How To Sign California Banking Form

How to industry sign banking california agreement

[Music] i'm christopher hanson at hanson law firm and welcome today i want to talk about the new california association of realtors forms that have been put out in response to the kovid 19 coronavirus pandemic california association of realtors as you know is a trade association that represents real estate licensees throughout california it has reacted nimbly in terms of getting out forms to its constituency for use in the next several weeks months with regard to transactions that are currently pending and new listings that are going to be coming on board and new offers that are going to be coming on board the california association of realtors car is fond of using acronyms for their forms and so one of these forms is the cva the other is the n-u-c-c the other is a p-e-a-d and the last of these four forms is the rlacaa really most of these forms are nothing but car acting to cya what now i've been a member of the california association of realtors for more than 40 years and i appreciate that its efforts are designed to protect the real estate licensees in the state i'm i'm not always a fan of the way that the caar forms protect the buyers and the sellers that those licensees are supposed to be representing and these four coronavirus forms are a pretty good example in my opinion of how the california association of realtors is less concerned about their clients actually less concerned about the customers of their clients than they are about their clients the real estate community so while these forms may be perfectly appropriate for a buyer and a seller in many situations i would urge every single buyer and seller to think carefully and read carefully before they sign off on any of these next forms so let's deal with them in order the corona virus addendum or amendment form the cva now this form is called addendum or amendment why well this the astute people in the room will understand that an addendum to a contract is something that you are adding to a contract before it has been executed it is as if you ran out of room on page one and so you're making an addendum that you're going to attach to the back of it to continue to discuss the thing that's on page one okay an amendment to the contract is a change to an already executed agreement now it's certainly appropriate or legal to amend a pre-existing contract but when you do that in california the law requires that there be some consideration for your doing so if you're going to change the terms you're supposed to get something in exchange for changing an already existing agreement and so as you read through these forms ask yourself what are the buyer and the seller getting as they amended the already executed agreement so where this comes up primarily is with regard to the liquidated damage provision of a purchase agreement so we've put together a paper it's available on the law firm's website feel free to download it and if you need some bedtime reading [Music] go ahead but let's see i want to use an example that i used in that memo let's pretend that you've got somebody that's got a 30 000 down payment on a million dollar house here's the memo and that deal is supposed to close march 25th everybody is signed off on escrow instructions the loan is getting ready to be funded and on march 25th the governor says everybody stay in place and the market tanks and the buyer was going to get their down payment money from selling stocks now the buyer hasn't got any stocks to sell or the value of those stocks have been depleted dramatically or the bank says well wait a minute let's let's we're our staff is disrupted right now and we're not going to be able to process this loan quickly enough and and but the buyer has already waived all contingencies including the financing contingency the closing date was supposed to be what april 25th april 25th comes and goes and the escrow doesn't close the liquidated damage provision says that the seller is now entitled to keep that thirty thousand dollars is that fair well let's further pretend the seller in anticipation of selling this million dollar house has bought a 2 million house and the seller has 60 000 as a down payment on that house and it's supposed to close march 26. now when the march 25 sale for million dollars doesn't close that seller's not able to buy the second one for two million dollars and that seller says well you've got a 60 000 liquidated damages clause and i want it because i've got a child that's got cancer and i've got no medical insurance and i need that 60 grand to pay for his care is it still not fair the form that the car has put together doesn't address those issues and and one of the things that the cva form makes note of is that the residential purchase agreement that has been used by the california association of realtors and all of its constituency doesn't have a force majeure clause in it there's nothing in the template residential purchase agreement that allows for an unexpected unanticipated event to act as a basis for a delay in the closing of escrow now what the car form does is says that in recognition of the obligation to act in good faith and to deal fairly with one another this cva form has been prepared to more completely express the agreement between the parties well that's all well and true there is an obligation to deal in good faith and to deal fairly but this agreement has already been formed and dealing in good faith doesn't mean that you are now required to give up a right that you've already bargained for like the ability to keep a 30 000 or a 60 000 liquidated damages amount so what the california association of realtors is trying to do with this form cva is create an avenue for the buyers and sellers to reach an agreement that will allow a a continuation of a closing date assuming all things can be continued and more importantly what this form is attempting to do is eliminate the real estate brokerage community being drug into litigation between the buyer and the seller when they start arguing about who's entitled to the liquidated damages amount under a purchase agreement so the next thing that the cva form does is it says that in order to use the criteria within the cva form you need to submit this next form which is the notice of unforeseen coronavirus circumstances so the first form the corona virus amendment or addendum says that here's what's going to happen if someone has some impact as a result of the coronavirus and then the next form is by the way we've now been impacted by the coronavirus and so when you look at the nucc form it it sets forth what some of those impacts can be one of them is loss of income well okay that that makes sense how many people now there's six million unemployment applications in in one week followed by an earlier week of three million unemployment applications the the the economic chaos that the coronavirus has spread around the country and california is unprecedented and we all acknowledge that we get it so if you have lost a job um if you have a delay in a notary appointment that is a cause that would allow you to continue your closing i'm not quite sure that that would qualify if there's a lender delay in funding okay that one makes sense to me there are more opportunities to list which would give rise to the use of the coronavirus amendment and one of them is difficulties in scheduling inspections okay that makes sense there are termite inspectors and roof inspectors and all of those folks who are being told to shelter in place so that would give rise to a delay in the the due diligence period of a sale but in a closing well those inspections have already been done so i don't know that that would count there's a delay here in getting movers well you know at first blush that seems kind of silly but it makes sense if you can't get a moving crew to come in and pack up your stuff and move you then are is that a corona virus triggered event a pandemic event well it's a governmental order that has triggered the movers from stopping work for the next two weeks or perhaps two months uh and then then there's one in here that is the final verification of condition final verification of condition isn't a contingency in the contract why in the world would it give rise to being a basis for a continuance of the closing on a corona amendment so then there's yet a third category of bases to use the nucc form that would trigger the cda coronavirus amendment first is a confirmed diagnosis of covid19 so as an infected person this real estate form requires you to advise everyone that you are infected that's a hepa violation isn't it inquiring minds want to know the next one is covid19 hospitalization well okay that makes sense to me governmental quarantine is one of the criteria well right now in california everyone is under governmental quarantine unless you are a medical provider or a first responder and i don't think medical providers and first responders are buying up a bunch of houses right now so everyone would be able to use this criteria as a basis for that cva form automatic continuation of a contract and then there is other just other come up with a reason other now the form requires you to verify your reasons to verify that that you have been under governmental quarantine or that your mover has refused or that you have lost your job or any of the other criteria but it doesn't say how exactly you are supposed to verify this are you supposed to give a copy of your termination notice do you have to give an email of the movers saying no they're not going to move you do you have to print out a copy of gavin newsom's governmental order quarantining everybody or having everyone stay in place apparently you do and then we go to the next form and the next form is the property entry advisory and declaration now this is a declaration you are going to declare something when you sign this form i've never seen and i guess we live in extraordinary times but i have never seen a situation where a prospective purchaser needed to make an affirmative declaration of any fact before they were allowed to inspect the piece of property that is on the market we live in extraordinary times so this form notes that real estate is an essential activity i'm not sure that governor newsom's declaration made the buying and selling of homes a necessary activity an essential activity but apparently the director of the form believed so this form says that you a prospective purchaser and a seller who was allowing a prospective purchaser into your house are acknowledging that showing or visiting properties may be dangerous or unsafe and that you are doing so at your own risk okay and then the form says that you the prospective purchaser and the seller will take all reasonable and necessary precautions to protect yourself all i'm a lawyer and i deal with words all is an awfully broad mandate for you to take to protect yourself because if you haven't done everything you have just assumed liability for yourself then you are making a declaration that you are not to the best of your knowledge currently afflicted with covet 19 and you have not knowingly come in contact with anyone who is currently afflicted with covet 19. 19 is asymptomatic and part of the reason for the pandemics spread is that people are being contaminated by those that they do not know who are and the incubation period is 14 days so i guess that this means that you would need to not go to inspect a house for at least 14 days from the time that you signed this form because you would need to know that you are not currently afflicted and the only way that you could know that is by waiting 14 days from the time you've signed this then this form says that you believe you are not likely to transmit or contract covet 19. ladies and gentlemen the center for disease control has said that approximately 50 percent of the population of the united states will within the next year contract covid19 50 percent how in the world can anyone declare that they are not likely to transmit or contract this disease yet that is what you are declaring in this form and you will be held liable for any damages that result from a breach of this declaration on your part then this form says that to the extent available you will wash your hands with soap and water you will use hand sanitizer you will wear rubber gloves you will wear a protective face mask and you will wear protective shoe coverings if any of those things are available before you walk into the house that you wish to inspect to purchase oh and by the way those things those masks and booties and gloves and soap and water are to be provided by the seller or the tenant or the landlord rather of the property nowhere in this form that is drafted by the california association of realtors does it say that the real estate licensee has any responsibility for any of that and then after you have gone through the scrubbing to be able to look at this property the seller or the landlord is responsible for cleaning and disinfecting the property not the broker the seller or the landlord will clean and disinfect now does that mean that you have to clean and disinfect after each and every prospective purchaser who has suited up in their hazmat suit has come in and looked at the property because that is apparently what this form requires [Applause] the plead pead form for all intents and purposes just in case you haven't gotten it has just canceled open houses or property showings throughout the state of california for the duration of the pandemic and the cva form does not allow the if you sign it does not terminate the listing based on whatever the original contract termination date is that cva form acts as an extension of the listing agreement until the governmental orders all of them state local federal homeowners association if there is such a thing all of them have to be lifted before the clock starts again on a listing agreement that would have otherwise expired on i don't know april 2nd it is very protective of the real estate brokerage community and then we get to the last of the four forms and that is the residential listing agreement corona addendum or amendment and once again we have that word amendment because this is a form that the real estate community is suggesting that current owners who have listed their property be given for sign off in order to maintain the listing the issue with that what is the additional consideration in order for an amendment to a pre-existing contract is addressed in the form and it says that there are mutual benefits in addressing the effects of the covid19 pandemic and in consideration of those mutual benefits the parties agree as follows there are mutual benefits in addressing the effects well how is the seller benefited by addressing those effects if all the seller is going to do is let the listing terminate based on the time that's in the existing listing agreement let's look at what else the form says once again this form is in place until all of the governmental orders or suggestions are lifted and and with respect to those orders they are orders that affect the property now i've read gavin newsom's order and it doesn't talk about property at all it talks about people and so how is there any order that affects property that's going to be lifted the ambiguity in this is rife then with regard to showings of property on this listing agreement remember you're hiring the real estate agent to sell your property to list it to to market it to show it to make it available for prospective purchasers to inspect and decide whether it is something that they wish to acquire but prospective purchasers will not be allowed to enter wait wait we'll not will be asked not to enter so if you ask someone not to enter and you say you don't have permission to do so and they barge past you and enter into the property anyway is that person now liable for trespass because you've just given the real estate agent the authority to bar people and they're going to contractually ask them not to enter unless the first thing is that this prospective purchaser must sign a statement and declare three things the first is that they are not afflicted by covid19 nor have they been in contact with anyone afflicted by covid19 to the best o their knowledge and that while on the property they will adhere to safe practices but what safe practices is and is not defined in this residential listing amendment then this prospective purchaser must provide verification that they either have sufficient cash to buy the property outright or that they have been pre-approved by a lender to get a loan for the amount necessary to buy the property they must show that they are pre-approved not pre-qualified pre-approved which means all of their credit has been analyzed everything is ready to go the only thing that this loan would be subject to is an appraisal and verification of the condition of the property while it is probably a best practice for a real estate broker to have already verified that their prospective buyer client either has the cash or is pre-approved to buy the real estate there are probably less than three out of ten that have done so and so now the barrier to entry for inspection has just been raised and next and somewhat humorously the prospective purchaser must verify that they have previously viewed the property online i guess zillow or realtor.com are really happy about this because now in order for your property to be shown the real estate licensee must put it online to be inspected online before anybody can come into it otherwise and if those things weren't enough the last of the provisions in this residential listing covered amendment or addendum is paragraph five and paragraph five contains a provision that says the seller agrees and shall the seller agrees to and shall hold broker and its agent harmless from any and all claims liabilities obligations attorneys fees for any actions and shall indemnify the broker for any damages costs attorneys fees or other fines from any third party that arise from or are related in any manner to this amendment or addendum you the seller are now agreeing to indemnify your broker for all claims that might arise as a result of that broker's performance of its duties to show your house i recognize that everybody is a little panic stricken right now and i recognize that knee-jerk reactions are oftentimes not well thought out but these forms by the california association of realtors while they are incredibly protective of the real estate community that the car is there to serve if i were a buyer or a seller and i were presented one of these forms [Music] i would certainly want to have independent legal counsel review it with me so that i understood what it was that the broker was asking me to sign if a buyer and a seller is given this form without the real estate licensee explaining the significance of the form to them i would posit that the real estate licensee has breached its fiduciary duty to the client because these forms change dramatically the legal positioning of the client buyer or seller and the real estate broker from what is already a pre-existing arrangement