CATEGORY: Commissions

 TITLE: Purchase Price May Be Amended To Increase Compensation To Brokers

 ISSUE:

Is it permissible for parties to a real estate contract to increase the sales price in order to accommodate a larger commission to the broker(s), assuming that both the buyer and seller agree in writing and the compensation is set forth on the HUD-1 Settlement Statement?

ANSWER: Yes

DISCUSSION:

If both the buyer and seller consent in writing, additional compensation may be earned by the broker(s) and it must be disclosed on the HUD-1 Settlement Statement.  The AAR’s Additional Compensation Consent Form, which operates as an addendum to the purchase contract between the buyer and seller, may be used for this purpose. Note: Commission Agreements should not be addressed in the purchase contract.


CATEGORY: Contracts (General)

 TITLE: Purchase Contract Should Address Solar Panels

 FACTS:

 The property owner contracted for the installation of solar panels, which are owned by the solar company and subject to a 20-year lease.  Subsequently, the owner accepted a purchase offer and the parties have executed a Residential Resale Real Estate Purchase Contract without reference to the solar panels or solar lease.  Now, the buyer has agreed to assume the lease obligations, but has demanded a $6,000.00 reduction to the purchase price as consideration.

ISSUE:

Can a buyer demand a price reduction in exchange for assuming a solar lease?  Also, if the buyer does not assume the lease, will the seller remain obligated to make the lease payments?

ANSWER:

See Discussion.

DISCUSSION:

Although the terms of solar leases vary, they generally provide the solar leasing company with discretion to accept or reject an assumption of the lease by a subsequent purchaser.  If the solar leasing company agrees to an assumption, the seller will generally no longer be bound by the lease terms, and the buyer is certainly within his or her rights to request a price concession in exchange for the lease assumption.  On the other hand, if the leasing company rejects an assumption or if the buyer refuses to assume the lease, the seller of the property may remain liable for the monthly payments for the duration of the lease term.  Please note that the buyer’s credit rating is a significant factor in the solar leasing company’s determination of whether to accept a lease assumption.  It is also important for the parties to carefully review the lease terms for transfer fees, pre-payment penalties, and other provisions which may affect their respective rights and obligations.

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