What’s New With PRDS Forms?

by David Hamerslough

Over the last six months, the PRDS Forms Committee has revised some of its existing forms and created several new forms. My next two articles will discuss some of those revisions and new forms.

Real Estate Purchase Contract (“REPC”)

• Paragraph 10 was rewritten to make it easier to read. The sentences are now shorter, but there is no substantive change.
• Language was added to Paragraph 30(B) to highlight the effect of a buyer failing to make any of the agreed-upon deposits. The language highlights that the seller is entitled to cancel the contract after delivering a Notice To Perform and pursue any and all legal and/or equitable remedies, as well as recover any and all damages. Any cap that might have existed as a result of liquidated damages being initialed no longer applies.

The impact of a buyer failing to make any of the required deposits continues to be an issue under Paragraph 14(C)(2) of the C.A.R. purchase contract (“RPA”). This language is capable of being used in conjunction wit the C.A.R. contract to address the issues raised by Paragraph 14(C)(2).

• Paragraph 31(D) has been revised to underscore that a real estate licensee’s voluntary participation in mediation does not make them a party to the contract, nor does it provide a basis for them to be compelled to participate in any binding arbitration.

This language should be contrasted with the language in Paragraph 31(D) of the C.A.R. RPA. Apparently, there have been claims made against real estate licensees using the C.A.R. RPA that they are obligated to participate in a binding arbitration if they have participated in a mediation. The revised language in the REPC addresses this argument.

Addendum (“ADM”)

• The ADM now defines the party preparing the form as the “Preparing Party.” This will be either the buyer, lessee, seller, or lessor. The Preparing Party can use Paragraph 1 to specify any new terms and conditions that are to be incorporated into the REPC or the Lease/Rental Agreement. Paragraphs 2 and 3, if checked, now provide for the Preparing Party to request an extension of time for the close of escrow or for the removal/waiver of contractual contingencies and/or contractual obligations. Often, the parties understand what has prompted the request for the extension of time but don’t always document those historical events and/or discussions. This might include why the extension is being requested, who is responsible for any delay, whether the other party has performed all of their contractual obligations, etc. Paragraph 1 of the ADM provides space for these historical events to be spelled out (they can also be written up on a separate document, which would then be attached to the ADM).

Another issue that arises when requests for extensions of time are made is what the parties expect will happen at the conclusion of that extension of time. Examples include what the rights and obligation of the parties will be with respect to the deposit or the buyer’s continued performance under the contract in the event that escrow does not close on the new extended date. The ADM provides space to address such issues at the end of Paragraph 4. Once again, if more space is needed, use a separate sheet and attach that to the ADM.

Paragraph 4 is also significant because it addresses the issue of the potential impact on the request for additional time on the time-is-of-the-essence provision in the REPC and/or Lease/Rental Agreement. Paragraph 4 preserves time-is-of-the-essence by stating that any request for additional time shall not be construed as any type of change or waiver of the time-is-of-the-essence provision.

Paragraph 5 of the ADM, if checked, now allows the Preparing Party to withdraw the ADM prior to any acceptance. Please note that any withdrawal must be made in writing. In addition, Paragraph 5 provides for a revocation of the ADM unless it is accepted by a specific date that is filled in by the Preparing Party. This language is similar to what is contained in the REPC. Please note, however, that any such language is potentially subject to waiver and/or estoppel claims.

One advantage of the PRDS ADM is that it accomplishes those transactional actions that require the use of three C.A.R. forms.

Cancellation Of Contract Agreement (Including Escrow Instructions And Disposition Of Deposit) (“CC”)

• A new paragraph has been added that provides the seller with the same option that is now included in Paragraph 31(B) of the REPC outlined above. This option allows the seller to cancel when the buyer has failed to make any of the agreed-upon deposits. The language in the CC follows the procedure in Paragraph 31(B) of the REPC and highlights those remedies available to the seller under those same circumstances.

Unlike C.A.R., PRDS has a Cancellation Of Contract Advisory (“CCA”), which discusses some of the issues and consequences that arise when either a buyer or seller cancels a contract. The better practice is to provide the CCA to a buyer or seller if they are contemplating cancelling the contract and to do so before preparing and delivering the CC form or otherwise communicating a desire on the part of either buyer or seller to cancel. The CCA has a checkbox for the attachment of the CC to the CCA. As noted, C.A.R. does not have a comparable advisory on these issues. The only language that C.A.R. has in its Cancellation Of Contract is one line advising that a party ought to seek the advice of a qualified California real estate attorney.

San Mateo/Santa Clara County Advisory (“SMSCA”)

• Language has been added to Paragraph 30 to address the potential that gas lines might be required to be replaced by a government agency as a result of remodeling or repairs undertaken by a property owner. The language has been added in response to the issues that continue to be discussed regarding the potential health and safety aspects of gas-powered appliances, etc.

Next month’s article will discuss other revisions (including those made to the Supplemental Seller’s Checklist (“SSC”)) and additional new forms.

About David Hamerslough

In his 35 years of practice, Dave Hamerslough has litigated and arbitrated residential and commercial real estate disputes on behalf of brokers and agents, buyers and sellers, and landlords and tenants. Dave also acts as a mediator and arbitrator of real estate disputes. He also teaches courses and writes articles on these subjects to brokers, agents, attorneys, and consumers.

HomeGuard serves most of Northern California from San Jose to Livermore, Oakland to Walnut Creek, up to Sacramento and down to Modesto.

HomeGuard is equipped to deliver superior home inspection services. Our Home Inspectors are carefully selected for certification based on technical skills and professionalism. We can set up a Home or Roof Inspection at the same time you call to make an appointment for your Termite Inspection, Pool/Spa Inspection, or Sewer Lateral Inspection, another timely and cost-effective way of meeting your needs.