New Year, New Laws, Old Form Documents? Exhibit A: Changes in Florida’s Real Estate ContractsClient Alert
Settling into a New Year often brings renewed energy into setting and pushing new goals of building business relationships, increasing sales, and moving Letters of Intent and negotiations into final, signed agreements.
It’s all too easy to grab a form document off the Internet (Google, anyone?), or to pull the last document in your files as a template for your next agreement.
However, changes in the law can take effect at the beginning of the calendar year, as well as mid-year or fiscal new year, and sometimes on a random date in between.
Your awareness – or lack of awareness – in changes in the law can mean the difference between keeping you and your business operating within the law or putting you at great financial and legal risk for not complying with the law. It can also result in financial and time savings or additional burden in time and costs.
Major Changes to Florida’s Form Contracts: FR/BAR “As Is” and Residential Contracts
Florida’s real estate market has been among the hottest markets to buy, sell, lease, and otherwise invest. Much of the state’s real estate market is driven by the residential market, namely the sale and purchase of single, family homes. These buyers and sellers are not always individuals. They also include individuals and investment companies, some based locally, others from out of state or out-of-country, who may not be familiar with Florida-specific laws and customs.
In Florida, there are form contracts you easily find online. However, the ones that are generally accepted form contracts, those widely used and accepted by professionals within the industry, are the purchase and sale agreements for residential real estate contracts, issued and approved by the joint committee of Florida Realtors and The Florida Bar, including the (i) FR/BAR Residential Contract for Sale and Purchase and the (ii) FR/BAR “As Is” Residential Contract for Sale and Purchase.
These FR/BAR contracts are not typically updated on a yearly basis, as they take significant collaboration between both professional organizations. The most recent changes took effect as of November 1, 2021, among them, a few highlights summarized:
“Loan Approval” and “Appraisal”
The definitions of “Loan Approval” and “Appraisal” have been expanded.
If the financing contingency box is checked, then in addition to obtaining approval for financing, the Buyer’s lender must also receive a satisfactory appraisal (or alternative valuation of the Property) prior to the expiration of the Loan Approval Period. This revision was made to expedite the receipt of the appraisal, as the prior form contract allowed the lender’s appraisal to come in right before Closing, and a deal could fall apart right before the Closing Day. Under the new revision, if the appraisal does not meet lender approval within the Loan Approval Period, the parties could terminate sooner than previously allowed and the property could return to the market sooner for other potential buyers.
Delivery Notice Methods
In addition to providing notice by mail or personal delivery, notices by fax or email are allowed. However, other electronic media delivery previously allowed is prohibited, so no texts or social media messages.
The occupancy clause has expanded to include disclosure of existing seasonal or short-term vacation rentals and future tenancies.
FOREIGN INVESTMENT IN REAL PROPERTY TAX ACT (“FIRPTA”)
FIRTPA withholding and reporting costs are now explicitly designated as a Seller.
Calendar days are now based on the Property’s location, and if a date or time period ends on a Saturday or Sunday, or a day that is a national legal public holiday (as defined by U.S.C. Sec. 6103(a)), or a day on which a national legal public holiday is observed because it fell on a weekend, that date or time period extends to the next calendar date which is not a Saturday, Sunday, national legal public holiday, or a day in which a national legal public holiday is observed.
Force Majeure (Pandemic now included)
The definition of “Force Majeure” expanded under the new form contracts to include “governmental actions and mandates, government shutdowns, epidemics or pandemics.” This section allows
Understanding Changes in the Law, Changes in the Forms
The foregoing summaries are just some of the changes to the new form Florida “As Is” and Residential Purchase and Sale Contracts. There are many other changes that were added, deleted, or modified.
Although you may be able to find one of the new forms online, very likely the older forms will pop up. Further, if the forms do not originate directly from the Florida Realtors or The Florida Bar or a licensed Realtor, Broker, or Attorney, you may not know if you have a form contract that is fully updated or if the correct Riders are being properly used.
It is worth paying the extra money for a professional to work with you in preparing or responding to a contract, even a form contract that appears to be blessed by professional organizations. The cost of “free” and fast forms can amount to an expensive and long process of fixing versus hiring a professional to prepare an agreement that’s specific, clear, and current or hiring an attorney to litigate for or against a not-so-current or compliant contract.
To learn more about the recent changes in Florida’s real estate contracts or other areas of residential or commercial real estate, please contact BMD Attorney Christine M. Berk (firstname.lastname@example.org) – (407) 214-8395.