poses some risk to the seller, as a short approval period may simply mean that the clock runs out on one buyer while sending the transaction back to square one when the next buyer comes along. The term boilerplate, as it’s used in law, has been definedas “A description of uniform language used normally in legal documents that has a definite, unvarying meaning in the same context that denotes that the words have not been individually fashioned to address the legal issue presented.” The problem though is that virtually all the language in commercial real estate leases has been individually fashioned, and while it may reflect the desires of the drafting party, it may not meet the needs or intentions of the s… While a Buyer must look at the potential deal-breakers to determine what sort of contingencies they will push for (or demand), a Seller must have an understanding of how far it is willing to bend to make the deal happen. Review the clauses in our Library of Clauses. Zoning Contingencies in Real Estate Contracts. Loan contingency: Further investigations concerning the property or the borrower sometimes result in denail of a mortgage application—even if the buyer has a loan preapproval letter. Therefore, for a “basic” land use contingency this writer, at a minimum, wants 180 days with a reasonable extension period if proceeding in good faith (90 days). It should be noted that even where use is unchanged, a purchaser should obtain a zoning letter from the local planning commission assuring them that the use is indeed permitted. A prospective buyer of a property needs to ask several questions when agreeing to purchase real property:  What is the owner allowed to do with the property? (See also Write Commercial Property Listings Yourself). For sample contingency clauses see Liquor License Contingency Clause (Restaurant Lease)Adequacy of Utilities Contingency Clause , (Restaurant Lease) (Pro-Tenant), and Paragraph 9(B)(5) in LexisNexis(R) Forms FORM 240-23.23 (granting a 60-day building permit Purchasers and tenants who need zoning and other land use changes prior to closing or rent commencement need to provide for adequate time in purchase agreements and leases. Home inspection: This gives the buyer the right to order a professional home inspection and back out of the sale if major unreported damage is found. Some contingency clauses are commonly used when making an offer. Ultimately, a Seller of real estate has only oneinterest in the transaction—the money promised in exchange for its transferring the property. Relevant information is typically obtained through a Phase I Environmental Assessment performed by a licensed and qualified environmental testing specialist. 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