Top 10 Residential Forms Changes in 2023

BY LEGAL JOHN (JOHN WAIT), GENERAL COUNSEL

Who are you?! You’re not the Forms Guy!

I spent months workshopping what my pen name might be for this Insight article. There were focus groups, teams of writers, and too many consultants to count. The Forms Guy has been a staple in this publication for years, and the pressure to get the branding just right to fill those shoes seemed impossible.

That was until, with no known premeditation, Brooke Rudd-Gaglie began calling me “Legal John” at the Winter Leadership Meetings in January.

The simplicity of the name was perfect, and I immediately fired my entire branding team. So no, I am not the Forms Guy. I am Legal John, and it is my privilege to take a minute and highlight ten big forms changes that just came out on July 1.

For those of you that may not know, these forms changes represent eight months of hard work by our Forms Committee members and NC REALTORS® staff. The chairs of the Forms Committee, Laurie Linder and Patrice Willetts, did an excellent job and worked very well with Bob Ramseur, chair of the Joint Forms Task Force. Leigh Morgan somehow kept me organized and made sure the train stayed on the track at the staff level.

I’d like to thank every REALTOR®, staff member, and NC Bar Association attorney who worked on these forms changes for their dedication and thoughtful contribution. I have always believed that the forms speak to REALTOR® values and should be a source of pride. As someone who works regularly with forms from other states, I have a deep appreciation for the years of work that have made our forms what they are today, and I believe these most recent changes will continue to make our forms some of the best in the country.

So, without further ado, here are ten big forms changes for 2023.

1. New Governmental Compliance Paragraph in the Offer to Purchase and Contract (Form 2-T).

The parties may discover that the property does not comply with governmental regulations during a transaction. Sometimes these issues are small, and sometimes they are big. This new paragraph has been carefully drafted to address those scenarios where the property is in material violation of a law, ordinance, or other governmental regulation.

It is important to note that this new paragraph is a brand-new condition in the contract, much like paragraph 11 and the condition that the property be in substantially the same or better condition at closing. Conditions, if they are not met, do not ordinarily result in a breach of the contract, which is true in this case.

Under this new condition, if the seller discloses a violation, then the buyer will have no right to terminate for that disclosed violation. If a governmental violation is discovered after the Effective Date, the seller can either remedy the violation or decline to fix it. Depending on the seller’s decision, the buyer can either proceed and close or terminate and receive a refund of their earnest money and due diligence fee as their sole remedy.

2. New Default Language for Who is Named in the Deed in Form 2-T.

Previous versions of the Offer to Purchase and Contract offered a blank for agents to identify who was to be named on the deed at the time of contract. According to closing attorneys, the blank was often filled out incorrectly, which created issues later in the transaction if the name needed to be changed.

The pre-printed language has now been adjusted to allow the deed to be made out to: (1) the buyer; (2) a corporation, limited liability company, or other business entity of which the buyer is the sole owner or shareholder; (3) a trust for which the buyer is the beneficiary; or (4) any relative of the buyer. These four options are automatic and do not require the agent’s input. There is still a blank in the revised paragraph, but it should now rarely be used, and if it is, a specific name must be inserted rather than “TBD.”

3. New Options to Identify Off-Site or Separate Septic Lots, Boat Slips, Garages, Parking Spaces, and Storage Units in Form 2-T.

Checkboxes have been added to the first page of the contract to indicate whether the sale will include a separate or off-site septic lot, boat slip, garage, parking space, or storage unit. A note has also been added advising the parties to attach the Additional Provisions Addendum (Form 2A11-T) if the property includes any of these off-site features. These new checkboxes, and corresponding additions to Form 2A11-T, should prompt earlier discussions about ancillary property features, help agents and clients better identify what is (or is not) part of the contract, and avoid last minute closing snags.

4. New Guidelines for Buyer and Seller Possession Forms.

New guidelines for Forms 2A7-T and 2A8-T do a lot more than just explain the pre-printed language of the buyer and seller possession addenda. In addition to providing important insight and background on how to fill out the blanks in their counterparts, these new guidelines explain important nuts and bolts of the landlord-tenant relationship, such as lease terms, the landlord’s right of access (or lack thereof), property maintenance, and, if necessary, eviction.

5. Property Manager Selection, Vacation Property Sales, and the Vacation Rental Addendum (Form 2A13-T).

It is common for the services of a vacation rental property manager to be negotiated by the parties in the sale of a vacation property. Previously, most of these agreements were verbal or informal, and the buyer agreed to use the seller’s property manager so that the seller could avoid early termination fees. If the buyer later withdrew from one of these informal agreements, the seller had a difficult path to seek a remedy.

New language added to Form 2A13-T addresses this problem directly. The form now states that if the buyer does not sign an agency agreement with the seller’s property manager prior to Settlement, then the buyer agrees to pay the seller a fee. There is a blank provided so that the parties can negotiate this fee, or waive it by putting $0 dollars.

6. New Seller Representations in the Exclusive Right to Sell Listing Agreement (Form 101).

Two new paragraphs have been added to the seller representations in Form 101. The first asks the seller to identify potential disputes and violations that may affect the seller, their HOA, or the property itself. The second requires the seller to indicate whether or not they are a foreign person to ensure FIRPTA compliance. It is hoped that both of these additions will help listing agents identify and disclose material facts about these issues.

7. New Form: Agreement and Sale of Personal Property (Form 320-T).

As the name indicates, this new form permits agents to deal effectively with personal property that may, or may not, be associated with a real property transaction. Currently, agents use an ad hoc approach or use a closing attorney to facilitate the transfer of personal property. This form will standardize this process and provide significant risk management benefit to REALTOR® members who encounter personal property as part of their real property transactions.

8. Significant Changes to Contract Termination Forms (Form 350-T, Form 351-T, Form 352-T, and Form 353-T).

By checking a new box in the standard termination forms, both the buyer and seller can now terminate an NC REALTORS® standard form purchase contract without providing a reason. The buyer and seller can also check a box that terminates the contract and alleges that the other party has breached the contract.

As the termination forms clearly state, neither the buyer nor the seller should send such a termination without first consulting legal counsel. However, if after being advised to do so the parties still wish to terminate, agents now have the tools available to facilitate a clean termination without using the termination forms that require the signatures of both the buyer and seller.

The termination forms for the buyer, Forms 350-T and 351-T, have an additional checkbox for the buyer to terminate if the governmental compliance condition is not satisfied.

9. Clarification on Previous Amendments to Agency Agreements (Form 710).

The previous language in Form 710 did not make clear whether any previous amendments to an agency agreement remain binding following the execution of a later amendment. The new language makes clear that prior amendments to an agency agreement, unless specifically amended, remain binding even if new amendments are made.

10. New Default Rules for Referral Fees (Form 730).

Older versions of Form 730 were not clear on what referral fee was due, if any, when the prospect closed on more than one property during the referral term. New default language has now been added to make clear that if a party closes on more than one qualifying property before the end date of the referral agreement, then the referring firm will be paid on each transaction unless otherwise agreed.