Legal Article | Top Ten Changes to 2022 Residential Forms

BY WILL MARTIN, GENERAL COUNSEL

Effective July 1, 2022, twenty-six of the residential forms in the NC REALTORS® forms library underwent a change of some sort. The extent and nature of the changes was typical of changes made in past years. They are for the most part formatting and/or wording changes intended to clarify the meaning of or to emphasize existing language. However, there are a number of more substantive changes, and the purpose of this article is to highlight 10 of what I consider to be the most significant changes that NC REALTORS® members need to be aware of. Five on my list are contained in the Offer to Purchase and Contract, with five other forms each accounting for one of the changes highlighted in this article.

For more details on the forms changes, a bullet-point summary of all the changes, as well as marked-up copies of the forms themselves showing the exact changes, is available on the NC REALTORS® website.

Offer to Purchase and Contract (Form 2-T)

Change #1: Fuel tanks/Fuel (paragraph 7(d)).

To reduce the number of disagreements relating to fuel tanks and fuel, a new section devoted exclusively to fuel tanks and fuel has been created. Wording pertaining to fuel tanks and fuel that appeared in different sections of the previous version of Form 2-T have been consolidated into a single new section. Although much of the wording has remained the same, there are two changes I think are worth noting:

• In a substantive change from the previous version of Form 2-T, the seller may use any fuel in a tank through Settlement (subject to the seller’s obligation to provide working utilities through Closing or possession by the buyer), but the seller is not permitted to remove the fuel or resell it. If there is a significant amount of fuel in a tank at the time of an offer, the seller should take that into consideration in determining an acceptable sales price.

• In an addition to the previous version of Form 2-T, sellers will be required to identify whether there are any fuel tanks located on the property, and if so, to provide information about them. Sellers are currently required to provide this information in listing their property using the Exclusive Right to Sell Listing Agreement (Form 101). It is believed that requiring a seller to provide the same information in the contract is reasonable.

Change #2: Change in Condition of Property (paragraph 11).

In a substantive change from the previous version of Form 2-T, if the property is not in substantially the same condition at Closing as on the date of the offer and the buyer elects to terminate the contract, the buyer will be entitled to a refund of any Due Diligence Fee paid in addition to any EMD. The seller in such a case will not be required to refund the buyer their Due Diligence Costs, as would be the case under paragraph 23(b) if the seller is in material breach of contract. This change was made in an attempt to fairly balance the parties’ rights and duties in a situation where the condition of the property has unexpectedly changed after contract but before closing, and it may or may not be feasible to return the property to its previous condition.

Change #3: Payment of Owner Association/ Management Company Fees (paragraph 9).

Misunderstandings about whether the buyer or the seller is responsible for payment of a particular fee charged by an owners’ association or management company are common. In the previous version of Form 2-T, the parties’ obligations to pay such charges are addressed in different sections of the contract. It is believed that addressing the parties’ obligations in the same paragraph of the contract should help reduce confusion about which party is responsible for a particular fee. Thus, the parties’ respective responsibilities for the payment of such fees are addressed in a new “Charges by Owners’ Association” paragraph. Although their obligations are not fundamentally different than in the previous version of Form 2-T, I do want to point out two things:

• Under paragraph 9(a)(iii), the seller is specifically responsible for payment of any fees charged for transferring or updating ownership records of the association, and under paragraph 9(a)(ii) for payment of any expedite fee charged for providing statements on owners’ association dues or assessments.

• In paragraph 9(b)(ii), the phrase “charges…for Buyer’s future use and enjoyment of the Property” that appeared in the previous version of Form 2-T has been eliminated in an attempt to reduce disputes about whether a particular fee falls within the meaning of that phrase. In the new version, specific types of charges are listed that the buyer is responsible for paying. All other HOArelated charges are the responsibility of the seller under paragraph 9(a)(iv).

Change #4: Mobile Homes (paragraph 1(c)).

In the new version of Form 2-T, the parties will need to affirmatively indicate whether or not the sale will include a manufactured (mobile) home. This change was made at the request of the real estate attorneys on the Joint Forms Task Force, and hopefully will reduce the number of problems that arise when the closing attorney is unaware until very late in the process that the sale includes a mobile home.

Change #5: Remedy of Specific Performance (paragraph 23(b)).

In the new version of Form 2-T, the buyer’s right to sue for specific performance is specifically stated. This is not a substantive change from the previous version of Form 2-T, which preserved any remedies available to the buyer if the seller failed to perform the contract. It is believed that specifically identifying the buyer’s right to sue for specific performance will highlight the existence of that remedy as an alternative to termination of the contract and recovery of damages.

NOTE: Change #s 2, 3, 4, and 5 have been made to the Offer to Purchase and Contract (Vacant Lot/Land) (Form 12-T), and change #s 3 and 5 have been made to the Offer to Purchase and Contract—New Construction (Form 800-T).

Buyer Possession Before Closing Agreement (Form 2A7-T)

Change #6: Means of Access/Seller’s Right to Enter Property (paragraph 1).

In substantive additions to Form 2A7-T:

• The seller must deliver all means of access to the property to the buyer at the commencement of buyer’s possession.

• The seller is entitled to retain an entry key and has a right of access to the property in case of an emergency.

Seller Possession After Closing Agreement (Form 2A8-T)

Change #7: Means of Access/Buyer’s Right to Enter Property (paragraph 1).

In substantive additions to Form 2A8-T:

• The seller is entitled to retain all means of access to the property during the seller’s post-closing term of occupancy, but must provide the buyer with an entry key at Closing.

• The buyer has a right of access to the property in case of an emergency.

Exclusive Right to Sell Listing Agreement (Form 101)

Change #8: Dual/Designated Dual Agency (paragraph 17).

• As in the previous version of Form 101, in paragraph 17(e) the seller must initial either the Dual Agency blank or the Exclusive Representation blank. However, the authorization to practice designated dual agency, if offered by the firm and if authorized by the seller, now appears as a subset of dual agency since a seller must first authorize dual agency for a firm to also practice designated dual agency. In the previous version, the formatting sometimes caused confusion about whether the seller needed to authorize both dual agency and designated dual agency. It is hoped that the reformatting of this section will clarify the need for the seller to initial both Dual Agency and Designated Dual Agency.

• It is important to note that if the seller initials the Designated Dual Agency choice, the seller is both authorizing and directing the firm to practice designated dual agency. This is a change from the previous form, and has been made largely at the request of the Real Estate Commission, which has received a number of complaints from sellers involving firms that chose to practice dual agency even though the seller had authorized designated dual agency. In the new Designated Dual Agency choice, the firm may remain in dual agency only if designated agency would not be permitted for some reason or the seller agrees in writing that the firm will remain in dual agency only.

• It is also important to note that if a seller authorizes dual agency, the new version of the form requires the seller to indicate whether the same individual agent will be permitted to represent both the seller and the buyer in a transaction.

NOTE: Change #8 has also been made to the Exclusive Right to Sell Listing Agreement—Vacant Lot/Land (Form 103), the Exclusive Buyer Agency Agreement (Form 201), and the Non-Exclusive Buyer Agency Agreement (Form 203).

Offer to Purchase and Contract (Vacant Lot/Land) (Form 12-T)

Change #9: Proper Use of Form.

NOTE (top of page 1). The primary purpose of this Note is to alert users to the existence of a North Carolina statute that limits the ability of a seller to sell property by reference to a subdivision plat that has not received final approval and been recorded. The Note in the previous version of Form 12-T has sometimes caused confusion about whether Form 12-T would be an appropriate form to use for a particular transaction. The purpose of the revisions to the Note is to more specifically describe the limitations imposed by the statute and to specifically cite the statute.

Referral Agreement (Form 730)

Change #10: Assignment.

In a substantive addition to the previous version of Form 730, a new “Assignment” paragraph has been added to prohibit assignment of a Referral Agreement by the Receiving Firm or a change in the individual agent to whom the referral is made without the Referring Firm’s written consent, and to clarify that if an assignment is permitted, the assignee will be bound by all the terms of the Referral Agreement.

Join the NC REALTORS® Residential Forms Committee

Committees help shape the direction of NC REALTORS® and its policies. Serving on an NC REALTORS® committee furthers your professional development by providing leadership experience, expanding your professional network and strengthening your ties within the association. What’s more, committee members are directly involved in identifying new opportunities, guiding projects and offering their expertise.

The NC REALTORS® Residential Forms Committee reviews and develops the standard residential real estate forms used by REALTORS®. Service on the Residential Forms Committee is a one-year term from July 1 to June 30. This committee may meet up to eight times a year in Greensboro, thus requiring an extensive time commitment. If you have any suggestions for the Forms Committee, please e-mail forms@ncrealtors.org.

Join for the Residential Forms Committee or another NC REALTORS® Committee by scanning the QR code or visiting ncrealtors.org/ CommitteeForm.