Effective July 1, 2015

The NVAR Board of Directors has approved a number of forms changes, as proposed by NVAR’s Standard Forms Committee. Those changes include language in the Residential Sales Contract, highlighted below, to address concerns arising from new Consumer Financial Protection Bureau.

1. K1321 – Residential Sales Contract  
a. Personal Property and Fixtures. The paragraph has been updated to address fuel tanks in one paragraph of the contract, rather than separately in the ADJUSTMENTS paragraph. The parties now must state whether fuel tanks are owned or leased, and include the number of tanks. The paragraph also clarifies that when fuel tanks are owned, the tanks convey. The paragraph further states that the content of the fuel tanks, namely the fuel, which remains in the tanks at settlement, will become the property of the Purchaser unless the parties agree otherwise in writing on the lines provided. The language addressing fuel tanks in the ADJUSTMENTS paragraph has been moved to this new provision.

b. Alternative Financing. This paragraph has been clarified. It now defines the term Alternative Financing more specifically to mean any change to the terms included in the PRICE AND SPECIFIED FINANCING paragraph. The paragraph then outlines the steps to substitute Alternative Financing, and separately addresses substituting lenders. 

c. Title. In January 2015, the Standard Forms Committee updated the title paragraph to address the possibility of defects in title that would require a delay in settlement. It gave Purchasers the choice, on settlement date, of voiding the contract or reaching an agreement with the Sellers and delaying settlement until such time as the title defects could be remedied. However, feedback from the NVAR Attorney Roundtable indicated that the language in the paragraph could have been interpreted to deny the Purchaser the option to seek specific performance. The title paragraph has been updated to reflect that the Purchaser does not forfeit any of the remedies available at law.

d. Time is of the Essence. The Consumer Financial Protection Bureau created new rules which govern the practice of lenders and settlement agents. As a result of the new regulations, the industry is expecting that some delays in settlement may occur as lenders attempt to comply with the new regulations. The new contract language provides a carve-out to the default provisions. In the event that the contract is contingent on financing and the settlement must be delayed to allow the lender to comply with regulatory requirements, such delay will not constitute a default by the Purchaser. Under these circumstances, the paragraph also grants the Seller the right to void the contract.

2. K1336 – Exclusive Right to Sell Listing Agreement; K1337 – Exclusive Agency Listing Agreement; K1281 – Exclusive Right to Lease Listing Agreement; and K1355 – Exclusive Right to Sell Unimproved Land Listing Agreement
a. Definitions. The term Purchaser has been replaced by the term Buyer.

b. Broker Duties. Has been updated to track more closely to the language in the Code of Virginia.

c. Marketing. The paragraph has been updated to reflect the availability of a Pre-Marketing Addendum to the listing agreement.

d. Types of Real Estate Representations. The explanation of non-agency was removed from the agreement, as it does not apply to the relationship at issue and created confusion.

e. Broker Compensation. The specified options of Sub-Agency and Non-Agency compensation have been removed and replaced with “Other Compensation.”  This was done in conjunction with MRIS’s removal of the sub-agency compensation field in Virginia listings.

f. HOA and Condos. (Not applicable to K1281 – Exclusive Right to Lease) The new language more clearly allocates the duties for ordering the documents and the time frames for doing so. It gives the option of ordering them at the time of listing or within three days of contract ratification or “other”.

g. Current Liens. The list of items has been re-ordered so that the first option is, “the property is not encumbered by lien.”.

h. Service Provider Referrals. The new language provides protection to brokers who provide a list of service providers to their clients.

i. Lease Term. (Applies only to K1281 – Exclusive Right to Lease) The landlord must state whether he or she will consider applicants whose source of funds comes through a housing voucher program such as section 8.

3. K1338 – Exclusive Right to Represent Buyer Agreement and K1282 – Exclusive Right to Represent Tenant Agreement
a. Term and Termination. Added the possibility of an early termination fee to the Buyer/Tenant agreements.

b. Compensation. Moved the retainer fee language to this provision to track with the Listing Agreements. The paragraph also clarifies how the buyer/tenant agent is compensated, and the duties of the buyer in the event that the compensation offered in the MLS is less than the parties agreed in the brokerage agreement. In addition, the language was modified so that the Buyer will owe the broker compensation for the purchase of ANY property during the “protection” period after expiration or termination of the brokerage agreement. The previous language limited compensation to properties shown during the agreement period.

c. Types of Real Estate Representations. The explanation of non-agency was removed from the agreement. It does not apply to the relationship at issue and created much confusion.

d. Service Provider Referrals. The new language provides protection to brokers who provide a list of service providers to their clients.

e. Recorded Paragraphs. Paragraphs were re-ordered to ensure proper flow within the document.

4. K1333 – Lease Common Law and K1354 – Lease VRLTA
a. Damages and Unlawful Detainer. These documents were sent to Chip Dicks, VAR Legislative Counsel, for their bi-annual legal update. Mr. Dicks made some revisions to reflect 2014 and 2015 law changes. These revisions include additional remedies for landlords to collect damages and costs for an unlawful detainer action.

b. Tenant Insurance. The lease has been updated to delete the requirement to name the Landlord as an additional insured under the Tenant’s renter’s insurance policy, as it was not possible in our marketplace.

5. K1369 – Pre Marketing Addendum to the Listing Agreement
a. This is a new form that was created by the Committee at the request of several large NVAR broker members. This document addresses the new “Coming Soon” status in the MLS, and lays out the marketing activities that the listing agent will undertake before making the property available for sale to the marketplace. 

Sarah Louppe Petcher is the general counsel for NVAR.