When can a buyer delay settlement?

Can a buyer hold up settlement if….?

With all the documentation required to purchase a property, including (in PA) a 14-page Agreement of Sale in 9 pt. font, you’d think every possibly eventuality would be addressed. You’d be wrong. There are unlimited scenarios that can arise when a property is being sold and no way to detail what should happen in every event. So how do you know whether a certain situation merits a buyer delaying settlement? It’s not always easy and the listing and buying sides often disagree.

Be sure to read the Agreement of Sale

Free of debris, broom-clean

Now that I’ve thoroughly bashed the incompleteness of the Agreement of Sale, I am going to seemingly contradict myself by encouraging you to read it carefully. Why? Because it does, indeed, specify certain requirements.  For example, the document says:

Possession is to be delivered by deed, existing keys and physical possession to a vacant Property free of debris, with all structures broom-clean, at day and time of settlement…

For example, many buyers think the seller needs to have cleaned the house, including wiping out the oven and the (empty) refrigerator. Sorry buyers–as long as there are no dishes/food/pots and pans left in the oven or the refrigerator, it is considered “free of debris”.

Inclusions/exclusions

The section that describes what is included/excluded deserves careful reading.The majority of issues surrounding buyers wanting to (and thinking they have the right to) delay settlement revolve around this topic.

• Some sellers leave paint cans and leftover renovation/building materials, assuming the buyers may want them. Unless the buyers have asked for them to be left, sellers are responsible for removing them. Nothing that is not attached to the property (like trampolines,  free-standing workbenches in basements, kitchen bar stools, etc.) should remain in the house. Things like shelving, light fixtures, mirrors that are glued to the bathroom wall and built-in microwaves stay. A big point of contention (which has now been spelled-out in the Agreement of Sale) is the fact that, unless otherwise agreed upon, tv mounts that are attached to the wall remain (as they’d leave a mess if removed). However, the tv itself, which is hung on the mount, is NOT attached, so that goes with the seller.
• Heating fuel (oil) must be left. Some sellers who have recently filled oil tanks don’t want to leave the oil for the buyer but the Agreement of Sale stipulates it must remain with the house.
• Shrubs, trees and other plantings: unless something is in a free-standing pot, it conveys with the property–that means sellers cannot dig up their prize rose bushes and take them when they leave.

So, while buyers and sellers often don’t pay attention to the details of the document, it does, indeed address many of these points.

Condition

Another area of contention involves this language:

Seller will maintain the Property (including, but not limited to, structures, grounds, fixtures, appliances, and personal property)
specifically listed in this Agreement in its present condition, normal wear and tear excepted.

While the previous examples are actually fairly clearly explained in the Agreement of Sale, interpretation of condition is more open to interpretation. Here are some common issues that fall under this category that suggest a buyer could delay settlement:

• a window lock is (newly) broken on second floor.
• an area of the floor that was previously under a rug is heavily stained and wasn’t disclosed in Seller’s Disclosure (which expressly asks about stains or other problems with flooring or floor coverings).
• the seller’s movers scraped the wall bringing furniture down the stairs.

Is the buyer within her rights to delay settlement until repairs have been made? Should she only expect to delay until she and the seller agree on how the repair will be done/paid for? Remember, from a legal perspective, nothing in the Agreement of Sale survives settlement. What that means is that once buyer and seller go to settlement and the property has legally changed ownership, the buyer relinquishes any leverage over the seller. Settlement effectively ends any further negotiations or interactions between the parties and terminates any responsibilities the seller has to the buyer. This finality is why buyers often want to delay settlement–until they pay the seller, they still have leverage over him. That leverage disappears once closing is completed.

Inspection items

If there has been an inspection and the parties have agreed that the seller will make repairs prior to settlement, what happens if those repairs have not been made? Well, then the buyer has a strong case for delaying settlement. But, what if they have been made, but the buyer isn’t satisfied with the repair? Or what if the seller cannot provide documentation that all repairs were done “in a workmanlike manner”, as stipulated on the Reply to Inspection document? And what, exactly, does that mean? Could the buyer hold up settlement in any/all of these situations?

What can/can’t the buyer do?

Now you may understand why it’s not always clear whether a buyer does or doesn’t have the right to delay settlement. So what should a buyer do when there’s an issue like some of the ones mentioned above? The first line of defense is to read the Agreement and any Reply to Inspection/Addenda forms as some of the questions might be answered there. For less defined questions, I’d advise discussing with your agent the best course of action. Sometimes, even though the sales paperwork doesn’t survive closing, people can have an attorney draw up some kind of agreement stipulating who is responsible for what. Sometimes, buyer and seller may agree to a monetary remedy–the seller writes the buyer a check for an amount both agree to and the matter is considered closed. Sometimes, settlement is delayed a day or two to allow time for a repair or correction to be made.

If the parties can’t come to an agreement, they may have to get lawyers involved, which is the least desirable outcome as it costs everyone money and sours what should be a positive transaction. However, a home purchase is a significant investment and if you need to go that route, so be it. On the positive side, rarely do things escalate to that point. Usually, both parties want to find a way to figure it out and go to closing.

If you are relocating to the Philadelphia/Main Line area, please go to my blog page and search for posts using the relocation tag. Contact me to discuss your Philadelphia area relocation! jen@jenniferlebow.com/610 308-5973