Why You Should Never Overlook Notice Provisions in Real Estate Sale Agreements

Why You Should Never Overlook Notice Provisions in Real Estate Sale Agreements

These revisions include changes to closing requirements and viable methods of communication regarding notices.

January 18, 2022

Under Florida law,  agreements for the sale of any interest in real property, and for the lease of property for a period longer than one year, are invalid unless reduced to a written contract. However, even the most straightforward real estate contracts (including the “FAR/Bar” standard template contracts) have many sections and provisions. These boilerplate agreements typically contain a lot of legalese about requirements like inspections, deposits, financing, and contract termination.

One particular provision in real estate contracts that is easy to overlook–yet critically important–is the provision specifying the form, method, and manner of how notices (i.e., termination, notice of default, waiver or satisfaction of conditions) must be provided to the parties involved.

Though Florida courts have sometimes been flexible in interpreting notice provisions, it’s still crucial for buyers and sellers to understand and adhere to the terms set out in their contract in order to avoid defaulting and forfeiture of deposits.

A qualified Florida real estate attorney can interpret contract notice provisions and tell you when and how you need to communicate with the other party.

What is a Notice Provision Under Florida Real Estate Law?

Notice provisions designate how the parties receive notices about binding matters in their real estate contract. Each provision clause should be clear on its requirements and include at a minimum the following information:

  1. The time limit for sending notices.
  2. Acceptable methods for sending notices, such as email, fax, or mail.
  3. How the notice should look.
  4. The information notices should contain.
  5. Who to send notices to (this may seem obvious, but when dealing with a party such as a trust or LLC, the answer can be less than clear).

If either party fails to adhere to all requirements in a notice clause, they could forfeit their rights to make a legal claim.

Critical Notice Provisions in Real Estate Law Contracts

The method of delivery and time limit for sending notices are the two most common points of dispute between buyers and sellers in real estate deals. What happens if the contractually-required method and time for delivery of notice aren’t used? The Florida courts recently answered that question in the case ofMegaCenter US, LLC v. Goodman Doral 88th Court, LLC.

In the MegaCenter case, the two parties were in disagreement over who was entitled to the $250,000.00 earnest money deposit (EMD). At the center of the dispute was whether the buyer provided proper and timely notice of cancellation during the due diligence stage. While the trial court ruled in favor of the seller, who argued the buyer defaulted by not providing proper notice, on appeal, it was found the buyer’s notice had, in fact, been sufficient. The buyer received reimbursement of the $250,000 EMD. In its ruling, the appellate court noted that, even though the buyer hadn’t strictly complied with the notice section of the contract, there was no dispute the seller actually had received timely notice.

What is Timely Notice, And Why Does It Matter?

When you make an offer to purchase real estate in Florida, an EMD is included to let the seller know the offer is genuine. A typical Florida real estate sales contract sets out who retains the EMD, and it’s typically the seller’s representative or agent who deposits the funds in an escrow or trust account until the deal closes. At closing, the EMD gets applied to the total purchase price, including closing costs.

If for whatever reason the sale doesn’t close, the contract spells out the conditions under which a buyer would forfeit the earnest money. If the seller meets all contract terms but the buyer does not, the seller, in theory, has the option to retain the EMD as liquidated damages. Depending on the wording of the contract, this may be the seller’s sole remedy; or, it may just be one of several options.

Buyers of Florida real estate have several opportunities during the sales process to get their EMD back. The most commonly-used route would be to tender notice of termination during the inspection period (also called a ‘due diligence period’). However, timing is everything (or, more specifically, timing is of the essence). If the notice is timely received, the Seller will typically have no choice but to terminate the contract and agree to a refund of the EMD. However, if the notice is even one day late, in this scenario the Buyer would have no right to receive a refund of the EMD (all else being equal).

When buyers and sellers disagree on whether a party gave timely notice, the funds can’t be distributed to either party until the dispute is resolved. If the title and closing agent cannot receive clear guidance or agreement on how to disburse the EMD, they may seek to interplead the funds–in which case the parties will have to argue in court as to who is entitled to the funds. In this scenario, additional time and expense will be incurred by both sides. And, for a seller in a hot real estate market, time is literally money. Therefore, it is in both parties’ best interests to get the issue resolved as quickly as possible.

The best way to avoid an escrow dispute? Prevent it from happening in the first place. A clearly-worded real estate contract outlining and setting forth each party’s responsibilities and rights, including notice provisions, ensures there are steps to follow if there’s a dispute, as well as what happens if there’s no quick resolution.

How to Avoid Notice Provision Disputes

What can a buyer or seller take away from all this?

  • First, as they vary significantly from contract to contract, always pay attention to the contract’s notice requirements. Get any questions about timely notice and method of notice delivery answered before you sign the contract.
  • Second, provide notice to all interested parties, not just the buyer or seller. The more people notified, the harder it’ll be for anyone to argue they didn’t receive proper notice.
  • Third, don’t rely upon verbal agreements. Typically a real estate contract will also contain a provision stating that no oral modifications can be made. In a nutshell, that means that any verbal agreement modifying the contract is completely unenforceable.

Real estate purchase offers are legally binding, and buyers and sellers are bound by their contract’s specific terms and conditions. To add to the complexity, Florida real estate law pertaining to contracts changed as of November 1, 2021, with numerous revisions to previous versions.

These revisions include changes to closing requirements and viable methods of communication regarding notices. For instance, texting is now seen as an unreliable way to prove notice is delivered. To ensure your real estate contract’s terms comply with current Florida law, your best course of action is talking with a contract attorney at Munizzi Law Firm who can explain all your options.

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