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2021 Arizona REALTOR® Voice
January 12, 2021
Pre and Post-possession Agreements
These types of agreements can serve a valid purpose for the buyer and seller, but should Arizona REALTORS® consider them when they carry so much risk…
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Seven Day Right of Rescission Language Must be Included in the Contract Selling Vacant Lot in a Subdivision
FACTS:
The agent is listing certain unimproved lots for sale in a subdivision. The developer/seller standard contract does not contain the rescission language set forth in lines 20-26 of the Arizona REALTORS® Vacant Land/Lot Purchase Contract Addendum Regarding Subdivided or Un-subdivided Lands.
ISSUE:
Is the rescission language required by law?
ANSWER:
Yes.
DISCUSSION:
If the property being sold is undeveloped (in other words a vacant lot) in an existing subdivision, the rescission language is required by statute, specifically A.R.S.§32-2185.01(D). The Commissioner’s Rules clarify the required language. See A.A.C. R4-28-804(A). The Rule states that a contract for the purchase or lease of an unimproved subdivided lot shall contain language substantially similar to:
The purchaser or lessee has the legal right to rescind (cancel) this agreement without cause or reason of any kind, and to the return of any money or other consideration by sending or delivering a written notice of rescission to the seller or lessor by midnight of the seventh calendar day following the day the purchaser or lessee executed the agreement. If the purchaser or lessee does not inspect the lot or parcel before the execution of the agreement, the purchaser or lessee shall have six months to inspect the lot or parcel and at the time of the inspection shall have the right to unilaterally rescind the agreement.
See A.A.C R4 -28-804(A).
The language must be in bold print or print larger than the other print used in the contract document. Id.
Notice of Loan Denial Can be Provided Without Using the Unfulfilled Loan Contingency Notice
FACTS:
The buyer and seller executed an AAR Residential Resale Real Estate Purchase Contract which was contingent upon the buyer obtaining financing. In connection with the contract, the buyer deposited $15,000.00 in earnest money with escrow. Shortly before the scheduled close of escrow, the buyer lost his job and was therefore unable to obtain the required financing. The buyer provided written notice to the seller and the escrow company of the inability to obtain financing. The seller has refused to release the earnest money to the buyer claiming the Unfulfilled Loan Contingency Notice form must be used.
ISSUE:
Is the buyer obligated to use the Unfulfilled Loan Contingency Notice to cancel?
ANSWER:
See discussion.
DISCUSSION:
Here, the Contract provides at Section (2)c that the buyer may cancel and be entitled to a return of the earnest money if, after a diligent and good faith effort, buyer is unable to obtain the loan and delivers notice of that inability to the seller. The Contract does not mandate that a particular form be used. The Unfulfilled Loan Contingency Notice could have been used under the circumstances, but that specific form is not required. All the contract requires is for the buyer to provide notice, as that term is defined in Section 8(m).
The buyer is therefore entitled to cancel the Contract and receive the return of his earnest money deposit.
NOTE – Arizona REALTORS® forms are not required in any given transaction. The parties may choose to use the forms if represented by a REALTOR®, but there is no obligation to do so.
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