The Risks of Termination
The Agreement between the seller and the buyer is a firm contract with clear terms, duties and performance responsibilities. The seller is obligated to sell, and the buyer is obligated to buy. If there are no remaining contingencies or conditions of either party, should the seller choose to terminate, they would be in default of the performance of the Agreement. The consequences of a default by a Seller are detailed in the Purchase and Sale Agreement on page 6, Paragraph 2. Default. The remedies listed include Buyer Remedies, Broker Remedies and Attorney’s fees. The relevant language is copied here. Paragraph 2. Default b. Remedies of Buyer: In the event this Agreement fails to close due to the default of Seller, Buyer may either (i) seek the specific performance of this Agreement or (ii) terminate this Agreement upon notice to Seller and Holder, in which case all earnest money deposits and other payments Buyer has paid towards the purchase of the Property shall be returned to Buyer following the procedures set forth elsewhere herein, and Buyer may pursue any other remedy available at law. c. Rights of Broker: In the event this Agreement is terminated or fails to close due to the default of a party hereto, the defaulting party shall pay as liquidated damages to every broker involved in this Agreement the commission the broker would have received had the transaction closed. For purposes of determining the amount of liquidated damages to be paid by the defaulting party, all written agreements establishing the amount of commission to be paid to any broker involved in this transaction are incorporated herein by reference. The liquidated damages referenced above are a reasonable pre-estimate of the Broker(s) actual damages and are not a penalty. d. Attorney’s Fees: In any litigation or arbitration arising out of this Agreement, including but not limited to breach of contract claims between Buyer and Seller and commission claims brought by a broker, the non-prevailing party shall be liable to the prevailing party for its reasonable attorney’s fees and expenses. As you can see, the potential costs of a seller default are significant. 1. Specific Performance. In a very strong Seller’s market, the Buyer has multiple reasons to elect to sue for specific performance: the uniqueness of the property, low inventory of similar homes in the market, and rising home prices. Should an action for specific performance be successful, not only would the seller be forced to sell, they would also be required to pay the buyers’ attorney fees and expenses of litigation. Fees for both the seller’s attorneys and the buyers’ attorneys can be extremely high. During the period of the litigation, the seller would not be able to transfer ownership of the property. In most cases, a lis pendens is filed by the buyer's attorney so this would put the world on notice that there is a pending lawsuit regarding the property. 2. Compensation to Brokers. Both brokers could sue the seller for the compensation that would have been earned if the contract closed per the contract terms. 3. "Other remedies at law" can include any consequential costs to the buyer such as living expenses, storage of furniture, transportation costs and other costs. Other costs could also be considered by the court in an action pursued by the buyers. According to Georgia law, Terminations of a Purchase and Sale Agreement must be made by the Seller and not by the broker. However, the seller’s agent can assist in the preparation of the termination document and can send it to the buyer’s representative. In most cases, it is unlikely that the buyer will walk away with only the return of earnest money. We encourage agents to advise the seller to seek their own legal advice in this matter before moving forward with the termination of a contract without a legal reason to do so.
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What is Radon?
Radon is an odorless, tasteless, naturally occurring radioactive gas that comes from the soil. It is produced when uranium decays and works its way up through the soil into the atmosphere. This gas is especially high among areas where granite is present which is very common in Georgia. As radon is released into the soil, it can enter buildings through the foundation and well water, eventually building to dangerous levels. Radon can be found in homes of any size, age, or location. Why should your buyer be concerned about radon? Radon causes more deaths each year in the U.S. than drunk drivers. It is the second leading cause of lung cancer and the leading cause of lung cancer in nonsmokers. Radon kills 22,000 people every year in the U.S.; 800 of those will be in Georgia. The Surgeon General has issued a health advisory concerning radon exposure, stating that all U.S. homes should be tested for radon and fixed if the level is high. There is no acceptable, safe level of radon. As you breathe, radon and radon decay products enter your lungs. These substances release small bursts of energy that can permanently damage lung tissue DNA, and lead to lung cancer. People all over Georgia should be concerned about radon and test their homes. Outdoors, radon is quickly diluted by the atmosphere and poses no problem. But if radon seeps into your home from soil beneath your home, it could build to hazardous levels in the relatively stagnant air in your home’s living space. How do I know if I am at risk of radon exposure? The only way to know is to test your home, since you can’t see, smell or taste it – and it doesn’t cause any immediate symptoms. You can have radon in your home no matter how old it is, how it is built, or how it is heated. Even if your neighbor next door has tested and found no problem, you may have high radon in your home because geology changes rapidly. Can new homes be built to be radon resistant? Yes. If you are planning to build a new home, ask your contractor to install a radon mitigation system during construction. Building the system in up-front costs much less than adding it after the home is built. What if I get a high reading (4 pCi/L or higher) from my radon test? Don’t panic. You’ll need to confirm the first high reading with a second test. If the second test has similar results, it is best to contact a trained, certified radon mitigation contractor for help. The contractor will probably use a combination of sealing techniques and a system that pulls air from beneath your home by using a vent stack and exhaust fan and vents it above the eave line. How often should radon testing be done? The EPA recommends performing a radon test every 2 years. Every type of building should be regularly inspected for radon, including homes, offices, and schools. The greatest exposure to you and your family is most likely at home where you spend a significant amount of your time. In a transaction in which the buyer is getting a mortgage, the closing attorney is representing the lender. If there is a dispute between the parties, the closing attorney, acting as Holder, has the same rights and duties of any other holder and holder may disburse the earnest money after 10-day letters and upon a reasonable interpretation of the Agreement.
It gets a bit more complicated when the transaction is all cash. In that event, there is no lender to represent, so the lender is representing either the buyer or the seller. If the transaction is written on GAR forms, the Purchase and Sale Agreement states that the closing attorney in an all-cash transaction represents the buyer. Fiduciary Duty. Unlike Realtors®, who do not own fiduciary duties to clients, attorneys in Georgia do owe fiduciary duties to their clients. Therefore, attorneys must protect the best interest of their client and cannot act against their best interests. If there is a dispute, the closing attorney therefore has a potential conflict of interest. Per the GAR F510, Closing Attorney Acting as Holder of Earnest Money, the closing attorney’s only remedy is to interplead the funds into a court of competent jurisdiction. (GAR F510 p.8). Things happen. The cash buyer could default, and the parties can’t come to an agreement regarding the earnest money. The closing attorney is blocked from disbursing funds to the seller because of fiduciary duty. So, the attorney must interplead the funds. Then the parties wait, pay the costs of filing and litigation, possibly lose the interpleader and then pay the other parties costs of litigation. A waste of both client funds and everybody’s time. Here’s the takeaway. If you want to avoid an interpleader in an all-cash transaction, consider NOT naming the closing attorney as the holder of earnest money. Your clients will thank you. Proper Notice is an important part of the real estate transaction. Improper notice can leave the party giving notice at risk, especially if the party giving notice intends to terminate a contract.
The GAR Contract requires all notices to be in writing, legible and signed by the party giving the notice. An email or text message is not an acceptable form of notice. In the event of a dispute regarding notice, the burden shall be on the party giving notice to prove delivery. Notices can be in person, by courier, overnight delivery service, certified mail; or by email or facsimile. To determine if property notice was sent, ask these five questions.
GAR has a form F816 that can be used for the purpose of giving notice. It is important that the party giving notice sign the notice before sending to the other party. Notice section from the GAR Purchase & Sale Agreement: C.1 Notices. a. Generally: All notices given hereunder shall be in writing, legible and signed by the party giving the notice. In the event of a dispute regarding notice, the burden shall be on the party giving notice to prove delivery. The requirements of this notice paragraph shall apply even prior to this Agreement becoming binding. Notices shall only be delivered: (1) in person; (2) by courier, overnight delivery service or by certified or registered U.S. mail (hereinafter collectively “Delivery Service”); or (3) by e-mail or facsimile. The person delivering or sending the written notice signed by a party may be someone other than that party. b. Delivery of Notice: A notice to a party shall be deemed to have been delivered and received upon the earliest of the following to occur: (1) the actual receipt of the written notice by a party; (2) in the case of delivery by a Delivery Service, when the written notice is delivered to an address of a party set forth herein (or subsequently provided by the party following the notice provisions herein), provided that a record of the delivery is created; (3) in the case of delivery electronically, on the date and time the written notice is electronically sent to an e-mail address or facsimile number of a party herein (or subsequently provided by the party following the notice provisions herein) even if it is not opened by the recipient. Notice to a party shall not be effective unless the written notice is sent to an address, facsimile number or e-mail address of the party set forth herein (or subsequently provided by the party following the notice provisions herein). c. When Broker Is Authorized to Accept Notice for Client: Except where the Broker is acting in a dual agency capacity, the Broker and any affiliated licensee of the Broker representing a party in a client relationship shall be authorized agents of the party for the limited purpose of receiving notice and such notice to any of them shall for all purposes herein be deemed to be notice to the party. Notice to an authorized agent shall only be effective if the written notice is sent to an address, facsimile number or e-mail address of the authorized agent set forth herein (or subsequently provided by the authorized agent following the notice provisions herein) whether or not it is not opened by the recipient. Except as provided for herein, the Broker’s staff at a physical address set forth herein of the Broker or the Broker’s affiliated licensees are authorized to receive notices delivered by a Delivery Service. The Broker, the Broker’s staff and the affiliated licensees of the Broker shall not be authorized to receive notice on behalf of a party in any transaction in which a brokerage engagement has not been entered into with the party or in which the Broker is acting in a dual agency capacity. In the event the Broker is practicing designated agency, only the designated agent of a client shall be an authorized agent of the client for the purposes of receiving notice. |
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