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INSTRUCTION MANUAL
REGARDING
Article
Form
Page
INTRODUCTION ...........................................................................................................................2
I.
CONTRACT FOR SALE OF RESIDENTIAL REAL ESTATE (RES-2000) .............3
II.
FINANCING AGREEMENTS (MSC-2010) ..............................................................28
III.
CONTRACT CONDITIONS (MSC-2020) .................................................................31
IV.
DISPUTE RESOLUTION (MSC-2030)......................................................................34
V.
COUNTER OFFER (MSC-2040) ................................................................................36
VI.
INSPECTION NOTICE (MSC-2050) AND CONTINUATION OF
INSPECTION NOTICE (MSC-2050A) ......................................................................38
VII.
DISCLOSURE OF INFORMATION REGARDING
METHAMPHETAMINE / CONTROLLED SUBSTANCES (DSC-5000)................43
VIII.
SELLER’S AGENCY LISTING CONTRACT (EXCLUSIVE RIGHT TO
SELL) (RES-1010) ......................................................................................................45
IX.
AUTHORIZATION TO SHOW PROPERTY (MSC-1100).......................................56
X.
BUYER’S EXCLUSIVE AGENCY CONTRACT (MSC-1080)................................61
XI.
REFERRAL AGREEMENT (MSC-4015) ..................................................................68
XII.
RESIDENTIAL LEASE (RES-3010) ..........................................................................71
December 31, 201
2013
NOTE
The Missouri REALTORS® (“MR”) standard forms do not contain an “Expiration Date”.
Accordingly, MR forms do not “automatically expire” as of the end of each calendar year. MR
forms are, however, continuously updated to reflect changes in the law, regulations and real
estate industry, and to otherwise generally improve the same. To make sure you always use
only current approved standard forms, always first check the “Current Forms List”
published at the “Standard Forms” page on the MR website (www.missouriREALTOR.org).
Please check the MR website and The Landing (at www.thelanding.net) regularly, as well as
other MR publications, to keep up with the latest standard forms and related issues.
If you have any questions or comments about Missouri REALTORS® standard forms, please
contact Mary LaBarbera at [email protected], or Barry Uphchurch, 2014 Chair of
Residential Forms Committee at [email protected].
Missouri REALTORS
2601 Bernadette Place
Columbia, MO 65203
(800) 403-0101
Mary LaBarbera – ext. 133
DISCLAIMER
THIS MANUAL IS PROVIDED SOLELY AS A GUIDE AND REFERENCE TOOL FOR
INFORMATIONAL PURPOSES ONLY. THIS MANUAL DOES NOT REPLACE THE
CONTRACTUAL PROVISIONS OF ANY DOCUMENT DISCUSSED HEREIN AND IS NOT
INTENDED TO AND DOES NOT CONSTITUTE A LEGAL OPINION OR FORMAL
INTERPRETATION OF ANY CONTRACTUAL PROVISION, ALL OF WHICH IS
EXPRESSLY DENIED. YOU MAY CONTACT LEGAL LINE AT 573-447-5278 FOR FURTHER
INFORMATION, BUT IF YOU OR ANY OF YOUR CLIENTS DESIRE SPECIFIC OPINIONS
OR ADVICE ABOUT YOUR OR THEIR LEGAL RIGHTS AND LIABILITIES UNDER ANY
CONTRACTUAL DOCUMENT OR PROVISION, YOU SHOULD CONSULT WITH YOUR
OWN ATTORNEY AND ADVISE YOUR CLIENTS TO DO THE SAME.
1
INTRODUCTION
Each year, a great amount of time and effort is expended towards improving MR form
sale contracts and other documents used by Missouri REALTORS®. This Manual was created
to serve as an instructional guide and educational resource for all REALTORS, and to help them
assist their clients. The use of standard forms serves to reduce conflicting operating practices
and procedures. At the same time, they are designed to preserve the ability of REALTORS to
customize and tailor details of each transaction, to fit the particular facts and circumstances
presented and the needs and desires of the parties they represent. It also facilitates interaction
between brokerage companies throughout Missouri and reduction of potential liability.
We hope this guide will be helpful to all REALTORS. It addresses all substantive
changes made to the Contract over the last few years, as well as those forms most commonly
used in connection therewith, including “Financing Agreements” (MSC-2010); “Contract
Conditions” (MSC-2020); “Dispute Resolution” (MSC-2030); “Counter Offer” (MSC-2040);
“Inspection Notice” and “Continuation of Inspection Notice” (MSC-2050 and 2050A) and
“Methamphetamine Disclosure” (DSC-5000). This Manual also addresses the MR form
“Residential Lease” (RES-3010), listing and other agency and transaction brokerage relationship
agreements (RES-1010 and RES-1080 in particular), the “Authorization to Show Property”
(MSC-1100) and “Referral Agreement” forms (MSC-4015).
Updates to this Manual will be posted on the MR website if and as they are made. All
hypotheticals set forth herein are for example purposes only. These documents must not be
provided to non-members. Doing so puts you in violation of copyright laws and diminishes the
value of membership in the Missouri REALTORS®. Special thanks go out to all Standard Forms
Committee members for all of their efforts in connection with this project.
Your comments and questions are welcomed!
2
I. CONTRACT FOR SALE OF RESIDENTIAL REAL ESTATE (RES-2000)
The following is a summary explanation of the current MR form Contract for Sale of
Residential Real Estate (RES-2000, the “Contract”), including basic instructions on how to
complete it. Letters listed below correspond to portions of the Contract so indicated on the
attached form. Numbers listed below correspond to line numbers set forth in the Contract.
General Note: All entries on the blank lines of all form documents should be printed or typed.
If any change is made to the preprinted (typed) language of the Contract (or any other MR form)
EACH change must be initialed and dated by ALL parties.
A.
PAGE 1
A blank “Reference” line is included at the top of all MR forms. This is for
identification purposes, for ease of reference and in case pages become separated. If
used, it should be completed in a consistent manner on all MR form documents used in
any given transaction, for instance, by including the names of all parties to the Contract
and/or the address of the subject Property (e.g., “123 Main Street, Your Town, Missouri,
Zip”). Signature is not required.
B.
Insert the full and complete legal name/identity of each Seller, including marital status
(e.g., “husband and wife”, “a single person”, “a married person”). This should be
available from the listing information, title commitment or vesting deed.
• If the Seller is a trust, insert the legal name of the trust and its trustee(s).
• If the sale is being made by an estate, insert the full name of the estate and its
personal representative (e.g., “Estate of John Doe, Jane Smith Personal
Representative”).
• If the Seller is some other form of legal entity, complete appropriately (e.g., a
“Missouri corporation”, “limited liability company” or “limited partnership”). If
there is not sufficient space within the blank provided at Line 1 to set forth the
complete legal name of each Seller, it is permissible to attach a separate page
containing that information and to cross-reference it at Line 1 (e.g., “See attached
sheet for identity of Seller”).
C.
Insert the full and complete legal name/identity of each Buyer by which it/they will take
title to the Property. The discussion at “B” above, regarding proper identification of the
Seller, equally applies to the Buyer here.
Note: A Buyer should be encouraged to obtain legal advice regarding any questions on
how to take title to Property (e.g., as joint tenants, tenants in common, tenants by the
entirety or other legally recognized forms of ownership).
2-3
The “Effective Date” is the date adjacent to the signature/initials of the last party to
sign/initial the Contract (or any Counter-Offer). See Section 30 below for discussion
regarding the procedures to be followed in order to accept an offer. The Effective Date
generally establishes the date on which most (if not all) of the contingency time frames
set forth in the Contract commence.
4-9
Pursuant to Section 1 of the Contract, the defined term “Property” means both the real
estate and all existing improvements located thereon. The “Property” also includes all
fixtures and permanently attached equipment (unless expressly excluded, as further
3
discussed below), as well as all rights and privileges appurtenant thereto (such as
easements which run with the land or reversionary rights in adjoining streets or alleys).
9-10
If available at the time an offer is submitted, a complete legal description, which
unmistakably identifies the Property, can and should be attached to the Contract, in
addition to the street address and zip code information (as prompted by the spaces
marked “D” and further discussed below). Reference to a record plat or inclusion of a
metes and bounds legal description is sufficient. If adequate space is not available to
directly insert the complete legal description in the blank spaces provided, the “Check
box” provision should be marked and the full legal description separately attached.
D.
A street address should be identified in the referenced blanks, but a mailing address
alone may not always be an adequate legal description (e.g., particularly if a rural tract
is involved; or if an adjoining, but legally separate, lot or parcel in an urban setting is
intended to be included as part of the Property to be sold). The Contract provides that
the legal description on Seller’s vesting deed(s) is to govern if a legal description is not
attached. Legal descriptions may be confirmed by the Survey, if any, pursuant to
Section 6 of the Contract (discussed below).
• Tip: If acreage or rural property is involved, also include the number of acres (e.g.,
“20± acres” or “20 acres more or less”), any available boundary lines, and the
assigned 911 number (if any).
Note: If a legal description is provided, its accuracy and boundaries may still be
confirmed and approved. If the legal description set forth in the Survey differs from
Seller’s vesting deed (and is to govern), then appropriate explanation/Objections should
be provided as part of the Title and Survey review procedures set forth at Section 6.
The intended effect (if any) on the Purchase Price to be paid (if the Survey reveals that
the total size or acreage of the real estate differs from what was believed to be the case)
should also be explained (e.g., if the Purchase Price to be paid by Buyer is to equal $XX
per [acre/sq. ft.] as shown on the Survey to be obtained by [Seller/Buyer]). The parties
should consult an attorney for specific language to use in such cases.
13-16
A laundry list of items (grouped by categories) to be included as part of the “Property”
is set forth at Section 2 of the Contract, but as noted above, ALL existing
improvements, appurtenances, fixtures and permanently attached equipment located at
the subject Property at the time of execution of the Contract are (excepting only those
expressly excluded, as set forth at F below) deemed INCLUDED as part of the
“Property” to be sold (whether or not set forth in the itemized laundry list). All such
items are each WARRANTED by Seller to be conveyed “free and clear”. The word
“convey” is used (in the parenthetical at line 14) because certain items of personal
property, referenced as included in the sale, may actually be financed and subject to a
security interest or lien (or otherwise not truly “owned” by Seller) at the time the
Contract is executed. The word “convey” better expresses the intended obligation of
Seller to actually transfer full ownership of all included personal property to the Buyer
“free and clear” of any lien or security interest at the time of closing.
E.
Specific items which a Buyer wants the Seller to leave behind (particularly those which
may be readily removable, possibly considered to be personal property, or which are
identified in a disclosure statement or MLS information, but not included in the
“laundry list” above) should be identified here (e.g., refrigerator, washer, dryer, “MLS
listing item No. __________”).
Note: For a sale of a farm or vacant land, MR forms FRM 2000 or LND-2000 may be
4
more appropriate to use. Otherwise, any special agreements regarding outbuildings,
silos, crops, etc. should be noted. For a sale of an apartment building, MR form COM2000 may be more appropriate to use. Otherwise (for example), any special agreements
regarding items which may be present, but available for tenant use only, should be
noted.
F.
All items which: (1) a Seller has identified as excluded in the listing (and/or which
Seller still wants to keep); (2) have been agreed upon to be excluded during negotiations
between the parties; (3) a Buyer wants the Seller to remove (but would otherwise be
included as part of the Property); or (4) a Seller does not (and will not at the time of
closing) own and does not intend to “convey” to the Buyer “free and clear” at closing
(e.g., items leased from or belonging to a third party, such as satellite dish equipment)
should be listed here. Any items crossed out from the laundry list above should
preferably also be cross-referenced here as well (e.g., “See deleted items above”).
G.
Section 3 of the Contract sets forth details regarding the Purchase Price and Earnest
Money to be paid, and the type of “Funds” to be used in connection therewith. At “G,”
insert the numerical full amount intended to be the “Purchase Price” (e.g.,
$150,000.00).
H.
At “H,” insert the numerical amount of “Earnest Money” (e.g., $5,000.00) which is to
be provided by Buyer.
Note: The Contract assumes that Earnest Money is actually supplied and delivered, in
hand, at the time a purchase offer is submitted by Buyer. If that is not the case,
appropriate explanation should be provided (e.g., if subsequent wire transfer is to be
made). If no Earnest Money is to be paid, then insert “zero”, “$0”, “NA” or “Not
Applicable”. The Contract does not provide an option for non-refundable Earnest
Money, or to require additional Earnest Money at a subsequent date (i.e., after
waiver/satisfaction of all contingencies or conditions to performance). The parties
should consult an attorney for specific language to use in this regard.
27
I
Mark the form in which the Earnest Money is received. “Other” may be cash, a
promissory note or any other form of valuable consideration (and should be described
appropriately at the blank line, where indicated at “I”). A separate “Receipt and
Acknowledgement” section, referenced at line 28, is located at the end of the Contract
(below the signatures). It provides a “paper trail” and identifies who (if anyone)
received the Earnest Money at the time Buyer’s offer was initially submitted (see further
discussion below).
29
MREC Regulation 20 CSR 2250-8.120 (1) requires that Earnest Money be deposited in
the escrow or trust account of the broker who is holding it no later than (10) “banking
days” following the Effective Date “unless otherwise provided in the contract”. The
Contract carries forward this same requirement, regardless of who is serving as the
designated “Escrow Agent.” If the parties to a Contract desire to modify this default
(i.e., MREC regulatory) language, then appropriate changes will be required. The
“Special Agreements” (Section 22) or Counter-Offer form (MSC-2040) may be used for
this purpose (with assistance of legal counsel, especially if the changes involve anything
other than simply specifying a different number of days by which the Earnest Money is
to be deposited with the Escrow Agent).
Note: The statutes and regulations do not specifically require an “insured” escrow
account. Nevertheless, licensees are reminded of the provisions of 20 CSR 22508.120(3), which states that the escrow or trust account required to be maintained by a
5
broker “shall be a checking account in a bank, savings and loan or credit union.”
Further, if applicable, the broker must disclose in writing, to all parties to the
transaction, that the account is interest-bearing and indicate who is to receive the
interest. Id. See also, §339.105 RSMo. and 20 CSR 2250-8.220 for additional escrow
account requirements.
J.
At “J,” insert the full and complete legal name of the company (and preferably, street
address and phone number, particularly if there is more than one branch office in the
area) or individual that will hold the Earnest Money (i.e., the “Escrow Agent”).
Note: REALTORS should make sure that any required Earnest Money payment is
timely delivered to and deposited by the designated Escrow Agent. Failure to do so
may result in a default or breach of contract being declared. It is good practice to
always obtain a written receipt from the Escrow Agent at the time the Earnest Money is
delivered.
32
Section 3 allows for payment of the Purchase Price at Closing via “cashier’s check or
other form of funds acceptable to Closing Agent . . .” (the “Funds”). While the decision
as to what is an acceptable form of Funds is to be made by the Closing Agent, note in
this regard that pursuant to the Missouri Title Insurance Act, §§381.011-381.412, a
“Settlement agent” (meaning “a person, corporation, partnership, or other business
organization which accepts funds and documents as fiduciary for the buyer, seller or
lender for the purposes of closing a sale of an interest in real estate located within the
state of Missouri, and is not a financial institution, or a member in good standing of the
Missouri Bar, or a person licensed under chapter 339, RSMo.”) must require a buyer,
seller or lender who is not a financial institution to convey such funds to the settlement
agent as “certified funds”. In turn, “certified funds” consist of United States currency,
funds conveyed by a cashier’s check, certified check, teller’s check, as defined in
Federal Reserve Regulations CC, or wire transfers, including written advice from a
financial institution that collected funds have been credited to the settlement agent’s
account. A check is exempt from these provisions of the Missouri Title Insurance Act if
drawn on:
“(1) An escrow account of a licensed real estate broker, as regulated and described
in section 339.105, RSMo.; or
(2)
An escrow account of a title insurer or title insurance agency licensed to do
business in Missouri; or
(3)
An agency of the United States of America, the state of Missouri, or any county
or municipality of the state of Missouri; or
(4)
An account by a financial institution.”
Note: Section 10 of the Contract sets forth the applicable obligations of the parties with
respect to “Adjustments and Closing Costs.” Those prorations and adjustments, along
with application of the Earnest Money, will affect the remaining amount of the Purchase
Price due at Closing.
33-34
K.
Section 4 sets forth details regarding the Closing of the Contract. The “Closing” is
defined to mean the exchange of the Deed for the Purchase Price, together with all other
documents and Funds required by the Contract. At “K,” insert the full and complete
legal name (and preferably street address and phone number, particularly if there is
more than one branch office in the area) of the “Closing Agent” which will conduct the
Closing (e.g., lender, title company, attorney).
Note: Although in most cases the “Escrow Agent” and the “Closing Agent” will be the
6
same person or company, they need not be.
L.
At “L,” insert the date on which the Closing is to occur (the “Closing Date”). As
further discussed at Section 31 and elsewhere below, a “day” is defined as a 24-hour
calendar day, seven (7) days per week. The Contract also provides that “Time is of the
essence” in the performance of the obligations of the parties under the Contract. This
generally means that deadlines are to be strictly complied with and that extensions are
not allowed for the performance of any stated obligations (including the obligation to
close). Accordingly, a REALTOR should always check applicable dates and time
frames, before a Contract is entered into, to ensure that the specified Closing Date (or
date for performance of any other contingency) does not fall on a weekend or holiday.
Particularly if a Closing Date is set for a Friday, it is generally considered “best
practice” to require (in the Contract at the time it is signed) the Closing to occur by a
specific time in the morning. Absent such language, a buyer would likely be found to
have “timely performed” as long as it has deposited acceptable “Funds” with the title
company/Closing Agent and signed all documents required of it, so as to allow the
Closing Agent to in turn deliver to the Seller such Funds by the end of the specified
“Closing Date” (even if those Funds are not capable of being timely deposited into the
Seller’s account before the end of the banking day so as to draw interest thereon).
Note: Although not obligated to do so, the parties may (of course) always later agree to
change the date or location initially specified for Closing (or any other terms of the
Contract). In order to have any reasonable expectation of enforceability in this regard,
any such changes should be memorialized in writing. MR Form MSC-2000
(Amendment to Contract For Sale of Real Estate) can and should be used for this
purpose. No automatic extension of the time specified for Closing is allowed, even if a
Seller must take additional steps to deliver marketable title (or for any other reason
other than for the possible limited exception set forth in Section 9, further discussed
below, regarding situations where a casualty event occurs prior to Closing).
M.
38-47
PAGE 1-2
Delivery of possession is strongly encouraged to occur simultaneously with the Closing.
In situations where this cannot occur, or if the parties specifically desire to make
different arrangements, the “other” box (at “M”) should be checked and explanation of
the specific date and time agreed upon should be inserted.
Note: REALTORS may use MR form MSC-2080 (if possession is to be delivered prior
to Closing) or MSC-2090 (if possession is to be delivered after Closing). Note,
however, that although these forms allow for possession by one who is other than the
true owner, they do not include all the provisions and protections of a traditional lease
(for example, there are no provisions for payment of a security deposit). Although these
forms may be helpful in situations where the time for delivery of possession prior to or
after Closing will be for only a very short term and the parties are not willing to enter
into a traditional lease agreeement, REALTORS are nevertheless strongly encouraged to
use MR form RES-3010 (“Residential Lease”) wherever possible. MR form MSC-2085
(“Limited Purpose Entry by Buyer Prior to Closing”) is also available for use in
situations where a Buyer is to be allowed temporary access to the Property for a limited
purpose (i.e., other than full actual possession and occupancy), such as for storage of
personal property. Clients should always be encouraged to seek legal advice regarding
these matters, as well as if a Property will continue to be tenant occupied post-Closing.
A separate blank is not provided for the specific time of day at which the Closing (and
thus, time for delivery of possession) is to occur. This decision was made in light of the
7
fact that Closings are sometimes conducted in a bifurcated manner (i.e., with each party
at a different location), and that payment of Purchase Price proceeds via electronic
transfers made after “normal” business hours is possible. Accordingly, a Contract
which is “closed” at 11:59 p.m. on the specified date for Closing would be timely. A
Contract is not considered “closed” until (1) Seller has delivered the fully executed
Deed, (2) the full amount of the Purchase Price proceeds due are delivered by Buyer to
the Closing Agent, and (3) all other Contract obligations and document delivery
requirements have been fully performed or waived by each party. In cases where
delivery of possession by a specific time is critical, REALTORS should make sure the
Contract includes a specific time of day by which the Contract must be closed. This
could be inserted at “L” or in the “Special Agreements” section. As a practical matter,
it should be noted that Closing Agent offices typically close at 5:00 p.m. (and are not
open on weekends or holidays).
Note: Bifurcated closings are not encouraged. Pursuant to the Missouri Title Insurance
Act, a title insurer, agency or agent is not authorized to provide escrow, settlement or
closing services unless as part of that transaction it issues a title commitment or policy,
and closing protection letters have been issued protecting the buyer’s and seller’s
interests, unless prior to the receipt of any funds, the title agency or agent provides
written notice to the affected person, on a form approved by rule promulgated by the
State Director of Insurance, that no title insurer is providing any protection for closing
or settlement funds received by it. These provisions, which became effective January 1,
2008, were designed to protect the public in light of the recent demise of many title
agency companies. See §§ 381.022.4 and .5 and 381.058.3 RSMo.
Lines 44-47, set forth the required occupancy status (which, by default, is vacant, except
for tenants or others in possession pursuant to a Lease or other agreement approved
pursuant to the Contract) and condition of the Property (which, by default, is to be in the
same condition as of the Effective Date, together with any improvements or repairs
required by the Contract, but ordinary wear and tear excepted) as of the Closing. If the
occupancy status or condition of the Property is to be different than as provided by
default, the parties should so specify.
For example, if it is intended that a Property is to continue to be tenant occupied postClosing, then DSC-8005 (Rental Property Verification) may be utilized by a
Seller/Landlord as a vehicle to identify all leases or other occupancy agreements in
effect along with certain basic terms thereof, Property expenses and any management,
service or other contracts and disclosures in connection therewith. REALTORS should
ensure that such matters are disclosed as soon as possible, preferably prior to the time an
offer to purchase is submitted (and DSC-8005 may be used for this purpose). MSC2035 (Rental Property Contract Rider) should be used to facilitate a Buyer’s formal
review of such matters. It sets forth the terms, timing and conditions by which copies of
all such documents are to be provided to a Buyer for review and approval, as well as
their assignment to Buyer and status as of the time of Closing, and a Seller’s ability to
enter into any modifications, renewals or new leases prior to Closing (among other
things).
PAGE 2
48-50
Section 5 of the Contract sets forth various options regarding possible financing. If the
Contract is not intended to be contingent on a Buyer's ability to obtain financing, then
Box A should be checked. Otherwise, depending on the type of financing to be
obtained, the applicable box should be checked. If assumption of an existing loan,
Seller financing or Government financing (e.g., FHA or VA) is to be involved, then
8
check Box B – (“Nonconventional”) and attach form MSC-2010 (“Financing
Agreements”) which is separately discussed in Article II of this Manual.
51-61
There is no specific time frame within which a Buyer must apply for a conventional
loan, but a Buyer must “do all things reasonably necessary” to obtain financing,
including but not limited to actually applying for a loan paying for a credit report,
appraisal and any other required fees and cooperating fully in a good faith effort to
obtain the financing described. At line 55, the time frame in which Buyer reasonably
expects to obtain a loan commitment (the “Loan Condition Date”) should be filled in.
This financing deadline is pegged to a period of time following the Effective Date (15
days by default, if not otherwise stated). A REALTOR should make sure to coordinate
integration with application of MSC-2020 when applicable (e.g., for situations involving
an appraisal or review of applicable farm programs).
Unless Buyer delivers a written Notice to Seller, prior to 5:00 p.m. on the date of the
Loan Condition Deadline, of Buyer's inability to obtain the described loan commitment,
the financing contingency is deemed waived. Such Notice is to be provided by Buyer’s
lender, but since declination letters are not always made available by lenders, despite
diligent efforts by a Buyer, lines 57-59 allow a Buyer to directly exercise its right to
terminate the Contract in such a situation. In order to do so, a Buyer must provide a
notarized affidavit stating that Buyer timely complied with the terms of paragraph 5C,
but was unable to obtain a declination letter from Buyer’s lender.
Note: This financing contingency does not afford a Seller any right to terminate
the Contract. If the financing contingency is waived by a Buyer (either expressly or as
set forth above) then the Contract essentially becomes a “cash” transaction and will
remain in effect (at least absent exercise of another contingency in favor of Buyer,
occurrence of a Seller default or other extraneous reasons) through the scheduled
Closing Date, whether or not Buyer ultimately obtains (or later loses) financing.
REALTORS are encouraged to explain this to their clients, for consideration in
establishing an acceptable amount of Earnest Money, and/or making any other desired
change(s).
62
If “Conventional” financing (Box C) is to be obtained, one or both of the blanks at line
62 should be completed. In the first blank, insert the percentage of the Purchase Price
for which financing is sought (e.g., “90%”). In the second blank, insert the dollar
amount that matches the percentage listed in the first blank.
Note: It is acceptable to fill out the first blank only (e.g., if the Purchase Price amount
offered is changed in the course of negotiations, then a “matching” second blank should
also be changed). Likewise, it is acceptable to fill out the second blank only. This
approach may be preferred if a Buyer is “pre-qualified” for a loan up to a specified
dollar amount.
63
In the first blank, insert the maximum (not to exceed) interest rate which Buyer is
willing to accept (or insert “prevailing rate,” if Buyer is agreeable). In the second
blank, insert the number of years over which Buyer will agree to repay the loan.
64
Check the type of loan which will be sought (i.e., fixed or adjustable). “Other” may be
checked if Buyer is willing to accept either a fixed or an adjustable loan, or if some
other special type of financing is desired (and in any such case, describe appropriately in
the blank provided).
65
Insert any special features or terms required with respect to the type of financing sought
here (e.g., acceptable time period intervals for interest rate changes on adjustable rate
9
loans; the number of points/loan fees, if any, which Buyer [or Seller] is willing to pay;
acceptable PMI requirements; etc.).
66-72
This disclaimer points out that a lender’s loan approval underwriting process does not
always include an “appraisal,” as that term is generally understood (e.g., an independent
professional analysis, including comparison of comparable properties, to determine
value). A lender’s decision to make a loan is often purely a function of the Buyer’s
creditworthiness. Furthermore, many different types of “appraisals” exist (e.g. a “driveby”). If a Buyer intends to purchase a Property only if it truly appraises at a specified
amount, then MSC-2020 should be used (“Financing Agreements”-Subpart C). It
further reminds that a “loan commitment” or “preapproval” does not always guarantee a
Buyer’s loan will be funded, even though the Buyer will remain obligated to have
sufficient funds available at Closing once the financing contingency is waived.
73-75
One of the primary goals of the Contract is to identify and resolve potential problems
with respect to title and survey matters as soon as possible, rather than wait until shortly
before the Closing. Section 6 of the Contract is designed to streamline the process by
which to make title and survey “Objections” (as further discussed below). These lines
specify that a general warranty deed (the “Deed”) is to be used (unless otherwise
specifically agreed). There are various alternative types of deeds that may be
appropriate or required (e.g., special warranty, quit-claim, trustee deeds). As always, it
is not the role for a broker to try and play “attorney”. Rather it is a basic duty of any
licensee to advise a client that they should seek legal counsel to provide any real
explanation of their legal rights, duties and options as well as for any other material
matter about which the licensee knows, but the specifics of which are beyond their level
of expertise (See, e.g., 339.730.1(3)(c) RSMO and Article 11 of the National
Association of REALTORS (“NAR”) Code of Ethics and Standards of Practice). If a
client or its counsel requires that a special warranty deed, quit claim or other type of
deed be delivered, then either the “Special Agreements” section or a Counter Offer form
may be used to indicate this change. The Deed is to convey marketable title to the
Property subject only to the “Permitted Exceptions” (further discussed below).
76-82
These provisions are designed to increase flexibility and allow for negotiation as to the
respective obligations of the parties regarding the cost and issuance of a “Title
Commitment” and “Owner's Policy” of title insurance (effective 1/1/2014, prior
language regarding “abstracts” has been deleted, as their use is essentially non-existent).
Practice and custom regarding these matters historically differed widely throughout the
State. If the Seller is to pay for both the Title Commitment and Owner's Policy, then
Box “A” should be checked. Box “B” should be checked for cases where the parties
agree to split these costs. If the Buyer is to be solely responsible for such matters, then
Box “D” should be checked. Box “C” should be checked if the Seller is to pay for the
Title Commitment (only) and the Buyer is to pay for its Owner's Policy. Blank lines at
Box “C” also allow the parties to specify a different proration of costs in this regard.
Line 83 makes clear that the designated Closing Agent (identified in Section 4) is to
issue the Title Commitment, unless the parties specify otherwise. The Buyer is always
responsible for the cost of any lender's policy of title insurance (see Lines 113-114).
The actions required of the parties in this regard are to be taken within 10 days after the
Effective Date (unless a different time period is inserted at Line 76).
Note: REALTORS are encouraged to have their Seller-clients provide a current title
commitment (and any available survey) for delivery to a Buyer immediately upon
acceptance of a purchase offer or as soon thereafter as reasonably possible. Many title
10
companies will provide title commitments free of charge or at a nominal fee.
83-84
Lines 83-84 of the Contract specifically require any survey in Seller’s possession to be
“promptly” delivered to the Buyer. The Contract requires a Seller to reimburse a
Buyer's survey and title examination charges if the Buyer terminates the Contract under
certain specified conditions (see Lines 105-106). A Seller may be able to avoid such
costs and reduce potential issues (and speed up the Closing) by beginning this process
when the Property is first listed for sale.
85-90
These lines point out that different types of surveys are available. All “surveys” may
not allow a Buyer to obtain full survey coverage from a title company. The Contract
assumes that only a Buyer will be responsible for the cost of any “Survey” obtained. If
that is not intended to be the case, appropriate changes will be required (e.g., add:
“Seller to pay for [type of] survey” at “Special Agreements” Section 22).
MSC-2500 (Survey/Elevation Certificate Order Form) is available to accommodate and
confirm a Buyer’s selection of the desired type of survey (e.g., with or without
improvements to be located) or “Surveyor’s Real Property Report” (or waiver of a
Buyer’s right to do so), as well as to identify the surveying company to provide the type
of service selected. If no selection is made in this regard, the surveyor may be selected
by the title company. It also allows for an option to order an “elevation certificate”,
which can be important for purposes of determining flood insurance requirements and is
commonly required for certain lakefront or other unique properties.
Note: Although the Contract includes a “Special Agreements” section (further
discussed below), extensive or significant use of that section is disfavored. Its presence
should not be implied to encourage protracted or unnecessary negotiations between the
parties, or be deemed to implicitly authorize REALTORS to engage in the practice of
law. While limited use of Section 22 to implement certain minor changes to the
Contract of the nature described herein may be permissible; as a general matter, if
parties desire a result different than that provided (or allowed for) by the pre-printed
terms of the Contract, then REALTORS should advise their clients to consult with their
own attorney. The MR form Counter Offer (MSC-2040, discussed below) also provides
some flexibility for the parties to customize terms agreed upon.
91-98
The Contract allows a Buyer to make and deliver written Notice of “Objections” within
20 days (or such other period of time as may be inserted at Line 91) after receipt of the
Title Commitment from Seller (if box 6A, B or C was checked); provided, however, that
if it was the Buyer’s obligation to directly obtain the Title Commitment (i.e., box 6D
was checked), then Buyer must deliver Notice of any Objections within 20 days after
the Effective Date (or such other time frame as is specified at Line 95). In either event,
it is the Buyer’s responsibility to obtain copies of any restrictions, rights of way,
easements or other recorded documents referenced in the Title Commitment to review.
A Buyer must timely submit any “Objections” it has to title and/or survey matters
within the applicable “Review Period” (or they will be deemed waived).
MSC-2055 (Title and Survey Notice) may be used by a Buyer to notify the Seller that a
title inspection or Survey has revealed unacceptable conditions. Like the general form
Inspection Notice (MSC-2050), MSC-2055 is also designed to facilitate a Seller’s
response, to notify the Buyer if Seller agrees (or does not agree) to satisfy all, none or
only some of the items objected to, as well as a Buyer’s reply thereto. Survey and title
matters can be very detailed and technical. Again, it is not the role for a broker to try
and play “attorney”. REALTORS should advise a client to see legal counsel to provide
11
any real explanation of their legal rights, duties and options as well as for any
customized language to be used or Objections to be made in this regard.
Note: Completion of a Survey may require extra time. If a Buyer needs more time to
obtain a Survey or to review all documents of record (or in areas of the State where
local customs and practices differ), the parties may override the default terms of the
Contract to allow for more time as may be necessary.
Prior to 2002, the Contract allowed a Buyer to object to title items only if they would
“materially interfere with such use of the property as Buyer might reasonably expect to
make in view of the general character of the area and neighborhood…”. The Contract
now allows a Buyer to submit “Objections” regarding any matters which the Buyer may
deem objectionable. “Marketable Title” is no longer defined to have the meaning set
forth in Title Standard 4 of the Title Examination Standards of the Missouri Bar. Prior
language, to the effect that an Objection would not be considered to be “valid” if Seller
furnished the affidavits or other documentation described in the applicable Title
Standards of The Missouri Bar to remove such encumbrance or defect, was also deleted.
These changes were made primarily due to the general lack of familiarity with and
perceived obsolescence of The Missouri Bar Title Examination Standards. These
Standards were under review by The Missouri Bar Property Committee for a number of
years but have since been abandoned without any change having been made.
99-114
Notice of any Objections to title and survey matters a Buyer may wish to claim should
be delivered to the Seller as early on in the process as possible. These lines set forth the
procedures to be followed if a Buyer desires to make any Objection(s). Unless specified
differently in the blank at Line 100, Seller has 7 days after receipt of Buyer's written
Notice to agree in writing to correct such Objection(s), prior to Closing, at Seller's
expense. If Seller does not so agree, then the Contract is deemed to terminate, unless
Buyer agrees in writing to take title “as-is” within 3 days (or as otherwise specified at
Line 102) after Buyer’s receipt of Seller’s response to the Objections. A Seller’s failure
to timely respond to Buyer Objections is deemed a refusal to do so. If the Contract is
terminated the Earnest Money is to be returned to Buyer (subject to Section 8 of the
Contract, which is further discussed below). A Buyer’s failure to timely make
Objections also constitutes a waiver of the right to do so with respect to any items
shown on the Title Commitment (or which could have been shown on a survey). The
defined term “Permitted Exceptions” is used for this purpose.
A title defect which causes a failure of “marketable title” will make Seller liable for any
survey and title examination charges (see Lines 105-106). Although its legal meaning
has been described by the courts in many and varied ways, Black’s Law Dictionary
generally defines “marketable title” to mean title which is free from encumbrances and
plausible or reasonable doubt or objection as to its validity, such that a court would
compel specific performance of its sale, or that a reasonably intelligent person who is
well informed as to facts and legal bearing, and ready and willing to perform, would be
willing to accept in exercise of ordinary business prudence.
Note: The Contract requires that any Owner's Policy issued include mechanic's lien and
inflation coverage, unless the title company specified to issue the Owner’s Policy does
not make available said coverage(s) or the parties provide otherwise. If the parties
desire to delete such coverage requirements, or to adjust responsibility for payment of
the extra cost (if any) of such coverage, appropriate changes/deletions should be made.
12
PAGE 3
Section
7
Virtually all residential transactions now involve one or more professional inspections.
Section 7 of the Contract contains a broad inspection contingency. The scope of
permissible inspections (e.g., physical inspections, environmental hazards, mold, etc.) is
not limited in any fashion. "Additional Property Data" may also be reviewed. This
includes (other than survey and title matters covered by Section 6), but is not limited to,
school district, square footage of improvements and insurability of Property.
Insurability is specifically included for a couple reasons. There is always a possibility
that an existing insurance policy may be denied renewal (or only at a dramatically
increased premium rate). REALTORS are encouraged to consider obtaining a report
from the Comprehensive Loss Underwriting Exchange (CLUE) for this purpose by
calling 1-866-312-8076 or online at www.choicetrust.com. However, this is true not
only for homeowner’s insurance generally, but most recently, in light of changes being
implemented to the National Flood Insurance Program, it is particularly true for flood
insurance. Although beyond the scope of this Manual to get into too much detail,
additional information regarding the importance of disclosing flood insurance
requirements
applicable
to
a
given
Property
can
be
found
at
http://www.realtor.org/videos/how-to-disclose-flood-insurance-requirements.
The
“NOTE” at Lines 124-127 also admonishes a Buyer to check for the possible presence
of sexual offenders or other criminals if desired.
ALL physical inspection reports must be in writing and obtained from a qualified
inspector(s). A Buyer may unilaterally terminate the Contract if dissatisfied with the
inspection results. Prior to 2002, a Seller had to be given an opportunity to correct any
noted defects (and thereby keep a Buyer bound to the Contract). This change was made
in light of the practical reality that a large percentage of deals became bogged down or
fell through at the last minute over contentious accusations as to whether a particular
item was truly defective. Now, if unhappy, a Buyer can quickly terminate the Contract
and the Seller can get the house back on the market as soon as possible. Lines 131-134
make it clear that a Buyer is responsible for (and must indemnify Seller against) any
damage to the Property or claims made as a result of such inspections. These Buyer
obligations survive any termination of the Contract.
Note: Again, the goal is to identify and resolve any potential issues as soon as possible.
A blank space for the time frame in which inspections may be conducted (i.e., the
“Inspection Period”) is provided at Line 129. The Inspection Period will run for 10
days after the Effective Date unless otherwise specified (i.e., if the Effective Date is the
first day of the month, then “day one” is the 2nd and the Buyer's Inspection Notice must
be in the hands of the Seller or Listing Broker by 11:59 p.m. on the 11th day of the
month). The “Initial Response Period” is (and virtually all other time frames set forth in
the Contract are) calculated in the same manner. REALTORS are encouraged to keep
the Inspection Period as short as is reasonably practical under the circumstances. A
Buyer’s failure to obtain any inspection, or to timely provide a written list of
unacceptable conditions, together with a complete copy of the written inspection
report(s) (i.e., the “Inspection Notice” – See MR form MSC-2050 discussed at
Article VI below), constitutes a waiver of this contingency. If a Buyer insists on a
lengthy Inspection Period, a Seller may want to consider eliminating the Buyer’s right to
unilaterally terminate the Contract, and/or require a larger Earnest Money deposit. As
set forth at Lines 130-131, only one Inspection Notice may be submitted. Accordingly,
a Buyer must be sure to include all matters it finds to be unacceptable (and not submit
multiple reports as they come in).
13
If a Buyer does not elect to terminate the Contract, a Seller may respond to the Buyer’s
Inspection Notice (within 7 days after Seller’s receipt of the Inspection Notice from
Buyer, unless specified otherwise in Line 140, i.e., the “Initial Response Period”). A
Seller’s failure to respond is deemed to constitute its refusal to correct any alleged
defects or agree to a monetary adjustment. The parties then have 3 days after Buyer’s
receipt of Seller’s response (or failure to timely respond), unless a different time period
is specified in Line 143) to agree in writing on which party will complete and pay for
correcting the defects, or to a monetary adjustment at Closing. A written statement
made during this time period by a Seller that Seller will correct (and pay for) all noted
defects, or by the Buyer that Buyer will accept the Property without any corrections,
constitutes an “agreement” for purposes of satisfying this contingency. Absent any such
written agreement or “capitulation”, the Contract will automatically terminate. See
further discussion of the “Continuation of Inspection Notice” (MSC-2050A) at Article
VI of this Manual regarding this issue.
The last sentence (at Lines 152-153 notifies the parties that limited warranty/service
agreements may be available for purchase. The Contract does not allocate responsibility
for payment of its cost, which should be negotiated between the parties and documented
in writing if any such warranty or service agreement is to be obtained. Beginning in
2014, a new form (MSC-2025 “Home Warranty”) is available for this purpose. Such
agreements may be useful in resolving disputes between the parties regarding the
condition of the Property. MSC-2025 can be attached as part of an offer (before the
Contract is executed), but if such an agreement is not reached until after the Contract is
signed, best practice would be to also reference it in the Inspection Notice.
Note: A monetary adjustment to the Purchase Price may affect the Buyer’s financing
and/or ability to obtain an occupancy permit (e.g., if required repairs are not performed).
The Contract contains a disclaimer that Brokers are not experts or inspectors. It also
contains an acknowledgment by the Buyer that (among other things) Buyer has not
relied upon any Broker in choosing to “select and engage” any particular inspector or
service provider.
Effective August 28, 2004, Missouri adopted a new statute (SB 1211, codified at
§339.190 RSMo.), which is designed to provide limited immunity from liability for real
estate licensees regarding statements contained in certain third party inspection reports
or disclosure statements signed by a Seller. The italicized “Note” at Lines 165-177 is
taken essentially verbatim from this statute. There are a variety of steps a REALTOR
should follow in order to qualify for the statutory immunity protection. First, do not
employ the expert or consultant. Immunity protection will not be available with respect
to statements made by any person who is employed by a licensee or the broker with
whom (s)he is associated. Second, do not “select and engage” the consultant. It
remains appropriate to provide a Buyer a list of competent experts in a particular field,
but only the Buyer should make the actual selection of the company(ies) to be used (see
Lines 158-165 of the Contract).
MAR form MSC-2045 (“Buyer’s Inspection Authorization”) can be used to facilitate
and document a Buyer’s selection of applicable service provider(s) to provide whatever
inspection(s) are desired. It confirms that Buyer is responsible to pay for all costs to be
charged and who is to schedule the same (or that Buyer has waived the right to conduct
any inspections). Similarly, while it should remain to be appropriate for a licensee to
facilitate an inspection (arrange for appointments by telephone calls, presence at site,
etc.), REALTORS should require clients to directly enter into and sign any contract with
(and thereby, directly “engage”) the expert(s) and pay for the services rendered (which
can be accomplished at the Closing and shown as such on the Closing Statement).
14
This still does not guarantee immunity in all situations. It does not provide REALTORS
“free license” to ignore known facts or make untrue or inaccurate statements. The
common law recognizes the concept that “actions speak louder than words” in this
regard. REALTORS should actually read an expert’s reports, as well as the Seller’s
disclosure statement, whenever they are provided or available. Immunity from liability
will not be available to a licensee who knew, prior to Closing, that a statement was false,
or who acted in reckless disregard as to whether such statement was true or false. If you
know that an expert’s report or a Seller’s disclosure statement contains false
information, or you believe it to be in error, or if adverse material facts or defects are
known by you to exist, then you must make appropriate disclosure of such knowledge
and beliefs in order to avoid potential liability. A licensee should not sign a Seller’s
disclosure statement (unless it desires to adopt these statements and disclosure as its
own for some reason). In any event, a licensee remains obligated to disclose all known
“adverse material facts” (as defined at 339.710 RSMo), and to correct any statements
which (s)he knew or should have known to be untrue. REALTORS are also reminded
of their disclosure obligations with respect to the referral of business to an affiliated
provider of settlement services or under a controlled business arrangement. See, e.g., 20
CSR 2250-8.110.
PAGE 4
Section
8
Section 8 of the Contract sets forth the respective rights and obligations of the parties
and the designated Escrow and/or Closing Agent (“Escrow Holder”) regarding
disposition and application of any Earnest Money or other escrowed funds or documents
(“Escrow Items”) held by an Escrow Holder. It specifically establishes the right of the
Escrow Holder to initiate an interpleader action (in which case it may deduct its
attorney’s fees, court costs and other legal expenses incurred at the time of filing). It
also specifically allows the Escrow Holder to withhold any expenses incurred by or on
behalf of a Buyer for payment to the applicable service provider(s), but only in
connection with a disbursement of Earnest Money to the Buyer. The parties’ consent to
distribution of Escrow Items may take the form of written escrow instructions (or their
signatures to a Closing Statement).
Note: An Escrow Holder who is a licensed real estate broker or salesperson is subject to
the provisions of 20 CSR 2250-8.130 regarding Earnest Money disputes. If the named
Escrow Holder is not so licensed, it will not be directly bound by MREC regulations,
but unless such an Escrow Holder requires the parties to sign a separate escrow
agreement the provisions of the Contract governing disposition of Earnest Money
should still be binding upon it. No provision is made in the Contract for payment of a
separate fee to the Escrow Holder for its services rendered. Some Escrow Holders may
indeed require compensation and/or execution of a separate agreement (e.g., containing
more extensive and detailed provisions, such as indemnity and hold-harmless
provisions).
Whereas the above-cited MREC regulation still allows a licensee to disburse earnest
money “based upon a good faith decision” and by following the procedures specified
therein, the Contract provides that the Escrow Holder “shall continue to hold said
Escrow Items” until a written release is obtained from all parties, a civil action is filed, a
court order or final judgment mandates its disposition, or “as may be required by
applicable law”. Accordingly, a REALTOR acting as an Escrow Holder is not entitled
to disburse Earnest Money based upon its “good faith decision” (absent appropriate
changes made to the Contract form language and agreed to by all parties). This is
generally for the best because any such good faith decision would not relieve a
REALTOR from potential civil liability against an aggrieved party.
15
The phrase “or as may be required by applicable law” quoted above was added in
response to amendments made to §339.105.4 RSMo. (effective July 1, 2003). That
Statute (referenced and summarized at Lines 189-191) requires a licensed broker to
report and deliver any disputed Earnest Money or other funds held by it in escrow to the
State Treasurer within 365 days of the initial projected Closing Date. The Contract
provides that the designated Escrow Holder is not authorized to do so until at least sixty
(60) days after the initial projected Closing Date. The intent is to give the parties a
limited “cooling-off” period in which to potentially resolve their disputes.
The State Treasurer’s office has professed its intent to make the reporting process as
simple as possible. The statutory changes discussed above were adopted in response to
frustration expressed by licensees who otherwise were required to hold on to disputed
funds for lengthy time periods, but instead wanted to “get out of the middle” of such
disputes and clear out their escrow accounts. Official reporting forms and additional
information are available at the State Treasurer’s website, www.showmemoney.com, or
by phone at (573) 751-8533. Parties to a Contract may notify the Escrow Holder in
writing of their agreement that such funds are not “in dispute,” and thereby possibly
avoid the statutory reporting and delivery requirements. Although 20 CSR 2250-8.130
has not been formally rescinded (at least not yet), its provisions to the effect that a
broker “shall continue to retain (disputed Earnest Money) in escrow until a written
release is obtained from all parties consenting to its disposition or until a civil action is
filed …” must presumably give way to the new (7/1/03) statutory reporting procedures
described above.
The Contract does not contain language which requires, in the event of non-performance
by a Buyer and surrender of Earnest Money to the Seller, that one-half (1/2) of such
amount (after reimbursement of expenses) be paid to Seller’s Broker in lieu of further
compensation. Many (if not most) brokers throughout the State do not actually seek to
retain ½ of forfeited Earnest Money in such situations. Note, however, that MR form
listing agreements still contain language to this effect (which should be deleted
therefrom if not the desired result of the parties). The MR form listing agreements (See
e.g., RES-1010 General Condition No. 4 separately discussed in Article VIII of this
Manual) were revised in 2005 to avoid implication that the Contract (which simply
provides that forfeited Earnest Money is to be delivered to a Seller) is a “subsequent
agreement” intended to modify the terms agreed upon by the parties in a listing
agreement regarding forfeited Earnest Money. Additional language was also added to
the Contract (see discussion at Lines 291-292 below) regarding this specific matter.
16
Section
9
Section 9 of the Contract allocates risk of loss to the improvements at the Property prior
to Closing. It gives a Seller the ability to restore the Property (at Seller’s cost) to its
prior condition. In such cases, the parties must proceed with the Closing, but only if
such repairs are completed prior to the scheduled Closing Date. It also specifies Notice
and response time periods for matters involving any such damage or destruction, the
availability of insurance proceeds and election of the parties’ rights under the Contract
as to how they intend to proceed. Section 9 also covers situations where a
condemnation proceeding is filed or threatened prior to Closing.
In both cases, the Contract requires a Seller to provide Notice thereof to the Buyer,
along with copies of any written communications to and from the insurer and/or the
condemning authority (as the case may be), a copy of any policy(ies) (or authorization
to obtain the same), the name and number of the insurance agent and any required
authorization to communicate with the same. A Seller may not settle any claim
pertaining to a condemnation without the Buyer’s written approval. A Seller is
obligated to maintain its current insurance coverages and to perform ordinary and
necessary maintenance, upkeep and repair prior to Closing. Any insurance proceeds
(which are applicable to physical damage caused to the Property) and any condemnation
awards paid to Seller (together with the amount of any deductibles) are, at Buyer’s
option, either credited against the Purchase Price otherwise payable by Buyer at Closing
or treated as a credit to Buyer at Closing (assuming all necessary repairs were not made
by Seller, and Buyer still wishes to proceed with the transaction). If the Seller is
providing financing, any insurance proceeds payable to Buyer must be applied towards
restoration and repairs.
MSC-2510 (Notice of Property Damage) is available to facilitate Seller providing the
required Notice to a Buyer if a Property has been materially damaged. As set forth
above, a Seller has the option to restore the Property to its condition as of the Effective
Date. MSC-2510 also facilitates delivery of a Buyer’s response thereto, which is
required to be given within 10 days after receipt of Seller’s Notice as aforesaid (and for
this limited purpose only, the time for Closing may be extended) or the Contract shall be
deemed to have been rescinded. Although a Seller does not have to restore the Property,
it also does not have a right to terminate the Contract. If a Seller does not elect to or
timely restore the Property, the Buyer may elect to proceed to Closing (in which case the
amount of insurance proceeds recoverable plus any deductible amount are to be credited
to the Buyer or to the Purchase Price at Closing) or to terminate the Contract. MSC2510 also contains a section by which a Seller may acknowledge receipt of the Buyer’s
election as aforesaid.
Section
10
Section 10 of the Contract details the parties’ respective responsibility to pay the listed
charges and expenses which, as allocated and adjusted, are to be set forth on the final
“Closing Statement”. It specifically allows the Broker(s) to retain copies of the
Closing Statements for both parties, as required by MREC regulation. See 20 CSR
2250-8.150(3). The term “Special Assessments” is defined to include all special taxes,
special subdivision and any other owner association assessments. A Seller is
responsible to pay for any so-called “one-time” Special Assessments. Any security
deposits or prepaid rents and expenses which have been collected at any time by or on
behalf Seller (and not already applied) are to be credited to the Buyer at Closing.
Note: Any agreed-upon change to the allocations and adjustments set forth in
Section 10 should be specifically addressed, either by interlineation where appropriate at
Section 10, by appropriate explanation in the “Special Agreements” (Section 22), or via
the MR form Counter Offer (MSC-2040). Where applicable, current FHA and VA
17
regulations will also “trump” any preprinted terms and provisions to the contrary.
PAGE 5
Section
11
Section 11 of the Contract addresses its “Assignability” and “Binding Effect”. It also
includes a “like-kind exchange” provision pursuant to §1031 of the Internal Revenue
Code. Buyers may generally freely assign the Contract, but an assignment does not
relieve the parties from their contractual obligations.
Note: The Contract may not be assigned by a Buyer without the Seller’s written
consent if Seller-financing is involved or if the Buyer is assuming an existing note.
The “Binding Effect” language makes the Contract binding upon the respective heirs,
successors and assigns of both parties. Accordingly, absent modification, the
heirs/estate of a deceased (original contracting) party may possibly be forced to sell the
subject Property (if a Seller descendant) or arguably even purchase the Property (if a
Buyer descendent).
Although the “§1031 Exchange” language is not applicable to the sale of homes which
are owner-occupied as a personal residence (and thus, most situations), the Contract is
used from time to time by developers and others (e.g., landlords) who own and lease
property for productive use in a trade or business or for investment. Accordingly, for
those situations, the Contract includes an obligation for the parties to generally
“cooperate” with each other to allow for the Closing to be structured as a §1031
“Exchange”. It specifically provides that no party shall be required to incur any cost or
expense, or hold title to any real property, for purposes of consummating an Exchange at
the request of another party, or have its rights or obligations affected in any manner
(including no extension of the Closing Date). The “Requesting Party” is obligated to
reimburse the cooperating party(ies) for any costs or expenses so incurred.
Section
12
Section 12 includes standard “boilerplate” acknowledgements that all agreements
between the parties regarding the subject matter of the Contract (i.e., the Property) are
wholly contained therein. In other words, there are no “side” agreements or separate
understandings. Any subsequent change to the Contract terms must be in writing and
signed by both parties. MR form MSC-2000 (Amendment to Contract For Sale of Real
Estate) should be used for this purpose.
Section
13
Section 13 sets forth the respective rights of Seller and Buyer in the event of a default
by the other. In particular, a Seller’s election to receive the Earnest Money as liquidated
damages in the event of a Buyer default is in lieu of the Seller’s ability to make any
other claim at law (e.g., for actual damages) or in equity (e.g., specific performance).
Likewise, a Buyer (in the event of a Seller default) may seek reimbursement from Seller
for all actual costs and expenses Buyer incurred (in addition to return of the Earnest
Money) in lieu of pursuing any other legal or equitable remedy, but it is not required to
do so.
Note: The terms of Section 8 of the Contract (discussed above) remain applicable. A
written release signed by all parties (or other appropriate action or documentation as
specified in Section 8) still remains to be a condition that must be satisfied prior to
actual disposition of Earnest Money pursuant to any Section of the Contract.
The Contract does not purport to limit any remedies available to a party at law or in
equity. Any expenses incurred by Buyer may be withheld from the Earnest Money if
Buyer terminates the Contract (Lines 283-284). The last sentence of Paragraph B, as
discussed above, is intended to make clear that a listing/brokerage service agreement
18
will prevail as to the proper ultimate disposition of forfeited Earnest Money (and not the
Contract, which simply says it is to be delivered to Seller). These provisions are
designed to allow (but not require) a REALTOR to follow a policy whereby Earnest
Money delivered to Seller as liquidated damages on account of a Buyer default is to be
equally split with the listing broker in lieu of compensation. As the Contract also points
out, a Buyer’s release of a Seller (in the event of a Seller default) does not relieve the
Seller from any liability to the Broker assisting Seller.
As always, if different results are intended, they should be addressed in the Contract or a
separate written agreement. MSC-2030 (further discussed at Article IV of this
Instruction Manual) may be used where both parties wish to have disputes relating to the
physical condition, nature, value, appearance or use of the Property, including fraud,
misrepresentation, warranty and negligence claims, settled by an alternative dispute
resolution procedure. In addition to offering binding arbitration according to the
specified rules of the American Arbitration Association (“AAA”), this “Dispute
Resolution” form offers additional options for voluntary mediation and Small Claims
Court actions. Disputes involving Broker(s) are not intended to be covered by MSC2030.
Note: REALTORS are strongly encouraged to not attempt to explain the likelihood of
success with respect to any legal or equitable remedies that may be available as the
result of a default by a party, or the procedures to be followed in connection with the
enforcement thereof. Although no such case is known to exist in Missouri, courts in
other states (including Illinois) have held that liquidated damage clauses in real estate
sale contracts are unenforceable if the contract also gives the Seller an option to elect to
pursue other monetary remedies. In such states, a liquidated damage clause is only
enforceable if the Seller’s option to pursue alternative relief is limited to equitable
actions (e.g., specific performance).
Section
14
Section 14 of the Contract (“Prevailing Party”) pertains to any litigation that might
arise between the parties regarding the Contract, not just remedies upon default
(although a default normally occurs before litigation is commenced). The prevailing
(i.e., “winning”) party in any lawsuit is contractually entitled to recover from the other
party (in addition to any other damages or relief awarded) litigation costs it has incurred,
including reasonable attorney’s fees. Although courts are often hesitant to strictly
enforce prevailing party clauses, that prospect should at least help serve to encourage
parties to endeavor to resolve disputes between them short of litigation.
Section
15
At Section 15 the appropriate box should be marked (i.e., “A” if Buyer has received a
completed Seller’s Disclosure Statement prior to submitting an offer; “B” if Buyer’s
review of a Seller’s Disclosure Statement is to be a condition to Buyer’s performance; or
“C”, if no Disclosure Statement is to be provided). Section 15 also contains a
confirmation by the Seller that the information set forth in the Disclosure Statement is
accurate, to the best of Seller’s knowledge, as of the Effective Date (or will be accurate
when delivered). A Seller is obligated to provide the Buyer with information that
contradicts or supplements that originally provided in a Seller’s Disclosure Statement (if
any) and is newly discovered by or made known to Seller during the pendency of the
Contract (i.e., that constitutes an adverse material fact or would make any existing
information in the Seller’s Disclosure Statement false or materially misleading).
Note: REALTORS should remind their client-Sellers to diligently update any
inaccurate or incomplete information contained in a Disclosure Statement. MR Form
DSC-8000 (Seller’s Disclosure Statement for Residential Property) may be used for this
purpose.
MR Form DSC-8010 (Seller’s Disclosure Statement for
19
Commercial/Industrial Property) may be more appropriate to use for commercial
transactions. The Disclosure Statement forms contain general disclaimers to the effect
that the information contained therein is not intended to constitute a warranty of any
kind as to the condition of the Property, and is not a substitute for any inspections or
warranties a Buyer may wish to obtain. Although no case law specifically addressing
the efficacy of these disclaimers is known to exist (and ultimately, such claims are
highly fact specific, and dependent on the actual language used and conditions present)
given that Buyers generally do in fact rely upon the statements set forth in a Seller’s
Disclosure Statement (and justifiably so), REALTORS should strongly advise their
clients that only complete, honest, accurate and truthful answers be given, and to consult
with legal counsel if they have any questions as to what information should or must be
disclosed, and for any specific or customized language as to how it should be disclosed.
Subpart B of Section 15 specifies that a Buyer’s failure to timely deliver Notice of
termination to the Seller on account of any information included in the Seller’s
Disclosure Statement is deemed to constitute the Buyer’s acceptance thereof. This,
however, does not mean that a Buyer may not further investigate the matters noted or
make objections with respect thereto under the inspection contingency provisions
(Section 7) of the Contract. See also the discussion above regarding the ‘Note’ at Lines
165-177 of the Contract regarding the possibility of partial immunity protection for a
broker in connection with a Seller’s Disclosure Statement.
PAGE 6
Section
16
Disclosure regarding lead-based paint hazards is required by federal law in connection
with the sale or lease of any residential property built prior to 1978. If not previously
provided, reviewed and signed by Buyer (which Section 16 of the Contract presumes),
REALTORS should attach to the Contract completed MR form DSC-2000 (or its
equivalent). MR form DSC-3000 should be used for lease transactions.
Section
17
Section 17 of the Contract allows for a “walk-through” prior to Closing. The purpose of
the “walk through” is to confirm that the Property is in the same general condition as
existed on the Effective Date and that any agreed upon repairs have been corrected (i.e.,
not to conduct “new” inspections). The Contract requires that all utilities be turned on
for this purpose, unless they have already been transferred to the Buyer. It provides for
a default date (4 days prior to Closing) by which a Buyer may require the utilities to be
so transferred if the Property is vacant. It also specifically states that the Closing does
not relieve Seller of the obligation to complete any required or agreed upon repairs (and
thus, this is an obligation which is intended to survive the Closing). Language regarding
the general right of permitted access to the Property is found at Section 7 (and
specifically of the Buyer and Brokers’ right to be present at any inspections and the
“walk-through” at Line 154).
Note: REALTORS are encouraged to prepare a “punch-list” of any incomplete required
improvements and repairs at the time of the walk-through in order to help minimize the
potential for disputes.
Section
18
Section 18 specifically allows for execution of the Contract in multiple counterparts
(i.e., allows the Seller to sign one counterpart, and the Buyer to separately execute
another counterpart). Both counterparts must, of course, be identical. This language is
designed to accommodate situations where, due to travel schedules, location of the
parties, timing or whatever other reason, both parties are unable to execute the same
original. Nevertheless, it is still preferred practice to have each party sign the same
actual Contract form which is signed by the other. The last sentence specifically
20
acknowledges and approves that (like a fax) a scanned image of a signature to the
Contract, an amendment thereof or any Notice to be delivered pursuant thereto, such as
a pdf sent via e-mail, or any other electronic form which is deemed valid in accordance
with the Missouri Uniform Electronic Transactions Act, is to be treated as an original
signature and document. Available “standard forms” (or customized documents
prepared by the parties or their legal counsel) should still be signed and used for this
purpose.
Section
19
The “Governing Law” language at Section 19 acknowledges that the terms of the
Contract are to be construed under Missouri law (only).
Note: The Contract is not approved of for use in any state other than Missouri. The
Contract may not comply with the laws and regulations of any other State. REALTORS
should not allow any client to use the Contract in connection with the sale or purchase of
real estate located outside Missouri, and should strongly encourage such clients to
obtain a contract which has been approved by a local board or State Association of
REALTORS, or by legal counsel licensed in such State.
The “Construction” language includes a “partial invalidity” provision whereby if any
portion of the Contract is deemed to be invalid, illegal or unenforceable in any respect,
then the Contract will not be deemed to terminate, but rather it will, to the fullest extent
permitted by law, remain in full force and effect.
Section
20
Section 20 clarifies that any “Notice” delivered to a Broker (or its affiliated licensees)
representing or assisting the Seller or Buyer (as the case may be), whether as a limited
agent, designated agent, dual agent or transaction broker is considered to be effectively
delivered directly to the Seller or Buyer. Accordingly, actual delivery of a Notice to the
named parties to the Contract (if they are represented or assisted by a broker) is not
technically required in order to constitute valid delivery of such Notice. Appropriate
changes to the Contract should be made if the parties insist on receiving Notice(s)
directly.
Note: A Notice delivered to a Seller’s subagent who is assisting a Buyer is also deemed
to be effective delivery of such Notice to the Buyer. If a party is not represented or
assisted by a broker, all Notices must be delivered directly to the unrepresented party.
All REALTORS must be as diligent as possible in promptly delivering all Notices
received to its clients/customers.
The defined term “Notice” includes “Any notice, consent, approval, request, waiver,
objection or other communication … required under this Contract to be delivered …”).
There is no specific language to define the manner by which Notices must be delivered
(i.e., via hand delivery, facsimile, certified mail with return receipt requested or
guaranteed overnight delivery service providing a receipt). It remains incumbent upon
the notifying party to deliver all Notices to a proper destination, where the “other”
Broker (or any of its affiliated licensees) can be found. Refusal to accept delivery of a
Notice also constitutes delivery. Actual delivery (or refusal to accept delivery) of any
Notice should always be documented to the extent possible. The manner by which to
accept an offer to enter into a Contract is discussed at Section 30.
Section
21
All other forms, riders and addenda (if any) to be made part of the Contract should be
attached and identified by checking the applicable box(es). Check the “Other” box(es)
if any additional documents (other than those listed) are used. Also identify and list the
form numbers (if any) of any such additional documents on the blanks indicated by “N”.
See Articles II, III and IV of this Manual for further discussion regarding MR forms
MSC-2010, 2020 and 2030. The latter is the “Dispute Resolution” form, which
21
although no longer specifically referenced at Section 21, is still available for use.
Note: The presence of the “Other” boxes is intended to allow for additional flexibility
in situations where other MR forms or customized riders are used. REALTORS are
reminded that whereas they are permitted to use current standardized forms prepared or
approved of by counsel for a trade association of which (s)he is a member, or by a
Missouri state or local bar association, or by counsel for the parties (and may complete
them by filling in blank spaces, see 20 CSR 2250-8.140), they must avoid drafting any
customized language or rider themselves. Doing so risks being found to have engaged
in the unauthorized practice of the law.
Section
22
Limited space is provided to allow the parties flexibility to negotiate and agree upon
special terms and/or minor changes to the Contract. Additional page(s) can be
incorporated by reference (e.g., “See Exhibit A attached hereto and incorporated by
reference as if fully set forth herein”). As discussed elsewhere throughout this Manual,
all parties are encouraged to avoid excessive use of (or “abusing”) this tool for purposes
other than very limited applications such as set forth herein. REALTORS otherwise
expose themselves to the possibility of being charged with engaging in the unauthorized
practice of law. Parties who desire customized terms, or results which differ from that
provided (or allowed for) by the pre-printed terms of the Contract, should be advised to
consult with their own attorney for legal advice.
Note: Pursuant to 20 CSR 2250-8.100(3), “Any change to a contract shall be initialed
by all buyers and sellers.” Accordingly, if hand written language is added to an
otherwise fully typed Contract offer at the “Special Agreements” section, or if any
other terms or language is changed via interlineations made throughout the Contract or
any riider thereto, a REALTOR should ensure that all such changes are initialed by both
parties.
22
Section
23
Section 23 is designed to accommodate the disclosure obligations mandated by 20 CSR
2250-8.110. In situations where a licensee will directly (or indirectly) acquire an
interest in, sell, buy or exchange real estate pursuant to the Contract, (s)he must disclose
his/her status as a licensee. Even in situations where a licensee is acting on behalf of
another party, a licensee must also disclose any ownership interest (s)he may have. The
name of the licensee who is required to make such disclosure should be filled in at Line
357. Whether (s)he has a direct or indirect ownership interest (or is an immediate
family member of) the Seller or Buyer can be indicated by checking the applicable box.
Disclosure of an immediate family member relationship is required by Article 4 of the
NAR Code of Ethics. It provides (in part) that “REALTORS® shall not acquire an
interest in or buy or present offers from themselves, any member of their immediate
families, their firms or any member thereof, or any entities in which they have any
ownership interest, any real property without making their true position known to the
owner or the owner’s agent or broker”. There is no question but that the term
“immediate family” includes ones children in this regard (although it is not so clear if,
for example it would include in-laws).
While it is perhaps not absolutely clear and the question may be open to some debate as
to how far an extended familial relationship disclosure may be required, case
interpretations under the Code indicate that it should be disclosed, at least whenever
there is any potential interest (however remote) that a REALTOR may have or someday
acquire (including by inheritance). This will be more of an issue then perhaps where the
familial relationship is with a buyer. In any event, whenever there is some possible
additional influence or consideration at play (e.g., other than transactions between
parties who are truly complete strangers to each other), as a practical matter, full and
honest disclosure of any such relationship will always provide a defense to any possible
claim of fraud for non-disclosure. Accordingly, disclosure is clearly the most
conservative and risk-free approach to take. If additional space is needed to disclose the
nature of the interest or relationship, that may be done in a separate writing (or in
“Special Agreements” Section 22)
Section
24
Identify the source(s) of any commission or compensation due to the Broker(s) involved
in the transaction(s) by checking the applicable box(es) at Line 361, as required by 20
CSR 2250-8.096(1)(A)2. All money received by a broker in a transaction must be set
forth on the Closing Statement. See, 20 CSR 2250-8.150(1). If both Seller and Buyer
are responsible to pay a commission or compensation, then their respective obligations
may be clarified by setting forth a specific percentage or dollar amount.
Note: If any compensation due to the Broker assisting the Seller (listing broker) or the
Broker assisting the Buyer (selling broker) is to be provided from more than one source,
all sources must be identified (i.e., check one, neither, or both of the boxes, as
applicable). If applicable, Special Agreements Section 22 may be used (or a separate
page attached) to identify any other source of payment (e.g., an employer, relocation
company, family member) or other specific terms and details of any special agreement
reached between the parties regarding payment of a commission or other compensation
to the Broker(s) (e.g., that may be contrary to what their existing agency representation
and/or broker cooperation agreements provide for). See also §§339.100.2(6) and
339.800 RSMo. for statutory provisions regarding the various possibilities and
consequences of payment of broker compensation.
This Section also includes a mutual representation by the parties that there is no other
broker(s) involved in the transaction on their behalf.
23
Section
25
The Broker preparing the initial offer should fill in both blanks on Line 389 (indicated
by “O”) with the printed name of the applicable “Listing” and “Selling” brokerage
company(ies) involved, and check the applicable box in each section (i.e., one box in
Lines 370-378 and one box in Lines 380-387). That Broker should also complete and
sign the appropriate signature block information at Lines 391-393. The Broker (if any)
representing the recipient of the offer should then complete and affix its own signature
at these lines.
Note: A dual agent or transaction Broker representing or assisting both parties should
check the appropriate box in each section (i.e., at both Lines 372 and 382, or at Lines
376 and 386, as the case may be) and sign and complete both signature blocks. This
“Brokerage Relationship” disclosure is intended to satisfy the confirmation
requirement set forth at 20 CSR 2250-8.096, and is not a substitute for, and does not
excuse a broker from, making any earlier required agency disclosure regarding its
brokerage relationship. See, 20 CSR 2250-8.095. MR form DSC-1000 (Real Estate
Brokerage Relationship Disclosure) may be used for this purpose. MR form DSC1000A may be used for this purpose in lease transactions
At Line 364, the parties confirm they have received the Broker Disclosure Form
required by the MREC. The Broker(s) MLS ID No. should be included (at Line 389) if
required.
PAGE 7
Section
26
Section 26 of the Contract is designed to notify the parties that a franchisor is not
responsible for the acts of its franchised broker. See, 20 CSR 2250-8.080(2).
Section
27
Section 27 of the Contract sets forth the permission of the parties to disclose sales data,
including the Purchase Price, regarding the transaction to (among others) any
professional users of real estate data. Such information may not be provided until after
the Closing. REALTORS are not authorized (by the Contract) to disclose any such
information prior to Closing. MR listing forms also contain language permitting
disclosure of certain information regarding a listed property (which is further discussed
at Articles VIII and X of this Manual.
Section
28
Section 28 of the Contract includes a representation that the Seller is not a “foreign
person” as described in the Federal Foreign Investment in Real Property Tax Act
(“FIRPTA”), and requires delivery of a certificate at Closing to that effect (which is, or
at least should be, required by all Closing Agents) containing the Seller’s tax
identification number. The specific section of the United States Code which creates this
obligation is referenced.
24
Section
29
Section 29 addresses the provisions of the USA Patriot Act (Public Law 107-56) and
Presidential Executive Order 13224 (effective September 24, 2001). It contains a
representation and warranty by each party that (s)he/it is not a “Specially Designated
National and Blocked Person” as defined therein, and is not prohibited from transacting
business thereunder (or any other anti-terrorism law).
The Office of Foreign Assets Control (“OFAC') of the US Department of the Treasury
administers and enforces these (and a whole series of related) laws that impose
economic and trade sanctions, based on US foreign policy and national security goals,
against targeted foreign countries and regimes, terrorists, international narcotics
traffickers, those engaged in activities related to the proliferation of weapons of mass
destruction, and other threats to the national security, foreign policy or economy of the
United States. OFAC acts under presidential wartime and national emergency powers,
as well as authority granted by specific legislation, to impose controls on transactions
and freeze foreign assets under U.S. jurisdiction.
The Patriot Act has extensive requirements dealing with money-laundering. Pursuant
thereto, OFAC created certain “Rules” that require all U.S. “financial institutions” to
screen new customers against federal lists of known and suspected terrorists, with an
emphasis on Specially Designated Nationals (“SDN”). They are obligated to block or
'freeze' property and payment of any funds transfers or transactions, and to report all
blockings to OFAC within 10 days of occurrence. Any institution in non-compliance is
open to adverse publicity, fines, and even criminal penalties. The OFAC Rules are not
limited to banks. Insurance companies, securities and investment firms, credit unions
and even import/export trading companies (amongst others) are all subject to OFAC
Rules. Specifically, the definition of a “financial institution” includes “Persons involved
in
real
estate
closings
and
settlements”.
As
reported
in
http://www.foxlegal.net/Articles/US-Patriot-Act-Etc-Transactions-In-A-ScaryWorld.pdf, the definition of “financial institutions” under the Patriot Act has not (at least
as of then) been interpreted to include real estate brokerage firms.
On the other hand, pursuant to Executive Order 13324, all “U.S. persons” (entities and
individuals, including permanent residents and persons who just happen to be here) must
comply with the regulations promulgated and administered by OFAC pursuant thereto.
These regulations prohibit U.S. persons from engaging in transactions with certain
prohibited companies, individuals, nations and residents of certain countries, or persons
acting on their behalf, and there are extremely stiff penalties (monetary fines and
imprisonment) for non-compliance.
Therefore, buyers, sellers, landlords, tenants and property managers should ascertain
that the other party to the transaction (including current tenants), and its officers,
directors and major equity owners are not on OFAC’s list of “Specially Designated
Nationals and Blocked Persons (“SDN list”). The SDN list is updated frequently and
can be found at www.treas.gov/offices/eotffc/ofac/sdn/index.html. OFAC also has a
hotline, 1-800-540-6322. Experts recommend that due diligence include searching
alternative spellings for names being searched, trade names and aliases, and checking
for “false positives”. There are software programs available which can assist in this
task. If assets of a person on the SDN list come into the possession of a U.S. person,
they must be blocked or frozen (kept in a segregated interest-bearing account) and a
report must be filed with OFAC within 10 days and annually thereafter. Earnest money
deposits, security deposits or advance rental payments would be examples of such
assets.
25
A more detailed (although still a bit “dated”) discussion can be found at
http://www.bakerlaw.com/files/publicdocs/news/articles/caron-wright-patriotact.pdf. As
set forth in the conclusion thereof (at least as of that time), “none of the regulations
issued pursuant to the Patriot Act have been enforced against real estate companies.
However, compliance with these regulations in one form or another may be required at
some point. Because violations of the Patriot Act can be quite costly, real estate
companies and lawyers conducting real estate transactions may wish to begin
considering what programs or policies that they may need to develop”. Still, since
compliance with the Executive Order currently is required of all “U.S. persons” and
violations of it may also result in substantial fines and penalties (or even imprisonment),
“(a)ll real estate industry participants should have some method or program in place,
which allows them to ensure that they are in compliance with the Executive Order and
are not doing business with any person on the OFAC list”.
Section
30
Section 30 sets forth timing requirements and acceptable procedure by which to provide
notice of acceptance of an offer. Beginning in 2011, it no longer specifies that a Seller
may only accept the Contract by timely “signing and delivering a fully-executed copy to
Buyer”. The Contract now allows for the traditional practice whereby notice of
acceptance of an offer may be communicated orally. The offer presented must, in fact,
have been signed by the Seller, but at that point, oral notice of acceptance given to the
Buyer (or to the licensee assisting the Buyer) will suffice to actually establish and create
a binding and enforceable “Contract”.
Likewise, written Notice of the withdrawal of an offer is no longer specifically required
by the terms of the Contract. In order to reduce potential disputes as to whether an offer
to purchase was in fact accepted (or withdrawn) on a timely basis, REALTORS are
encouraged to separately confirm, in writing, any oral notice provided in this regard as
soon as possible (and, of course, to also promptly deliver an actual signed copy of the
Contract).
Insert the date and time at which the offer submitted will automatically expire at the
blanks indicated by “P”.
Note: An offer may generally be withdrawn at any time before it is accepted by the
offeree (i.e., even before the stated automatic expiration date). Although oral notice of
withdrawal should now suffice, REALTORS are still encouraged to document in writing
any rescission of a pending offer, including the time and date of any oral notice thereof.
Section
31
The Contract specifically provides that “Time is of the essence” with respect to each
party’s contractual obligations (meaning that strict compliance with stated timeframes
and deadlines is required). It also clarifies that all time periods referenced are deemed to
mean “Central Time.” The last sentence makes clear that any reference to a “day” is
intended to mean a 24 hour calendar day (7 days a week).
Note: REALTORS should be careful to check the calendar and schedule the dates
on which all contingencies (or conditions to performance) will expire, as well as any
other date for performance of contractual obligations. All such dates (e.g., the
Closing Date and all Notice, response and contingency periods) are based on a pure
“calendar-day” basis. There is no provision whereby if a date for performance falls on a
day other than a business day, that such date for performance is extended to the next
succeeding business day. If this creates a particular problem, REALTORS should adjust
the time period(s) accordingly, before the Contract is signed. Otherwise, in order to be
safe, the action to be performed should be taken in advance of the applicable deadline
26
that falls on a holiday or other “non-business” day.
398-407
All Buyer(s) should sign (and date) the Contract before the offer is made (at “Q”). If the
Seller(s) intend to accept the offer as presented, all Seller(s) should sign (and include the
time and date thereof, at “T”) before (or at the same time) notice of their acceptance of
the Contract is communicated or delivered to the offeror party and/or its Broker
representative.
Note: Failure to have all individuals constituting Seller and Buyer sign the Contract
may result in the Contract being enforceable against only the individual signator(s).
If the Seller(s) do(es) not intend to accept the offer as presented, the Seller(s) should not
affix any signature(s) at line(s) “T”. In such case, the Seller(s) should initial the
appropriate line (i.e., at “R” if the offer is to be simply rejected, or at “S” if a Counter
Offer is to be made). In the latter case, the Counter Offer form (MR form MSC-2040,
discussed at Article V in this Manual) should be attached.
Note: MREC regulations require that “A Buyer or Seller must be promptly advised
when an offer or counteroffer has been rejected.” 20 C.S.R. 2250-8.100(2).
Accordingly, if an offer is rejected and a Counter Offer is not to be submitted, the
REALTOR representing the offeree should promptly notify the other party (i.e., the
offeror) of the rejection.
424-427
This Section is intended to clearly set forth a “paper trail” to establish which licensee (if
any) has actual possession of the Earnest Money supplied by Buyer at the time an offer
is executed by the Buyer and submitted to the Seller. The initial recipient of the Earnest
Money is to subsequently deliver the same to the Escrow Agent identified (for deposit as
set forth at Section 3 of the Contract). Such licensee should print and sign his or her
name and affix the date at the spaces denoted by “U”. If Earnest Money is not actually
supplied and delivered in hand, at the time a purchase offer is submitted, appropriate
explanation should be provided.
27
II.
FINANCING AGREEMENTS (MSC-2010)
Section 5 of the Contract (discussed above) provides flexibility to describe particular
features of any desired type of conventional financing (e.g., interest rate adjustments,
amortization periods). MSC-2010 should be used in connection with the Contract only if the
type of financing sought involves a loan assumption, seller financing or a government loan (e.g.,
FHA or VA).
The terms of MSC-2010 equally apply to the MR Vacant Land and Farm sale contract
forms (LND and FRM 2000). MSC-2010 is generally not applicable to the MR form
Commercial and Industrial Real Estate Sale Contract (COM-2000), unless a government
sponsored loan is involved. The particulars of MSC-2010 are discussed below.
PAGE 1
A.
Loan
Assumption
Complete the Reference (identification) line consistent with the Contract.
Check Box A if Buyer is to assume the Seller's existing loan which encumbers the
subject Property. Identify the “Existing Lender”, and preferably its address and
phone number, at the blank indicated by “B” on the form. Insert the remaining
term of the loan (at “C”), interest rate (at “D”) and the amount which the parties
agree is to be balance of the loan as of the Closing (at “E”), in the spaces provided.
If the actual balance of the note at the time of Closing does not match exactly the
agreed-upon amount pegged by the parties, then the Purchase Price proceeds due at
Closing should be adjusted lower (i.e., a credit to the Buyer) by the amount which
the actual principal balance exceeds the pegged amount. Likewise, if the actual
principal balance due as of the Closing is less than the anticipated balance agreed
upon by the parties, then Buyer is to reimburse Seller for the difference (plus any
deposits held by the Existing Lender and transferred to Buyer). Consistent with
Section 5 of the Contract regarding conventional financing, this section also
requires that a Buyer “do all things reasonably necessary” to obtain such financing,
and sets forth the procedures Buyer must follow in order to exercise its right to
terminate the Contract (and become entitled to return of the Earnest Money) in the
event of a failure of this condition (e.g., by providing written Notice from the
Existing Lender, or an appropriate sworn/notarized affidavit), or the same will be
deemed waived. Insert the time period in which Buyer is allowed to obtain any
necessary consent of the Existing Lender at “F”.
Lines 19-20 makes clear that the Buyer’s notarized affidavit, if any, must be
presented by 5:00 pm. on the Loan Condition Deadline (i.e., the same time as is
required for a rejection Notice from the Existing Lender). Subparts A, B and C
each specify that any return of the Earnest Money to Buyer remains “subject to
terms of Contract” (see discussion of Section 8 of the Contract above regarding
such matter).
Seller
Financing
Check Box B if Seller agrees to finance part of the Purchase Price. If so, insert the
amount agreed to be financed at “G”. Fill in the agreed upon amortization period in
at “H” and the interest rate at “I”. Insert the priority of the deed of trust (e.g.,
“first”, “second”) at “J”. Insert the term of the loan (e.g., the period of time after
which it will mature) at “K”. If the loan is intended to be fully amortized over the
term of the loan, the inserts at “H” and “K” should be identical. If the loan is to
include a balloon payment, “K” will be a shorter period of time than “H”. The form
of promissory note and deed of trust to be used is to be based on the then effective
form of such documents promulgated by FNMA/FHLMC (as opposed to, say “a
28
form approved by Seller”). This is designed to reduce potential disputes which
might otherwise arise between the parties regarding the content of such documents
(such as prepayment penalties, fees, remedies, etc.). REALTORS are encouraged
to have their clients consult with legal counsel for any advice regarding these
matters.
Insert at “L” the number of days that Seller is entitled to investigate Buyer’s credit,
and to notify Buyer if it is unacceptable. Failure to timely do so constitutes a
waiver of Seller’s rights in this regard. MSC-2010 provides a Buyer with possible
additional time to obtain alternate financing. Insert the additional amount of time
(if any) to be provided at “M”. Unless the Buyer timely provides Seller with an
unconditional loan commitment to evidence such alternate financing, then the
Contract automatically terminates and the Earnest Money is to be refunded to
Buyer. This subparagraph also specifically allows for any credit information
regarding the Buyer to be released directly to the Seller or any involved Broker, and
absolves the Brokers from any responsibility for the contents or disclosure thereof.
Note: It is possible that a transaction will involve both assumption of an existing
loan as well as Seller financing (e.g., a second priority “take-back” loan). In such
case, both Box A and B should be checked and completed appropriately.
PAGE 2
Government Check Box C if Buyer seeks any sort of federal, state or local government insured,
guaranteed or subsidized loan. Given the wide variety of governmental financial
loan
loan programs and assistance available, the scope of this language is not limited to
a U.S. Government insured or guaranteed government loan (e.g., FHA or VA). As
specifically noted in the bold type parenthetical, if a FHA or VA loan is to be
applied for, the applicable subpart of Box C should also be checked. MSC-2010
may be used in connection with COM-2000 if a “Government Loan” of some sort is
to be a condition to a Buyer’s obligation to close.
Fill in the minimum acceptable amount of the loan at “N”, and the amortization
period at “O”. Insert the maximum acceptable interest rate at “P”. At “Q”, insert
the maximum amount of loan fees/points (expressed by either a total dollar amount
or number of points; e.g., “$500” or “two (2) points”) which Buyer agrees to pay.
Insert any portion of the loan fees/points which Seller is willing to pay at “R”.
Note: One “point” is an amount equal to one percent (1%) of the amount of the
loan. If a party is not willing to pay any loan fees/points, then insert “zero” or
“none”.
Again, although there is no specified time period in which a Buyer is required to
apply for a government loan, a Buyer remains obligated to “do all things
necessary” to obtain financing. MSC-2010 includes the same requirements and
procedures as set forth at Section 5 of the Contract regarding this point.
As discussed above with respect to “Loan Assumption”, and consistent with the
terms of Section 5 of the Contract for conventional financing, this subpart of MSC2010 also sets forth the procedures a Buyer must follow in order to exercise its right
to terminate the Contract and become entitled to return of the Earnest Money (e.g.,
by providing written notice from the proposed lender, or an appropriate
sworn/notarized affidavit). The Contract will terminate only if the Buyer timely
delivers (by 5:00 p.m.) such Notice to Seller that Buyer was unable to obtain a loan
commitment for the described financing by the Loan Condition Deadline (set forth
at “S”). Otherwise this contingency is deemed waived.
29
Loan
Disclosure
Insert (at “T”) the minimum value at which the Property must appraise by the FHA
(e.g., the Purchase Price amount set forth in the Contract). Also mark the box if the
HUD disclosure form “For Your Protection: Get a Home Inspection” is attached.
U.
Given the innumerable financing terms and options available in today’s society,
Box D (“Other Financing and/or Terms”) is designed to provide flexibility for
the parties to identify any specific alternative type of loan which the Buyer is
obligated to pursue. It can also be used in connection with the options already
listed in MSC-2010 (i.e., Boxes A-C) to describe any additional specific terms or
nuances relating thereto upon which the parties mutually agree. As is the case with
the “Special Agreements” section of the Contract and discussed elsewhere in this
Manual, in order to protect REALTORS against claims of engaging in the
unauthorized practice of law, parties who desire or insist upon customized terms
should be advised to consult with their attorney for specific language (to insert at
“U”) and legal advice.
80-87
This admonishment is similar to that found at Section 5 of the Contract. It is
applicable regardless of whether a Buyer seeks conventional or alternative
financing.
40&92
When used, MSC-2010 should be initialed (at “V”) by both parties at the bottom of
both pages of the form.
30
III.
CONTRACT CONDITIONS (MSC-2020)
MSC-2020 deals specifically with conditions for (A) a Buyer’s sale and closing of other
property it owns; (B) for only the closing of an existing contract on such Buyer’s other property;
(C) Buyer’s need for an appraisal of the subject Property; (D) a Seller’s need to terminate an
existing contract on Seller’s subject Property; and (E) Buyer’s review of any applicable farm
programs. The terms of the “Contract Conditions” form also generally apply to the MR Vacant
Land, Farm and Commercial sale contract forms (LND, FRM and COM). The particulars of
MSC-2020 are discussed below.
A.
PAGE 1
Complete the Reference (identification) line consistent with the Contract.
Introductory
Language
MSC-2020 incorporates defined terms and terminology consistent with the
Contract. Like all MR form riders, in the event of an inconsistency between the
terms set forth in MSC-2020 and the terms set forth in the Contract, the terms of
the rider will take precedence and control. The introductory admonition “Upon
termination of this Contract pursuant to any of the events described below, the
Earnest Money shall be returned to Buyer, subject to the terms of the Contract”
applies to each subpart of MSC-2020.
Contract
Contingent
Upon Sale of
Buyer’s
Existing
Property
Check Box “A” if closing on the sale of a property currently owned by a Buyer
will be required as a condition to Closing under the Contract. If so, insert the
address of the Buyer’s existing property(ies) to be sold at blank “B”, and the
outside (i.e., “last”) date permitted for that closing at blank “C”. If that closing
does not timely occur (at least unless the reason is due to the Buyer’s fault), then
the Contract will terminate, at Buyer’s option, by delivering Notice to the Seller.
Note: Although this contingency is designed for the primary benefit of the
Buyer, a Seller need not be forever “held hostage” to a Buyer’s inability to sell its
existing property. Commonly known as a “kick-out” clause, a Seller may
effectively eliminate the continuing efficacy of this contingency by delivering
Notice to the Buyer, at any time, that the Contract will be terminated unless
Buyer, within the time period inserted at “D”, delivers Notice to Seller that Buyer
will close on the Contract even if Buyer’s existing property is not sold. MR form
MSC-2060 should be used for purpose of these Notices. In order to so proceed,
the Buyer must also provide one or more of the items listed in subparts 1(a), (b)
or (c). This part “A” of MSC-2020 also clarifies that the contingency time
periods set forth in Sections 5, 6 and 7 of the Contract (regarding financing, title
and survey, and inspections - see discussions above) begin to run as of the earlier
of the date that Buyer contracts to sell his or her existing property to a third party,
or when Buyer delivers its Notice waiving this contingency.
31
Contract
Contingent
Upon Closing
of Existing
Contract on
Buyer’s
Existing
Property
Check Box B for those situations where a Buyer’s existing property is already
under contract to sell (but has not closed) as of the time Buyer and Seller execute
the subject Contract. Insert the date of that existing sale contract at blank “E”,
insert the address of the Buyer’s existing property(ies) at Blank “F”, and the
outside (i.e., “last”) date permitted for that closing at blank “G”. If that closing
does not timely occur (at least unless the reason is due to the Buyer’s fault), then
the Contract will terminate, at Buyer’s option, by delivering Notice to the Seller.
In such case, Buyer’s Earnest Money, less any expenses incurred by or on behalf
of Buyer, is to be refunded (subject to paragraph 8 of the Contract). Under this
part “B” of MSC-2020, the referenced timeframes at Sections 5, 6 and 7 of the
Contract commence immediately as of its Effective Date.
Contract
Contingent
Upon
Appraisal
Check Box C if the Contract is to be subject to receipt of a qualifying appraisal
from an appraiser selected by Buyer (or Buyer’s lender if the Contract is subject
to financing). See also the discussion of Lines 66-69 of the Contract above
regarding this point. If so, the appraised value of the Property must be equal to or
greater than the Purchase Price set forth in the Contract. If the Property does not
appraise at the required amount and Buyer wants to act upon this contingency
Buyer must deliver a copy of the appraisal to the Seller no later than the outside
date specified at “H” (i.e., 25 days after the Effective Date if left blank). Given
that an appraisal can often take some time to prepare (and that an appraisal may
be required even if the Contract is not conditioned upon financing)., this time
frame is no longer pegged to the Loan Condition Date specified at Section 5 of
the Contract
If the Contract is also conditioned upon the sale of Buyer’s property as outlined in
Part A, then it may be appropriate to allow for additional time by which Buyer
must deliver a copy of the appraisal to Seller (e.g., “X days after the earlier of the
date Buyer (a) contracts to sell Buyer’s existing property, or (b) delivers written
Notice to Seller waiving that contingency”).
A Seller may elect to keep the Contract enforceable against a Buyer by agreeing
(in a writing delivered to Buyer) to reduce the Purchase Price to the appraised
value within the time period specified at “I” (i.e., 5 days after delivery of the
appraisal to Seller if none stated). Otherwise, Buyer may elect to terminate the
Contract by delivering Notice to Seller within the time period specified at “J”
(i.e., 2 days after the deadline for Seller’s response if none stated).
Contingent
Upon
Termination
of Seller’s
Previous
Contract
(“Back up
Contract”)
Check Box D if the Contract is being accepted by a Seller as a “back-up” (i.e., if
Seller’s Property is already subject to a pending contract with a different buyer).
This contingency, which is designed to be for the primary benefit of protecting a
Seller (i.e., so that Seller’s Property is not made subject to two “live” contracts at
the same time), may be waived by Seller by delivering Notice thereof to the
Buyer.
Nevertheless, the fact that Seller has accepted a “back-up” Contract expressly
does “not limit Seller’s discretion to amend the terms of the previous (main)
contract” (see Lines 38-39). Accordingly, it is essentially a Seller’s call as to
how to proceed (in choosing between the main or “primary” contract and the
“back-up” Contract. This does not mean that a “back-up” Buyer must idly sit by.
A Buyer may elect to terminate a “back-up” Contract at any time (at least prior to
its receipt of Seller's waiver or a fully executed written release of Seller's previous
contract).
32
Note: As a practical matter, a Seller will presumably elect to proceed with
whichever offer it deems best. Accordingly, while “back-up” Buyers could
choose to “hang in there”, they are not required to do so. They can elect to
terminate and “walk away”, or perhaps even try to “sweeten the pot” by making a
better offer.
If a Seller’s proffered waiver of this contingency is not supported by a written
release signed by all parties to the primary contract, then explanation of the
circumstances (together with any supporting documents) surrounding the failure
of the primary contract is to be supplied to the Buyer for its consideration. If not
satisfied with such explanation/supporting documentation, then Buyer may still
elect to terminate the “back-up” Contract (i.e., despite Seller’s attempted waiver)
by delivering Notice thereof to Seller within 24 hours after Buyer’s receipt of
Seller’s waiver of the contingency (and any supporting documentation).
The contingency time periods for financing, title and survey review and
inspections (i.e., Sections 5-7 of the Contract) applicable to the subject “back-up”
(and now primary) Contract will begin to run upon Buyer’s receipt of either the
fully executed release regarding the prior contract or Seller’s waiver of this
contingency.
PAGE 2
Review of
Farm
Programs
Condition
Check Box E if the Contract is to be subject to Buyer’s review and approval of
any restrictions imposed upon the Property pursuant to a federal, state or local
farm program(s) in which the Property may be enrolled (e.g., “set-aside” crop
programs). Insert the date by which Buyer is allowed to obtain and review such
restrictions, and to notify Seller if they are not acceptable and thereby terminate
the Contract, at “K”.
L
When used, MSC-2020 should be initialed (at “L”) by both parties at the bottom
of the form.
33
IV.
DISPUTE RESOLUTION (MSC-2030)
MSC-2030 may be used where both parties wish to have disputes relating to the physical
condition, nature, value, appearance or use of the Property, including fraud, misrepresentation,
warranty and negligence claims, settled by an alternative dispute resolution procedure. In
addition to offering binding arbitration according to the specified rules of the American
Arbitration Association (“AAA”), as its section headings suggest, the Dispute Resolution form
offers additional options for voluntary mediation and Small Claims Court actions. Disputes
involving the Broker(s) are not intended to be covered by MSC-2030. It also does not apply to
(and thus excludes) disputes pertaining to the condition of title (see Lines 8-9). If the parties did
not agree upon and sign/attach the Dispute Resolution rider simultaneously with the Contract,
they may still later agree to submit a dispute to a Small Claims Court action, voluntary mediation
or arbitration by using this form.
MSC-2030 does not include a schedule of filing fees (which was previously based on the
amount of the claim involved). In response to a U.S. Supreme Court decision regarding the
possibility that an arbitration provision in a contract could be unenforceable if high fees imposed
on a consumer made arbitration “virtually inaccessible”, the AAA adopted (effective 3/1/02)
certain new Supplementary Procedures for Consumer-Related Disputes, and a wholly revamped
pricing structure. Based on these new rules, brokers, as sellers of services, could arguably be
drawn into disputes, even if such disputes were truly only between the actual parties to the
Contract, and yet be forced to pay the great majority of the costs to arbitrate. Accordingly, the
Dispute Resolution rider is no longer designed for a Broker to sign (and thereby submit itself to
the dispute resolution procedures set forth therein).
There are many pros (e.g., generally quicker and less expensive, but not always;
preservation of privacy; less formal and contentious) and many cons (e.g., virtually
unappealable, even if a “wrong” decision is issued; no application of traditional “discovery” or
rules of evidence; legal arguments which might support a summary judgment are generally not
available; no jury) to consider when deciding whether or not to submit to arbitration.
REALTORS should advise their clients to seek legal advice regarding the benefits and
disadvantages of arbitration and/or any suggested changes to make to the Dispute Resolution
rider. A summary of arbitration procedures, time frames and fees, and additional information
can be obtained from the AAA at the address set forth on the second page of MSC-2030 or at
www.adr.org. The particulars of the Dispute Resolution rider are discussed below.
PAGE 1
A.
Complete the Reference (identification) line consistent with the Contract.
B.
Insert the Effective Date at the space indicted by “B”.
10-12
Arbitration is governed by the Uniform Arbitration Act (as adopted in Missouri at §435.012
RSMo. et. seq.) and the AAA Construction Industry Dispute Resolution Procedures then in
effect. Those procedures are available from the AAA office listed on page 2 or on-line. They
include a mediation alternative and are fully incorporated by reference into MSC-2030 (as the
procedures are very lengthy). REALTORS providing the Dispute Resolution rider are
encouraged to download a copy of the latest rules from the AAA website and provide them to
the parties along with the form.
34
13-18
The Small Claims Court option was added as it may be a more efficient and cost effective
manner of resolving disputes than mediation/arbitration in some situations. The parties should
consider that the jurisdiction of a small claims court is limited to a maximum amount of
dispute and that a judgment rendered thereby may not be enforceable by a lien.
22-26
A voluntary mediation step is part of the dispute resolution process. The AAA reports that
mandatory mediation reduces the percentage of cases that are actually resolved in mediation
(15-20% of cases are resolved in mandatory mediation, whereas 70-80% are resolved in
voluntary mediation).
30-33
According to AAA representatives, its Construction Industry Dispute Resolution Procedures
(the governing procedures of the mediation/arbitration process) are (1) updated more often, (2)
provide a more cost effective fee structure for disputes under $75,000, and (3) are better suited
for disputes involving the physical condition, nature, value, appearance or use of real property.
These rules/fee schedules are regularly updated (and would be difficult if not impossible to
keep up to date), so the Dispute Resolution rider does not include summaries thereof.
34-37
The Dispute Resolution rider survives Closing of the Contract. In other words, any dispute
subject to its terms which arises after the Closing is still subject to arbitration. The applicable
statute of limitation governing such dispute (i.e., the ultimate time frame by which a claim
must be submitted or is forever lost) is controlled by the Missouri statues, which are
incorporated by reference for this purpose.
38-39
The Dispute Resolution rider is enforceable only against those parties who agree to submit
disputes to its alternative resolution procedures (as evidenced by their signature). REALTORS
are advised to encourage their clients to seek legal advice, particularly if there are multiple
parties and less than all of them intend to submit disputes to these alternative dispute
resolution procedures. Unexpected (and perhaps expensive) adverse consequences may result
if the same issue must be decided in different forums against different (or overlapping) parties.
40-43
AAA mediators and arbitrators are located throughout the State. A mediator (or arbitrator, as
the case may be) from the County where the Property is located will be chosen if possible. In
order to reduce potential costs, a single mediator (and arbitrator, if necessary) is to be used. In
order to reduce bias that may arise during a failed mediation session, the Dispute Resolution
rider requires the arbitrator to be a different person than the mediator. The parties may, of
course, always differently agree (e.g., to more than one arbitrator or mediator, or to have the
mediator also be the arbitrator.) REALTORS should not attempt to provide advice in this
regard.
PAGE 2
C.
Obtain the signatures (and date thereof) of the Buyer and Seller at the spaces indicated by “C”.
35
V.
COUNTER OFFER (MSC-2040)
This form is to be used whenever a counter-offer is to be made. A practice of crossing
out certain terms, initialing changes and making multiple changes to a single counter-offer form
will often result in a messy and difficult to interpret Contract. REALTORS are advised to use a
new Counter Offer form every time they negotiate a change in terms. Each new Counter Offer
form should include and “carry-forward” all prior changes agreed upon. Doing so serves to
make the process much cleaner and reduces potential for mistake. The final “accepted” Counter
Offer form (together with the Contract and all Riders or other attachments thereto) will make up
the final agreement between the parties. Any previously rejected Counter Offer form is not part
of the final Contract (but should be retained as part of a REALTOR’s files).
The Counter Offer form generally applies to all MR form sale contracts (RES, LND,
FRM or COM). The particulars of the Counter Offer form are discussed below.
PAGE 1
A.
Complete the Reference (identification) line in a manner consistent with the Contract.
B.
Each new Counter Offer is to be identified with a new number. Insert the sequential
number of the Counter Offer then being submitted at “B”.
8
Check the applicable box to indicate which party is initiating the pending Counter-Offer
(i.e., the “Counter-Offeror”).
9-15
Identify both parties to the Contract and insert the Property address/common description at
the spaces indicated.
16-41
Complete the blanks at subparts (a) - (c) only if the referenced terms are to be changed. At
subparts (d)-(e), check the applicable box(es) with respect to only the referenced forms that
are being changed, and include a brief description of the change(s) made.
PAGE 2
42-49
At subpart (f), reference the paragraph and line number (if appropriate) of any additional
change(s) being made to the Contract and/or any other attachment thereto (in which case
the form number and caption should also be specified). Briefly describe the terms
changed.
Note: REALTORS are strongly encouraged to not draft any special or customized
agreements on behalf of their clients in order to avoid the potential of being found to have
engaged in the unauthorized practice of law. Clients should be encouraged to consult with
legal counsel in connection with any language to be inserted at subpart (f). If a client
insists on including additional changes at this section, only the specific language directed
by the client to be included should be set forth. REALTORS should advise their clients
that REALTORS cannot attempt to explain the legality or legal consequences of any such
language.
50-64
Insert the date and time (“Acceptance Deadline”) by which the Counter-Offeree must
accept the Counter Offer at blank “C”. As discussed above (see Section 30 of the
Contract), any offer (including a Counter Offer) may generally be withdrawn at any time
before it is accepted. Like the Contract, the Counter Offer form no longer requires that
36
such withdrawal be documented in a written Notice delivered to the Counter-Offeree in
order to be effective. Notice of withdrawal (or acceptance) of a Counter Offer (like an
offer) may now be communicated orally. Before delivering a Counter Offer, a REALTOR
must obtain the signature of each Counter-Offeror (and insert the date thereof) at the spaces
indicted by “D”, and indicate whether it is the Seller or Buyer at “E”.
65-82
If the Counter-Offer is to be accepted, obtain the signature of each Counter-Offeree (and
insert the time and date thereof) at the spaces indicated by “F. Indicate whether it is the
Seller or Buyer at “G”. Acceptance of a Counter Offer may be accomplished in the same
manner as set forth in Section 30 of the Contract with respect to an original offer presented
(i.e., oral notice of acceptance should suffice once the Counter Offer has in fact actually
been signed by the Counter Offeree). In order to reduce potential disputes as to whether a
Counter Offer was timely accepted (or withdrawn), REALTORS are encouraged to
separately confirm in writing any oral notice provided in this regard as soon as possible. A
REALTOR should also promptly deliver a fully executed copy to the Counter-Offeror.
Note: Although signature of a Counter-Offeree is not legally required in order to reject a
Counter Offer (e.g., it would otherwise ultimately automatically expire as of the stated
“Acceptance Deadline”), MREC regulations provide that “A buyer or seller must be
promptly advised when an offer or counteroffer has been rejected.” 4 C.S.R. 250-8.100(2).
Accordingly, if a Counter-Offeree does not intend to accept the Counteroffer, (s)he should
not affix any signatures at “F”. In such case, a REALTOR representing a Counter-Offeree
should promptly return the unsigned Counteroffer to the Counter-Offeror with either the
“Reject” blank initialed (at “H”), or with the “New Counter Offer” blank initialed (at
“I”), in which case a new Counter Offer form should be attached (and the sequential
number thereof identified at “J”).
The signature lines at the bottom of the Counter Offer form conform to the procedures used
in the Contract (i.e., a Counter Offer is to be signed if it is to be accepted, or initialed if it is
to be rejected or if a new Counter Offer is to be submitted).
37
VI.
INSPECTION NOTICE (MSC-2050) AND CONTINUATION OF INSPECTION
NOTICE (MSC-2050A)
The Inspection Notice is designed to coordinate with and implement the procedures set
forth in Section 7 of the Contract regarding inspections of the Property, and the resolution of
disputes pertaining thereto. MSC-2050A should only be used in connection with the RES, LND
and FRM series MR form contracts. If COM-2000 is the subject Contract form used, then the
separate Commercial form Inspection Notice (COM-2050) should be used. The particulars of
the Inspection Notice and Continuation Of Inspection Notice forms are discussed below.
PAGE 1
A
Complete the Reference (identification) line in a manner consistent with the Contract.
B
List the full name(s) of the Seller(s).
C
List the full name(s) of the Buyer(s).
D-E
Insert the Effective Date of the Contract at “D”; and the address of the subject Property
at “E”.
Part A
Part A is to be completed by the Buyer to initiate the resolution process. As mentioned
in Article I (regarding Section 7 “Inspections” under the Contract), a Buyer may
unilaterally elect to terminate the Contract if dissatisfied with the inspection results. In
such case, Box 3 should be checked and the signed Inspection Notice delivered to the
Seller along with complete copies of all inspection reports to establish that inspections
were in fact conducted. It is suggested that a Mutual Release form (MSC-4050) also be
provided (to confirm that the Contract has been terminated and that neither party has
any remaining claims against the other in connection therewith).
If a Seller does not want/require that inspection reports be provided to it, then the
reference to those reports in the last sentence of the Inspection Notice (at Line 16) could
be deleted in advance of accepting the Contract. This can be accomplished pursuant to
Section 3(f) of the Counter Offer form (discussed above), and by physically modifying
this form and attaching it to the Contract as a rider,, with appropriate explanation in the
“Special Agreements” section and cross-reference at Section 21 of the Contract. Similar
revisions should also be made to Line 128 of the Contract in such cases.
Note: The subject MR form contracts provide (See, e.g., RES-2000 at Lines 138-139)
that “Failure to obtain any inspection shall constitute a waiver and acceptance by Buyer
of any condition any inspection may have disclosed.” If a Seller does not receive the
Inspection Notice from a Buyer on a timely basis (i.e., by the end of the “Inspection
Period” set forth at Section 7), then the Buyer is deemed to be satisfied with the results
of such inspection(s) and the contingency is therefore effectively waived. Nevertheless,
Box 1 can be checked and the signed Inspection Notice sent to the Seller in order to
“speed things up” if so desired. Copies of the inspection reports need not be provided if
Box 1 is checked.
Box 2 should be checked and completed (by specifying the unacceptable conditions
which the Buyer requests Seller correct and/or a monetary adjustment to be provided at
Closing) if the Buyer seeks to negotiate a resolution rather than terminate the Contract
or take the property “as-is.” All inspection reports should be provided in this situation.
38
Note: A monetary adjustment may affect the terms of Buyer’s loan.
Box 3 should be checked if the Buyer seeks to terminate the Contract. In this case, the
Earnest Money is to be returned to Buyer (subject to Section 8 of the Contract and
assuming the Buyer is not otherwise in default under the Contract). All inspection
reports (and preferably, a Mutual Release ~ MSC-405) should be provided in this
situation.
F-G
Obtain the signature(s) of the Buyer (at “F”) and the date(s) thereof (at “G”). This
helps establish the date of delivery of the Inspection Notice and (if applicable)
commencement of the “Initial Response Period” (further discussed below).
PAGE 2
Part B
Part B is to be completed and returned by a Seller to the Buyer within the “Initial
Response Period” established at Section 7 of the Contract (i.e., within 7 days after
Seller’s receipt of the Inspection Notice, unless specified otherwise). The date of the
Buyer’s Inspection Notice should be completed at “H”.
Box 1 should be checked if the Seller is willing to satisfy all items objected to by Buyer
on the Inspection Notice.
Note: All repairs agreed to are to be performed by the Seller in a workmanlike manner,
at Seller’s expense, prior to or as of Closing. If the walk-through establishes that such
repairs have not been timely or properly performed, and a mutually acceptable extension
of the Closing Date or other resolution is not reached, then although the Contract
provides in this regard that Closing does not relieve Seller of any obligation to complete
repairs agreed upon or required by the Contract (see discussion of Section 17 of the
Contract above), REALTORS should encourage their clients to seek legal advice.. In
any event, a “punch-list” identifying all items still desired to be completed post-closing
should be prepared.
Box 2 should be checked if Seller elects to satisfy only some (but not all) of the items
objected to by Buyer, and/or elects to provide the Buyer with a monetary adjustment at
the Closing. In such case, the lines at “I” should list each specific item which Seller is
willing to satisfy prior to Closing. If applicable, check the box at Line 67 and insert the
amount of the adjustment Seller is willing to provide at “J”.
In lieu of agreeing to perform any repairs (or if Buyer only sought a monetary
adjustment to begin with) a Seller may elect to provide the Buyer a monetary
adjustment only. If so, only check the box at Line 67 and insert the acceptable amount
of the adjustment at “J”. If the amount inserted by Seller at “J” is the same amount
requested by Buyer in Part A2, then the contingency is resolved. Otherwise, the
negotiation process may continue as further described below. Note: A monetary
adjustment may affect the terms of Buyer’s loan.
Box 3 should be checked if the Seller does not agree to satisfy any items Buyer objected
to, and/or does not agree to a monetary adjustment at Closing.
K-L
Obtain the signature(s) of the Seller(s) (at “K”) and the date(s) thereof (at “L”) before
returning the Seller’s Response to the Buyer.
39
Part C
Part C should be completed by Buyer following receipt of the Seller’s Response (if
Part B2 thereof was checked). Insert the date of the Seller’s Response at “M”.
Box 1 should be checked if the Seller’s Response is acceptable (in which case the
contingency is resolved).
Box 2 should be checked if Buyer is willing to accept the Seller’s rejection under the
Seller’s Response proposal pursuant to Part B3.
Box 3 should be checked if Buyer does not accept Seller’s proposal under option B2,
but desires to continue negotiations. In this case, MSC-2050A (Continuation of
Inspection Notice) should be completed and returned to the Seller.
Box 4 should be checked if Buyer does not accept Seller’s proposal under option B2.
Other than for lapse of time, there is no limitation on the number of proposals and
counter-proposals the parties may make in an effort to resolve disputes regarding
inspection matters. REALTORS are reminded that home owner warranties and service
agreements can often assist the parties in reaching an agreement. Beginning in 2014, a
new form (MSC-2025 ~ “Home Warranty”) may be used for this purpose.
N-O
Obtain the signature(s) of the Buyer (at “N”) and the date(s) thereof (at “O”) before
returning the Buyer’s Reply to the Seller.
40
CONTINUATION OF INSPECTION NOTICE (MSC-2050A)
The “Continuation of Inspection Notice” form was created for use in those situations
where MSC-2050 has run its course without resolution of all items objected to, but Buyer wishes
to continue negotiations. As noted above, there is no limitation (other than patience and time
constraints) on the number of proposals a party can make in an effort to reach agreement on
inspection matters. It must be kept in mind, however, that (unless a different timeframe is set
forth at Section 7 of the Contract) the parties only have a total of 3 days after Buyer’s receipt of
the initial Seller’s Response to Inspection Notice to reach an agreement.
A-E
These portions of the Continuation form should be completed in the same manner as
set forth above with respect to MSC-2050.
9-13
This portion of the Continuation form is to be completed in essentially the same
manner as Part A of MSC-2050. If Buyer marked Option C3 on MSC-2050 and
wishes to continue negotiations, its counterproposal (i.e., the scope of repairs and/or
monetary adjustment still demanded) should be set forth at Lines 9-12. The Buyer(s)
signatures(s) should be affixed at “P” and the date thereof at “Q”.
Part D
This part of the Continuation form follows the same structure as Part B of the
Inspection Notice and should be completed in the same fashion. The date of the
Buyer’s Continuation of Inspection Notice should be completed at “R”.
Box 1 should be checked if the Seller is willing to satisfy all items objected to by
Buyer on the Continuation of Inspection Notice.
Box 2 should be checked if Seller elects to satisfy only some (but not all) of the items
objected to by Buyer, and/or elects to provide the Buyer with a monetary adjustment
at the Closing. In such case, the lines at “S” should list each specific item which
Seller is willing to satisfy prior to Closing. If applicable, check the box at Line 25
and insert the amount of the adjustment Seller is willing to provide at “T”.
In lieu of agreeing to perform any repairs (or if Buyer only sought a monetary
adjustment to begin with) a Seller may elect to provide the Buyer a monetary
adjustment only. If so, only check the box at Line 25 and insert the acceptable
amount of the adjustment at “T”. If the amount inserted by Seller at “T” is the same
amount requested by Buyer in Lines 9-12, then the contingency is resolved.
Otherwise, the negotiation process may continue as further described below. Note:
A monetary adjustment may affect the terms of Buyer’s loan.
Box 3 should be checked if the Seller does not agree to satisfy any items Buyer
objected to, and/or does not agree to a monetary adjustment at Closing.
U-V
Obtain the signature(s) of the Seller(s) (at “U”) and the date(s) thereof (at “V”)
before returning the Seller’s Response to Continuation of Inspection Notice to Buyer.
41
Part E
This part of the Continuation form generally follows the same protocol as Part C of
the Inspection Notice. Part E should be completed by a Buyer following receipt of
the Seller’s Response to Continuation of Inspection Notice (if Part D2 thereof was
checked). The date of the Seller’s Response should be inserted at “W”.
Box 1 should be checked if the Seller’s Response under Option D2 is acceptable (in
which case the contingency is resolved).
Box 2 should be checked if Buyer does not accept the Seller’s Response proposal.
Box 3 should be checked if Buyer is willing to accept Seller’s refusal to make any
repairs or monetary adjustments that were requested by Buyer in the Continuation of
Inspection Notice (in which case the contingency is resolved without satisfaction of
Buyer’s request).
X
Obtain the Buyer(s) signature(s) and the date(s) thereof (at “X”) before returning the
Buyer’s Reply to the Seller.
Part F
If the parties still do not reach a written agreement within 3 days (or such other time
as was inserted at Section 7 in the Contract) after the Initial Response Period as to
who will complete and pay for correction of the defects Buyer objected to, or upon a
monetary adjustment at Closing in lieu thereof, then the Contract will automatically
terminate. Either party may avoid this result (even after earlier negotiation failed to
produce an agreement) if (i) Seller agrees to timely satisfy all items originally
objected to by the Buyer; or (ii) Buyer agrees to accept the Property without
satisfaction of any items it originally objected to. In such case, the Seller or Buyer
(as the case may be) should check the applicable box above its name, affix its
signature(s) and the date(s) thereof (at “Y” or “Z” as applicable), and return the form
to the other party before expiration of the 3 day (or other specified) time period.
Note: If a Buyer rejects a proposal made in a Seller’s Response, Buyer cannot
thereafter force a Seller to make any such repairs which Seller was previously willing
to perform. All objections originally made by a Buyer must be waived in order to
take advantage of this “agreement by capitulation.”
42
VII.
DISCLOSURE OF INFORMATION REGARDING METHAMPHETAMINE /
CONTROLLED SUBSTANCES (DSC-5000)
This form was developed in response to SB 89 & 37, which became Missouri law
effective August 28, 2001 (the “Act”). The Act repealed five existing statutory sections and
enacted 13 new sections covering a broad variety of topics, from school district discipline policy
and procedures to criminal liability involving the sale, manufacture or possession of
methamphetamine and its precursor products and other controlled substances. In pertinent part,
the Act requires a Seller (§442.606 RSMo.) or a Landlord (§441.236 RSMo.) with prior
knowledge of production of methamphetamine on the Property, or that the Property was the
residence, storage site or laboratory of a person convicted of certain crimes involving the
possession or production of methamphetamine or other derivative controlled substances, to
disclose such facts in writing to the Buyer/Tenant. Form DSC-5000 is designed for use in both
sale and lease transactions, whether residential, farm, vacant land or commercial property.
The Act does not prescribe when the disclosure must be made (presumably no later than
the signing of the Contract or lease) or any specific civil ramifications for failure to make any
required disclosure. In addition to potential criminal liability, failure to disclose presumably
would allow a Buyer/Tenant to terminate, and possibly rescind (i.e., after the fact), a
Contract/lease. REALTORS are encouraged to cause any required disclosure to be made as soon
as possible in the marketing process, and to have the Buyer/Tenant sign-off to indicate its receipt
of the disclosure form immediately. The implications and consequences of the Act should
become more clear over time. The particulars of DSC-5000 are discussed below.
A.
Complete the Reference (identification) line in a manner consistent with the applicable
Contract or lease (if any).
B.
Insert the address of the subject Property.
2-4
The form provides that disclosure is not intended to be a warranty of any kind and is not
a substitute for any inspection or warranty that may be desired. Many of the regulated
substances pose serious health hazards. The Inspection Period set forth in the Contract
should still apply, but whether any recourse is available to a tenant who signs a lease
after the disclosure form is provided remains unclear.
8-18
The Act requires a Seller/Landlord to disclose in writing to the Buyer/Tenant that the
subject Property was used as a site for methamphetamine production, provided that the
Seller/Landlord has knowledge of such. In such case, Box 1 should be checked. The
Act also requires the Seller/Landlord to disclose “any prior knowledge” of such
production, regardless of whether the person(s) involved in the production was
convicted for such production.
Box 2 should be completed, to the fullest extent possible, to explain the source, nature
and scope of any knowledge which the Seller/Landlord may have regarding such
matters. Accordingly, if Box 1 is checked, Box 2 should also be checked and
completed, to the fullest extent possible, in order to provide the most protection against
liability, regardless of how limited the knowledge available to the Seller/Landlord may
be.
43
19-31
The Act also requires written disclosure if the subject Property was (a) the storage site
or laboratory (if so, check the second box below Box 3) for any substance for which a
person was convicted of any of the crimes listed in subparts (1)-(5); or (b) the residence
of a person convicted of any such crime (i.e., regardless of whether the Property was the
site of production), in which case, check the first box below Box 3.
Note: Various statutory provisions and defined terms are cross-referenced in the list of
crimes specified at subparts (1)-(5). Despite the use of terms such as “controlled
substances” and “drug paraphernalia,” it appears that the scope of the Act is limited to
such items which are used in connection with the possession and/or production of
methamphetamine, amphetamine and their analogues and precursor products.
32-34
The form specifically authorizes Brokers to distribute it to potential Buyers/Tenants. It
also contains an acknowledgment that the information set forth therein is true and
accurate to the best knowledge of the Seller/Landlord.
C.
Obtain the signature and fill in the date on which the Seller/Landlord signed the
disclosure form.
37-39
Buyers/Tenants are admonished to have the Property inspected should they so desire.
The form is designed to acknowledge a Buyer’s/Tenant’s receipt of, and having read,
the methamphetamine disclosure statement.
D.
Obtain the signature and fill in the date on which the Buyer/Tenant signed the disclosure
form to acknowledge its receipt.
44
VIII.
SELLER’S AGENCY LISTING CONTRACT (EXCLUSIVE RIGHT TO SELL)
(RES-1010)
RES-1010, referred to herein as the “Listing Contract”, is the most commonly used of all
MR listing contract forms. The following sets forth basic instructions on how to complete the
Listing Contract. Letters listed below correspond to the portion of the Listing Contract so
indicated on the attached form. Numbers set forth below correspond to line numbers of the
Listing Contract. Other MR form listing agreements are substantially similar (but not identical).
Note: As a general matter, a listing agreement can be legally extended between a
consenting property owner and listing broker without executing a separate new Listing Contract.
MR form MSC-1030 (“Listing Contract Change of Status”) may be used for this purpose (as
well as to change the listed price or any other terms of a Listing Contract). In certain situations,
it may be appropriate for a relocation company (or other authorized agent) to send in a Change of
Status form. §339.151 RSMo. was enacted to prevent a licensee from paying a commission or
other valuable consideration to another “unless reasonable cause for payment exists”.
Reasonable cause specifically does not exist unless the party seeking the compensation or
valuable consideration (e.g., a relocation company) “actually introduces the business” to the
licensee before an agency agreement is established. Still, once an existing listing agreement
expires (assuming a “ready, willing and able” buyer has not been procured), the Seller/Owner is
generally free to list the subject Property with a different broker. In such a case, a relocation
company is arguably not counseling or inducing an existing client on how to “terminate or
amend” an existing listing agreement, but rather is negotiating conditions upon which a “new”
listing agreement may be entered into.
Pursuant to 20 CSR 2250-8.090(4)(C), “Any change to the listing agreement or other
written agreement for brokerage services must contain the initials of all parties”. This applies to
an extension of a listing agreement as well. Accordingly, if a Listing Contract Change of Status
is signed and mailed in directly by a relocation company, the Broker should obtain for its files a
copy of the assignment of rights, power of attorney or other such legally binding document,
signed by the actual true owner of the subject Property, which authorizes the relocation company
(or other agent) to so act on the Owner’s/Seller’s behalf. According to a 2007 MREC newsletter,
the MREC will recognize as valid changes made to a brokerage agreement via email, provided
that both owner and broker expressly agreed to such in the original brokerage agreement and the
owner’s/buyer’s email address is specified. Changes to this effect were implemented into the
MR forms beginning in 2008, and expanded in 2010 to cover all electronic forms of signatures
deemed valid under the Missouri Uniform Electronic Transactions Act.
PAGE 1
A.
A blank “Reference” line is included at the top of all MR forms. This is for
identification purposes, for ease of reference and in case pages become separated. If
used, it should be completed in a consistent manner on all MR form documents used
in any given transaction, for instance, by inserting the name(s) of all persons
constituting the Owner and/or the address of the subject Property (e.g., “123 Main
Street, Your Town, Missouri, Zip”). Signature is not required.
B.
Identify all persons and/or entities actually holding an ownership interest in the
subject Property (i.e., “Owner”) at “B” (whether one or more), using their full and
complete legal names. They should match exactly the names which are set forth at
“P” (See discussion below).
C.
Identify the brokerage company (“REALTOR®”) intended to serve as the listing
45
agent for Owner (which in the case of RES-1010 is specified to be the sole and
exclusive agent, with exclusive right to sell) at “C”.
D.
A separate line is dedicated to identify and fill in (at “D”) the street address and
relevant Property location information. Since no space is available to directly insert a
legal description, a “check the box” option is provided to confirm if a legal description
is separately physically attached to the Listing Contract (which is preferable to initiate
title work and reduce uncertainty). The italicized admonishment (at Lines 7-9)
conforms with the terms of MR standard form sale contracts (e.g., RES, FRM and
LND-2000).
E.
Establish the day and month through which the Listing Contract is intended to remain
in effect at “E”. “11:59 p.m.” is specified to be the time at which the “Listing
Period” will expire.
F.
Insert the amount for which the Owner initially agrees to sell the subject Property (i.e.,
the “listing” or desired sale price) at “F”.
Note: A REALTOR should not disclose that an Owner is willing to accept less (or
that a buyer or tenant is willing to pay more) than the asking (or offered) price or lease
rate for the subject Property without the consent of the client to whom the information
pertains. See, e.g., §§339.710(9) and 339.750.4(1-2) RSMo. See also the discussion
below regarding “Disclosure Authorizations.”
G.
If there are any special or unique terms upon which the Owner will agree to sell the
Property (e.g., take-back financing, installment sales, lease-purchase option, etc.)
briefly describe them at “G” (or add and reference additional pages if necessary).
13-14
These lines specifically recite and acknowledge that the efforts and services to be
provided by the REALTOR constitute legal consideration sufficient to make the
Listing (or other brokerage services) Contract a legally enforceable agreement.
15-16
These lines set forth basic respective rights and responsibilities associated with the
exclusive agency with exclusive right to sell brokerage relationship established
between the parties.
Note: An Owner’s obligation to refer prospects to REALTOR will differ in situations
involving an “exclusive agency” only (where the Owner reserves a right to sell on his
or her own) or an “open” listing.
H.
Establish the amount which Owner agrees to pay REALTOR for “performance” of the
Listing Contract (i.e., if a ready, willing and able buyer is procured) at “H”. Such
compensation should be specified by either indicating a percentage of the actual sale
price received for the subject Property, or alternatively a specific dollar amount.
Note: If REALTOR’s compensation due is specified as a percentage of the sale price,
the amount of such “commission” will vary depending on the actual final sale price.
I.
Establish the length of any “Protection Period” following termination of the Listing
Period. Sales to prospects introduced to the Property (regardless of by whom
introduced) during the Listing Period may entitle REALTOR to receive the specified
compensation/commission (see discussion of possible exception below).
46
21-27
In order to qualify for possible “Protection Period” coverage as discussed above, a
REALTOR must provide the Owner with a written list the of prospects it procured, on
or before termination of the Listing Contract. Presentation of an offer to an Owner
during the Listing Period qualifies as and constitutes such a notice. An exception to
“Protection Period” coverage (for the RES, FRM and LND listing forms, but not for
COM form listing agreements) is if the Owner enters into a new valid exclusive listing
contract during the Protection Period with another licensed broker, and the Owner
pays the new listing broker a commission at the time the sale is consummated. An
Owner is not required to pay REALTOR any further compensation in that
circumstance.
Note: This approach is based on the rationale that (at least in residential and farm and
vacant land transactions) it is generally better for all REALTORS, as a group, to keep
properties listed and facilitate actual sales, rather than (as was prior practice in certain
areas) require Owners to “sit still” for the duration of the specified “Protection Period”
before further marketing a Property.
As a practical matter, usually more than just an initial introduction to a property will
be necessary to establish “procuring cause”. It should not be expected that simply
viewing a website or pulling listing information from the MLS during the period of a
listing will serve to automatically vest “procuring cause” status (even if that might be
considered as one factor). In this regard, the nature, status and terms of any brokerage
service agreements; who introduced Buyer to the property; and of course, the conduct
of all parties are all factors, but so are (among other things) the initial contact with the
purchasers and the conduct of the brokers. In sum, there is no one factor that will
provide a predetermined rule of entitlement. Rather, the entire course of events must
be considered in any procuring cause dispute between REALTORS®. The NAR
Code of Ethics and Arbitration Manual explains all the factors to be considered when
seeking to determine the originating cause of “the uninterrupted series of causal
events which results in the successful transaction”. As a general matter, if a broker
can demonstrate that a sale was truly the result of that broker's efforts (as the result of
a “direct and proximate link”, as distinguished from one that is indirect and remote,
such as a bare introduction) and that there was no “abandonment” or break in the
chain of events because of a “legitimate” reason (e.g., due to real changed
circumstances of the sellers or buyers, as opposed to a conspiracy to exclude the true
procuring cause) there may be grounds to make a claim of procuring cause (although
there is no magic or bright line test as to where the line can be drawn in all cases).
An exchange, option or other transfer of the Property is specifically included as a
qualifying transaction.
28-33
J
In addition to a percentage commission, the Listing Contract allows for a REALTOR
to receive a separate “flat fee” component of compensation. This separate fee may
(by checking the applicable box at Lines 31 or 32) be due and payable either as of the
Effective Date (“up front”), or only if and at the same time as the other compensation
is due under the Listing Contract. The amount of any separate flat fee should be
specified at “J”. If REALTOR does not require or intend to collect a separate flat fee,
fill in “0”, “zero”, or “N/A” at Line 29 and check the “not applicable” box at Line 33.
34-47
The “Broker Cooperation and Shared Compensation Policy” provisions are
47
designed to comply with NAR Standard of Practice 1-12.
Set forth at “K” either a specific dollar amount or a percentage of the sale price (not a
percentage of the listing commission rate) to indicate the amount of compensation to
be offered by the listing REALTOR to cooperating licensees. By doing so, the
REALTOR is simultaneously indicating all applicable forms of cooperative
relationships which REALTOR’s company policy allows with other agents and
brokers. Pursuant to MREC regulations, all listing and buyer/tenant agency
agreements must contain (among other things) “A statement which permits or
prohibits the designated broker from offering subagency.”
20 CSR 22508.090(4)(A)6 and (5)(A)6. Likewise, all such agency agreements, as well as all
transaction brokerage agreements, must specify “whether or not the designated broker
is authorized to cooperate with and compensate all other designated brokers acting
pursuant to any other brokerage relationship as defined by 399.710 to 339.860
RSMo.” 20 CSR 2250-8.090 (4)(A)9; (5)(A)9; (6)(A)10; and (7)(A)9. This portion of
the form is designed to satisfy these requirements and should always be appropriately
completed.
Note: By inserting “zero”, a REALTOR indicates that although its company policy
does authorize such cooperation, it simply is not willing to offer compensation to the
“cooperating” broker. Per the italicized parenthetical at Lines 37-38, “N/A” or “not
applicable” should be inserted (in the blanks at Lines 45-47) to indicate such
cooperation with other brokers is not authorized (whether by reason of company
policy or otherwise).
48
The box at Line 48 should be checked if REALTOR’s offer of compensation specified
above is not available to brokers other than those which belong to the same MLS. The
phrase “participants in the Multiple Listing Service in which REALTOR is a
participant (“MLS”)” is used (instead of “members of REALTOR’s local Board of
REALTORS”) because in certain parts of the State multiple boards participate in the
same MLS. A unilateral offer of compensation to other MLS participants is generally
created when a property is listed on a MLS. Accordingly, participation in a MLS is
likely the more typical and common basis upon which a REALTOR’s company policy
differs as to such matters.
49-50
L
This box is to be checked if further limitations of a REALTOR’s company policy
regarding compensation and cooperation need to be separately described. If a
REALTOR’s company policy excludes specific brokers (whether or not they are
members of REALTOR’s local MLS), or its policy of cooperating with and
compensating other brokers is otherwise limited, then the blank at “L” should be used
to explain such situations (additional pages can be added if needed). The actual
company policy of REALTOR should always be accurately explained in this regard.
51-57
The “Disclosure Authorizations” sections are designed to address possible permitted
disclosures of an Owner’s motivating factors to sell or the existence of other offers on
the Property. A separate subpart is provided to demonstrate Owner’s permission for a
REALTOR to disclose actual terms of an offer. Again, additional pages can (and
should) be added if necessary to identify specific terms or motivating factors to be
disclosed.
52-53
The “Motivating Factors” subpart, consistent with Standard of Practice 1-15 of the
48
NAR Code of Ethics and §339.750 RSMo., allows for disclosure of “motivating
factors” of a client in buying, selling or leasing property, provided that the client
consents to such disclosure. This section is intended to allow a means by which to
document specific matters which a client authorizes a REALTOR to disclose (e.g.,
motivating factors, such as a divorce or loss of job) or other information that may be
“confidential”). See, e.g., §§339.710(9); 339.730.2; 339.740.2; and 339.750.4 RSMo.
If such disclosure is authorized, check the “DOES” box at Line 52 and provide
explanatory details in the blanks at “M”. If no such disclosure is authorized, check
the “DOES NOT” box and leave “M” blank.
54
The “Offers” subpart implements NAR Standard of Practice 1-15. Check the
applicable box at Line 54, as agreed upon between Owner and REALTOR at the time
the Listing Contract is entered into. Any change in Owner’s willingness to disclose
such matters during the Listing Period should be separately documented in writing or
by an amendment of the Listing Contract.
55-57
As mentioned above, the RES, FRM and LND form listing agreements allow an
Owner to authorize a REALTOR to disclose certain terms of offers made on a
Property. The Listing Contract also provides that a REALTOR may disclose such
terms as are required by applicable MLS requirements (e.g., designation of a Property
as “under contract” or “subject to 72-hour kick-out clause”), applicable brokerage law
or the NAR Code of Ethics and Standards of Practice. A REALTOR should not
confuse this permission to mean that it allows for disclosure of protected confidential
information (without the client’s consent). A REALTOR should carefully consider
any additional information which it may desire to disclose or advertise in this regard.
Note: If during a Listing Period the parties decide to change any term(s) of their
original listing/agency/brokerage agreement, then the parties should execute an
amendment by which to document their mutual agreement and understanding with
respect to such changes. (See further discussion above regarding MR form MSC1030 – Listing Contract Change of Status).
58-60
The “Current Exclusive Representation Agreement” section implements Standard
of Practice 16-13 of the NAR Code of Ethics, as well as MREC regulations, regarding
the ability of a licensee to negotiate or enter into brokerage service agreements if the
Owner/client is already subject to an exclusive agency agreement with another broker.
See, e.g., 20 CSR 2250-8.090(4)(E) and discussion of General Condition 15 below. If
an Owner (client) entering into a Listing Contract (agency/relationship agreement) is
currently a party to another exclusive representation agreement regarding the sale of
the subject Property, then specify the date that agreement ends at “N”.
Note: REALTORS should make sure that the expiration date of any existing
exclusive representation agreement precedes the “Effective Date” of the new Listing
Contract. If there is no existing exclusive relationship agreement for the sale of the
subject Property, then check the “IS NOT” box at Line 58 and leave “N” blank. Only
a pending exclusive listing contract for the sale of the subject Property will constitute
a conflict to entering into the subject Listing Contract. In other words, if an Owner is
subject to an exclusive buyer’s agency agreement with another broker (e.g., to find a
replacement home), that would not prevent the parties from entering into the Listing
Contract to sell the listed Property. See further discussion on this topic at General
Condition 16 discussed below.
49
PAGE 2
Section 1 (“Owner Disclosures”) of the “General Conditions” contains 4
General
Conditions different subparts. Each generally pertains to required or optional information to
be provided, and disclosures to be made, regarding the Property. Subpart A
Subpart A specifically includes an Owner’s approval of all information set forth in the
Property Data Form (which should be attached, if any, See MSC-1020).
Check the appropriate box (i.e., “DOES” or “DOES NOT”) to indicate if the
Owner will complete and provide a form Disclosure Statement. If so, Owner
further authorizes REALTOR to share all such information with prospects, as well
as inspectors, appraisers and prospective lenders and insurance companies;
confirms the accuracy of all such information to its best knowledge; and agrees to
promptly provide updates as to any future contrary information or change in
circumstance. Lines 73-74 obligates Owner to furnish all inspection reports about
the Property, and authorizes REALTOR to provide them to prospects.
Subpart B
Effective November 1, 2010, Missouri adopted sweeping changes to its mechanic’s
lien law. See § 429.016 RSMo. Subpart B sets forth language notifying Owner
that the requirements of § 429.016 RSMo. may affect the ability to deliver “clear”
title at closing (or more specifically, of a buyer to get mechanic’s lien coverage
under a title insurance policy, as is required by RES-2000 and other MR standard
form sale contracts). Additional information regarding these requirements are
available on the MR website (which primarily effect new construction and
investment properties), but REALTORS should advise their clients to consult with
legal counsel to answer any questions regarding these new requirements.
Note: Effective August 28, 2009, HB 103 (codified at §67.281 RSMo.) became
law. This new statute requires “A builder of single family dwellings or residences
or multi-unit dwellings of four or fewer units …” (a “Builder”) to offer to a
purchaser the option to install or equip, at the purchaser’s cost, a fire sprinkler
system. This must be done on or before entering into a contract and should be
done in connection with all sales by a “Builder” (presumably even if the
improvements have already been built, as the statute does not provide an
exemption based on stage of construction). Although MR does not currently
sponsor any new construction sale contract forms, and this law is not directly
applicable to licensed real estate brokers, it certainly behooves a REALTOR to
advise its clients/Builders of the requirements of HB 103, and to ensure that such
disclosure/mandatory option has been provided to a subject buyer on or before
entering into a purchase contract. Further note that this law (by its original terms)
was set to expire on December 31, 2011, but it was extended to December 31,
2019.
Subpart C Subpart C references the Lead-Based Paint Disclosure form, a specific
disclosure that might be required under federal law (and preferably should be
attached). DSC-2000 (for sale contracts) and/or DSC-3000 (for leases) may be
used for this purpose.
Subpart D At Subpart D “Representations” Owner confirms that it knows of no (other than
as may have been disclosed) proposed special assessments, adverse material facts
50
or non-working conditions about the Property. It is not intended to be a warranty
per se, but rather only to set forth truthful statements as to the Owner’s knowledge
and opinions. Any required repairs are to be dealt with in the Contract or
separately in writing.
The last two sentences were added in 2009 to remind the Owner of its obligation to
advise REALTOR if there is a likelihood the transaction will result in a “short
sale.” In such cases, MSC-1025 (Short Sale Supplement to Listing Contract)
should be used. MSC-1026 (Authorization to Release Information) should also
be used (and signed by all Owners) if the Owners agree to authorize a lender to
disclose and discuss confidential account information regarding loan status and
related financial information to a REALTOR and its agents, and any title company
or escrow agent who may participate in the closing of the sale.
Subpart E
Subpart E “Indemnity” essentially states that Owner (and not REALTOR) is
responsible for all claims that may be made with respect to any errors or omissions
regarding information provided or omitted by Owner. Owner is to hold
REALTOR (and all cooperating brokers and their respective licensees and
employees) harmless from any claims, damage or loss arising in connection
therewith.
General
Condition
2
General Condition 2 sets forth what is required of an Owner regarding evidence
of title to the Property and delivery of a deed thereto. The Owner agrees to provide
any available survey.
General
Condition
3
At General Condition 3 Owner acknowledges that it will pay all taxes and
assessments (general and special) which are a lien on the Property (except those
which are to be prorated as of the closing).
General
Condition
4
General Condition 4 pertains to any earnest money that may be received. The
first sentence authorizes REALTOR to accept and hold any earnest money
received in an escrow account, but also acknowledges that a contract accepted by
Owner may specify different terms as to how Earnest Money is to be held or
applied. The second sentence makes clear, however, that Owner’s agreement, to
split (with REALTOR) any earnest money which is forfeited as liquidated damages
(if applicable), can only be changed by a subsequent written agreement which
specifically mentions and amends General Condition 4. Thus, a subsequent
accepted sale contract, which simply states that a buyer’s earnest money is to be
forfeited to a seller as liquidated damages, should not serve to defeat REALTOR’s
right to claim 1/2 of any such amount pursuant to a signed Listing Contract. See
discussion of Section 8 of the Contract for further analysis on this point.
Note: If a REALTOR does not require or desire the right to split forfeited earnest
money with an Owner as aforesaid, then all but the first sentence of General
Condition 4 should be deleted from the Listing Contract.
General
Condition
5
General Condition 5 discusses MLS participation, cooperation with other brokers
and ‘lock boxes’. It permits a REALTOR to disseminate relevant information to,
among others, any Association or Board of REALTORS both prior to and after a
closing. It also specifically allows for the use of a lock box and includes a separate
indemnity by Owner regarding any claim that might arise as a result of their use.
Owner authorizes REALTOR to cooperate with other brokers in accordance with
51
REALTOR’s company policy (as further discussed regarding Lines 40-50 above).
Note: If during the course of a listing, REALTOR’s company policy regarding
cooperation with and compensation of other brokers is modified or amended in
some fashion, then REALTOR should obtain the informed consent of all property
owners with whom it has entered into listing agreements regarding any such
modification or amendment of REALTOR’s company policy which affects the
original relationship entered into between them.
PAGE 3
Pursuant to General Condition 6, the listing REALTOR is authorized to remove all
General
Condition other signs and to advertise the Property “in any manner deemed wise by
REALTOR”, including without limitation by way of virtual tours, web-sites and
6
communication via email and facsimile.
Note: Effective July 1, 2009, MR made available a new form (MSC-1021 Internet
Opt-out Supplement to Listing Contract). It is designed to facilitate the new
NAR model Virtual Office Website (“VOW”) Policy, Rules and Bylaws required to
be adopted in connection with a settlement with the U.S. Department of Justice
regarding certain MLS procedures and policies. Simply put, an Owner may
affirmatively elect to not allow its Property (and/or the address thereof) to be
advertised or displayed on the Internet. MSC-1021 should be completed for any
listing where the Owner has made such an election (and to evidence the same).
Otherwise, advertising on the Internet is specifically permitted by General
Condition 6.
General Condition 7 makes clear that (a) showings of the Property to prospects
General
Condition and (b) inspections (including but not limited to photographs or videotapes of the
interior and exterior of the Property) may occur upon reasonable notice to Owner
7
and at all reasonable times, and that opinions resulting from such inspections may
be disclosed. Specific language makes it the responsibility of Owner to secure and
insure all valuables, and to assume the risk of potential loss thereof.
Beginning in 2014, it also provides, consistent with the “walk-through” provisions
of Section 17 of RES-2000 (and other MR standard form sale contracts) that Owner
will arrange to have the utilities turned on during the same and any inspections, but
if the Property is then vacant, the utilities may be transferred to a buyer under
contract within (by default if not otherwise specified) 4 days prior to closing.
General Condition 8, as its caption suggests, sets forth Owner’s awareness of and
General
intention
(if any) to offer a warranty plan as part of a sale. It also acknowledges
Condition
that REALTOR may receive a separate fee from the warranty company if one is
8
provided. Separate appropriate disclosure should be made if in fact such a fee will
be received. Beginning in 2014, a new “Home Warranty” form (MSC-2025) is
available to confirm whether a buyer or seller has agreed to purchase a home
warranty plan (and the particulars thereof) or if such has been waived by a buyer.
General Condition 9 expands upon the general admonishment found beneath the
General
Condition caption on page 1 of all MR forms. It specifically disavows that REALTOR is
making any representation or warranty regarding any legal, tax or other specialized
9
matters mentioned therein. Consistent with the terms and conditions of the
52
Missouri statutes, it also provides that while REALTOR agrees to cooperate with all
experts, they are to be “selected and engaged” by Owner, and that REALTOR is to
have no liability with respect to such matters. Of course, REALTORS must still
make sure to actually conduct their involvement and activities appropriately in this
regard. For further information on this topic, see the discussion of Section 7 of
RES-2000 at Article I of this Manual.
This language was added, beginning in 2014, to allow for the possibility that
General
Condition REALTOR may recover (in addition to any other rights or remedies) the costs of
litigation, including reasonable attorney fees, if it becomes necessary for
10
REALTOR to sue for enforcement of its rights following a breach by Owner.
Although courts are generally hesitant to require a party to pay for the litigation
costs and attorney’s fees incurred by another, absent contractual language providing
for such, there is no real prospect to begin with. At a minimum, this should at least
help serve to encourage resolution of any disputes short of litigation.
General Condition 11 is based on the same language contained in Section 26 of
General
Condition RES-2000 and other MR form contracts. It incorporates a “check the box”
provision to indicate if such “Franchise Disclosure” (that the Franchisor is not
11
legally liable for the actions of REALTOR) is applicable to the subject REALTOR
(if so, it is specifically required to be included in all “listing agreements,” See 20
CSR 2250-8.080(2)).
General Condition 12, “Equal Opportunity” sets forth the general admonishment
General
Condition that the Property will be offered for sale in accordance with all applicable fair
housing laws, and on an equal opportunity basis with respect to each of the
12
protected classes set forth in Article 10 of the NAR Code of Ethics.
PAGE 3-4
The “Owner Consent to Brokerage Relationships” section is designed to comply
General
Condition with applicable MREC regulations. In particular, it is designed to identify the types
of brokerage relationships that are offered by a REALTOR’s company policy, and
13
to evidence an Owner’s consent (or refusal) to convert to a different brokerage
relationship in certain situations (e.g., for “in-house” sales transactions and to
designated agency or designated transaction brokerage where permitted and
consented to).
EACH SUBSECTION MUST BE COMPLETED. Three boxes are made
available to choose from in this regard, with respect to each potential brokerage
relationship: “Yes” or “No” (to indicate Owner’s consent or refusal) and “Not
applicable” (if the type of brokerage relationship described is not offered by
REALTOR’s company policy). This format was adopted in response to MREC
indicated preference (effective October 31, 2009). Disclosure of a conversion to a
different brokerage relationship must still be made upon the occurrence thereof
where required by applicable law or MREC regulation.
PAGE 4
General
General Condition 14 was added in light of §§ 339.710 and 339.780 RSMo.,
53
Condition which requires brokers to provide specified “Minimum Brokerage Services” in
connection with any “exclusive brokerage agreement” (meaning any agreement
14
which provides that a broker has the sole right to act as the “exclusive limited agent,
representative, or transaction broker of the client”).
General Condition 15 specifically allows for execution of the Listing Contract in
General
Condition multiple counterparts (i.e., allows Owner to sign one counterpart and REALTOR to
separately execute another counterpart). Both counterparts must, of course, be
15
identical. This language is designed to accommodate situations where, due to travel
schedules, location of the parties, timing or whatever other reason, all parties are
unable to execute the same original. Nevertheless, it is still preferred practice to
have each party sign the same actual Listing Contract form which is signed by the
other. At the request of a party, the other party agrees to sign a conformed original.
Facsimiles and scanned images of a signature to the Listing Contract, such as a pdf
sent via email, as well as any other electronic form deemed valid in accordance with
the Missouri Uniform Electronic Transactions Act, are to be treated as an original
signature and document. As noted in the introduction to this Article, the last
sentence also specifically sets forth the parties agreement that changes to the Listing
Contract may be made via email.
Note: If changes via email are not approved, insert “N/A” or “Not Allowed” at the
email address lines in the signature blocks (Lines 252, 258 and 264). If either party
does not intend to allow for the execution and transmittal of the original Listing
Contract via electronic means, the second and third sentences of General Condition
15 should be deleted.
General Condition 16 establishes the date on which the Listing Contract is to
General
Condition become effective (i.e., the date of the last party to sign it, unless specified
otherwise). This “Effective Date” is also the date on which REALTOR becomes
16
authorized to act as the (sole and exclusive per RES-1010) agent for the Owner with
respect to the advertising and showing of the subject Property for sale. See, 20 CSR
2250-8.090(1-2).
Note: A REALTOR must not negotiate or enter into a brokerage service agreement
with an Owner if the REALTOR knows or has reason to know that the prospective
client (Owner) has a written unexpired exclusive brokerage service agreement with
respect to the same property with another broker, unless the Owner (or buyer or
tenant) initiates the discussion unsolicited by the REALTOR. In such a case a
REALTOR may negotiate and enter into an agreement which will take effect after
the expiration of the current exclusive agreement. See, 20 CSR 2250-8.090(4)E and
5(E), and subparts 6(E) and 7(E) regarding transaction brokerage agreements. See
also Article 16 of the NAR Code of Ethics and the Standards of Practice thereunder,
and the discussion of Lines 58-60 of the Listing Contract.
Space is provided at General Condition 17 to allow the parties flexibility to
General
Condition negotiate and agree upon special terms and/or minor changes to the Listing
Contract. Additional page(s) can be incorporated by reference (e.g., “See Exhibit A
17
attached hereto and incorporated by reference as if fully set forth herein”). As
discussed elsewhere throughout this Manual, all parties are encouraged to avoid
excessive use of (or “abusing”) this tool for purposes other than very limited
applications such as set forth herein. Although there may be some more “wiggle
54
room” and latitude for a broker to draft “Special Agreements” in situations where
the Broker is a direct party to the agreement (such as the Listing Contract), this will
in great part depend upon the nature of the changes being made. In any event, when
clients desire customized terms, or results which differ from that provided (or
allowed for) by the pre-printed terms of the Listing Contract, they should be advised
to consult with their own attorney for legal advice. REALTORS otherwise expose
themselves to the possibility of being charged with engaging in the unauthorized
practice of law.
246-249
The first sentence acknowledges that by its signature (at “P”) Owner has accepted
the Listing Contract and received a copy of it. The second sentence acknowledges
Owner’s receipt of the required MREC Broker Disclosure Form. REALTORS are
reminded of their obligation to provide, at the earliest practicable opportunity
during or following the first substantial contact with a seller or landlord (or buyer or
tenant) who has not entered into a written brokerage relationship agreement for
services in a residential real estate transaction, a written copy of the current broker
disclosure form prescribed by the MREC. See, §339.770 RSMo.
O
In the first line, print the name of the actual listing brokerage company, followed by
the signature, printed name, email address (if authorized pursuant to Lines 227-229)
title of the individual broker/agent authorized to enter into the Listing Contract on
its behalf, and the date on which it is signed.
P
Obtain the signature of all persons comprising the “Owner” in the first line at “P”,
followed by the printed name, email address (if authorized pursuant to lines 227229) and date of signature of each such Owner.
Note: A licensee must not advertise (i.e., place a sign upon) for sale or lease (or
show) a property to prospective customers without the written consent of the Owner
or his or her (or their) duly authorized agent. See, 20 CSR 2250-8.090(1-2).
Q
259-267
Insert the Owner’s current address (for mailing purposes) at “Q”.
This section allows (where appropriate) a REALTOR to designate, at the time the
Listing Contract is first signed (at “R”), one or more of its affiliated licensees to
serve as designated agent(s) for the client from the outset. Any such designation is
to be signed and dated (at “S”) by the REALTOR’s designated broker, or office
manager or supervising broker that has been authorized for such purposes. MR
forms DSC-7000 and DSC-7010 (as the case may be) may also be separately (or
subsequently) used for such purposes.
PAGE 5-6
Pages 5 and 6 of RES-1010 (and other MR form listing and brokerage relationship
agreements) set forth the applicable statutory duties and obligations of limited
agents, dual agents and transaction brokers, as established pursuant to the referenced
Missouri laws. See also the “Owner Consent to Brokerage Relationships” section
discussed above (General Condition 13).
55
IX.
AUTHORIZATION TO SHOW PROPERTY (MSC-1100)
This form is intended for use in those situations where a REALTOR desires to show a
property (for sale or lease), but does not have a written agency or transaction brokerage
agreement in place with the owner/landlord. 20 CSR 2250-8.090. Contrary to the form listing
agreements, it does not create an agency relationship between the Owner and REALTOR. Any
such “other written authorization” agreement must contain all of the information set forth at
subpart (8) of the cited regulation. The particulars of MSC-1100 are discussed below.
PAGE 1
A
A blank “Reference” line is included at the top of all MR forms. This is for
identification purposes and ease of reference in case pages become separated. If
used, it should be completed in a consistent manner on all MR form documents
used in any given transaction [e.g., by inserting the name(s) of all persons
constituting the “Owner” (or the duly authorized agent of the Owner) of the
subject Property, or its address].
Instructions
Note that the second sentence specifically provides that “This form does not
contemplate cooperation with other brokers.” As a practical matter, that is
because in most situations, the Authorization to Show form is utilized when a
property owner is only willing to entertain the possibility of a deal with a prospect
on a “one-time” basis. Further, contrary to the agency and transaction brokerage
agreements discussed in Article VIII, 20 CSR 2250-8.090(8) does not specifically
require an “other written authorization” agreement to include a statement as to
whether the designated broker permits or prohibits offering subagency, or is
authorized to cooperate with and compensate others acting pursuant to any other
brokerage relationship. Accordingly, if in fact a REALTOR using MSC-1100
intends to cooperate with or compensate other brokers, the second sentence of the
Instructions should be deleted and appropriate information should be added to
explain what is intended in this regard.
The Authorization to Show Property form (“Authorization”) is not limited to a
specific prospect(s) identified therein (although such an arrangement would
certainly be permissible). If that is what the parties desire, appropriate
explanation and revision should be made to express such an understanding.
MSC-1100 takes the approach that the names of all prospects will be provided to
the Owner after the Authorization is signed. As further discussed below, it
includes a “Protection Period” concept and contemplates that prospects shown the
Property during the Authorization Period are to be registered in writing with the
Owner.
1-3
B
Insert the legal description and complete street address of the Property, including
the city where it is located; or in the absence thereof, a clear description which
unmistakably identifies the Property. 20 CSR 2250-8.090(8)(D).
Note: If available, a legal description may (and should) be referenced and
separately attached as an Exhibit or addendum.
4-6
C
By default, the actual authorization to show the Property to prospects is limited to
30 days (the “Authorization Period”). There is no statutory or regulatory
56
requirement limiting the permissible length of an “Authorization Period”. While
30 days may be a common or typical length, the parties should specify (at “C”)
any different time period that is acceptable to both Owner and REALTOR.
7
A licensee is not allowed to advertise or place a sign upon any property offering it
for sale or lease to prospects “without the written consent of the owner or his or
her duly authorized agent”. 20 CSR 2250-8.090(1). Similarly, a licensee may not
show residential property absent a currently effective listing agreement or “other
written authorization signed by all owners”. 20 CSR 2250-8.090(2).
Again, while it would certainly be legal and permissible for the parties to agree to
permit media advertising or placing signs on the Property, Owners who are not
willing to generally list their property for sale or lease (but might consider a “onetime” offer, and thus, are using this Authorization) would presumably object.
Accordingly, such activities are expressly prohibited by the form Authorization.
If a REALTOR contemplates advertising in any fashion a Property that is subject
to an Authorization, then all such contemplated activities should be described and
consented to by Owner therein (and the full sentence at Line 7 should be deleted).
Any separate marketing fee that may be agreed to should also be specified.
8-9
As discussed in Article VIII of this Manual regarding the “Current Exclusive
Representation Agreement” Section of RES-1010, this language is designed to
comply with NAR Standard of Practice 16-13, which provides in part that before
providing substantive services, REALTOR shall ask prospects whether they are a
party to any exclusive representation agreement. If an Owner is subject to a
pending exclusive representation agreement with respect to the sale of the
Property, then as further discussed regarding Lines 43-44 below, a REALTOR
should make sure that its expiration date precedes the “Effective Date” of the
Authorization.
D-E
Insert the amount of the Sale Price (at “D”) and/or the Lease rental rate (at “E”)
which the Owner is willing to accept. If an Owner will only agree to sell (or
lease, as the case may be) the Property, then insert “N/A” or “Not Applicable” at
“E” (or at “D” if Owner is only willing to lease the Property).
Note: Contrary to a listing agreement, MREC regulations do not require that an
“other written authorization” specifically include the price at which a Property is
to be sold or leased. Logically, this is because in most situations where an
Authorization is used, the REALTOR holding the same is serving as a Buyer’s
agent (and/or the Owner simply has not decided on an acceptable price, or is not
willing to disclose such information “up front”). In such cases, the blanks at “D”
and/or “E” may be completed by inserting “TO BE DETERMINED” (or words to
that effect). As further discussed below, the Authorization does, however,
contemplate payment of a commission and affording Protection Period rights.
F
Fill in (at “F”) any other special terms or features that an Owner will require or
agree to in order to sell or lease (as the case may be) the Property (e.g., length or
term of a Lease, purchase option, take back financing).
13-17
G-I
A sale (or lease) to a prospect introduced to the Property by REALTOR or any of
its affiliated licensee which occurs during the Authorization Period (or the
“Protection Period”) may entitle REALTOR to payment of compensation.
57
Establish the length of any such “Protection Period” (meaning the time frame
following the Authorization Period during which REALTOR may be entitled to
compensation if Owner sells [or leases] the Property to a qualifying prospect) at
“G” (or if none is intended, insert “N/A” , “Not Applicable”, “zero” or other
words to that effect). The amount (if any) which Owner agrees to pay REALTOR
(in cash, at closing, unless specified otherwise) pursuant to the Authorization may
be specified as a specific dollar amount or by indicating a percentage of the sale
price (at “H” in the case of a sale), or if a lease by indicating a percentage of the
lease and/or option payments (at “I”). If the Authorization is intended to cover
both a sale or lease, then both H and I should be completed. If only one type of
transaction is permitted, then the other option should be marked “N/A” or “Not
Applicable”.
Note: Any compensation or commission amount specified is payable by Owner
to REALTOR only if the sale or lease is to a prospect introduced to the Property
by one of its affiliated licensees. Accordingly, the Authorization is akin to an
“open” listing in this regard and is not designed to create any right of exclusivity.
17-20
Like the MR RES, LND and FRM listing forms, despite the “Protection Period”
coverage discussed above, REALTOR is not entitled to payment if Owner lists
the Property pursuant to an exclusive right to sell or lease agency or transaction
brokerage agreement and a sale or lease occurs during the Protection Period,
provided that Owner pays the new listing broker a commission on the closing of
that sale or lease. See also the discussion of lines 19-27 of RES-1010 at
Article VIII above regarding the philosophy behind this approach.
20-22
Consistent with Section 26 of RES-2000 and General Condition 5 of RES-1010
(discussed in Articles I and VIII of this Manual) this language specifically
authorizes REALTOR to provide lease or sales data to its local board and other
professional users of real estate data. Whereas the Contract specifically provides
that such information may not be provided until after the Closing, and the Listing
Contract specifically authorizes dissemination of such information both prior to
and after any closing, the Authorization is silent as to the permitted timing of any
such disclosure.
22-25
The Authorization provides that if a transaction does not close due to the fault of
a buyer (or lessee, as the case may be), then REALTOR and Owner are to equally
split between them any “net damages” received by Owner on account thereof (not
to exceed, however, the specified amount of compensation agreed to be paid to
REALTOR as provided therein).
Note: Unlike the MR form Listing Contract (see discussion of General Condition
4 at Article VIII above), the concept of “net damages” under the Authorization is
not necessarily limited to forfeited “earnest money” (although such should qualify
as at least part of any “net damages” received). If a REALTOR enters into an
Authorization with an Owner but actually represents the buyer (or tenant), then an
Owner would presumably not agree to entitle such REALTOR to receive any
compensation which is based on a default by its client. As always, a REALTOR
should make sure that any agreement it enters into is customized if and as may be
necessary to accurately reflect the true intentions and agreement of the parties.
58
25-26
If a transaction does not close due to the fault of an Owner, the amount of any
compensation agreed to be paid to REALTOR pursuant to the Authorization is
stated to become immediately due and payable.
27-30
As stated above, the Authorization does not create an agency relationship with the
Owner, or any exclusive right in the REALTOR with respect to the Property. The
Owner is free to deal with any other brokers or other persons who have not been
introduced to the Property by REALTOR. The Authorization specifically
provides that a REALTOR may act in the capacity of a buyer’s or tenant’s agent,
or as a transaction broker.
Note: The statutory definition of a “Transaction Broker” is set forth at §339.710
(23) RSMo. It reads as follows:
(23) “Transaction broker”, any licensee acting pursuant to sections
339.710 to 339.860, who:
(a) Assists the parties to a transaction without an agency or
fiduciary relationship to either party and is, therefore, neutral,
serving neither as an advocate or advisor for either party to the
transaction;
(b) Assists one or more parties to a transaction and who has not
entered into a specific written agency agreement to represent one
or more of the parties; or
(c) Assists another party to the same transaction either solely or
through licensee affiliates. Such licensee shall be deemed to be a
transaction broker and not a dual agent, provided that, notice of
assumption of transaction broker status is provided to the buyer
and seller immediately upon such default to transaction broker
status, to be confirmed in writing prior to execution of the
contract.
Given this statutory language, it is not totally clear whether any broker who
participates in a deal where an Owner is not separately represented could avoid
being classified as a defacto “transaction broker”.
The current form
Authorization (which includes on page 2 thereof the statutory duties and
obligations of a transaction broker pursuant to §339.755 RSMo.) was specifically
approved of by the MREC in June of 2006.
31-32
REALTORS are reminded of their obligation to provide, at the earliest
practicable opportunity during or following the first substantial contact with a
seller or landlord who has not entered into a written agreement for brokerage
services in a residential real estate transaction, a written copy of the current
broker disclosure form prescribed by the MREC. See, §339.770 RSMo. This
sentence acknowledges Owner’s timely receipt of the same.
59
33-40
The “Signatures” section specifically allows for the Authorization to be executed
in multiple counterparts (i.e., allows Owner to sign one counterpart and
REALTOR to separately execute another counterpart). Both counterparts must, of
course, be identical. This language is designed to accommodate situations where,
due to travel schedules, location of the parties, timing or whatever other reason,
all parties are unable to execute the same original. Nevertheless, it is still
preferred practice to have each party sign the same actual Authorization form
which is signed by the other. At the request of a party, the other party agrees to
sign a conformed original. Facsimiles and scanned images of a signature to the
Authorization, such as a pdf sent via email, as well as any other electronic form
deemed valid in accordance with the Missouri Uniform Electronic Transactions
Act, are permitted for transmittal purposes and are to be treated as an original
signature and document. As noted in the introduction to this Article, the last
sentence also specifically sets forth the parties agreement that changes to the
Authorization may be made via email.
Note: If changes via email are not approved, insert “N/A” or “Not Allowed” at the
email address lines in the signature blocks. If either party does not intend to
allow for the execution and transmittal of the Authorization via electronic means,
the second and third sentences of the Signatures section should be deleted.
J
Limited space is provided in the “Special Agreements” section of the
Authorization (at “J”) to allow the parties flexibility to negotiate and agree upon
special or customized terms and changes to the ‘standard’ form. As discussed
elsewhere throughout this Manual, excessive use of this tool (e.g., beyond limited
applications as set forth herein) is discouraged and should be avoided.
K
By default, the “Effective Date” of the Authorization is designed to be the date of
the last party to sign it. As discussed above, if the Owner is already subject to an
exclusive brokerage services agreement regarding the sale (or lease, as the case
may be) of the Property, then specify an appropriate date in the blank line at “K”
such that the Authorization will not become effective until after expiration of the
pending exclusive agreement.
Note: A REALTOR should make sure that a completed and fully executed copy
of the Authorization is received by the Owner.
PAGE 2
L
Obtain the signature and email addresses of all persons constituting the “Owner”
and insert the date thereof at “L”.
M
At “M”, in the first line print the name of the REALTOR’s brokerage company,
followed by the signature (and preferably, printed name and title) of the
individual broker/agent authorized to enter into the Authorization on its behalf,
and the date on which it is signed.
The second page of the Authorization sets forth the statutory duties and
obligations of a transaction broker pursuant to §339.755 RSMo.
60
X.
BUYER’S EXCLUSIVE AGENCY CONTRACT (MSC-1080)
The Buyer’s Exclusive Agency Contract form (MSC-1080 or “Buyer’s Agency”)
establishes an exclusive agency relationship between a REALTOR and buyer/tenant/client
(“Buyer”). It allows for payment of an optional separate “Flat Fee” (which may be payable
either on a contingent basis or “up-front” and non-refundable) and/or a percentage commission
or specific dollar amount if the Buyer enters into a contract to acquire real estate of the type
described. Many of its provisions are similar to the MR form listing agreements. This
Article addresses issues and pertinent observations from a Buyer’s (and Buyer’s REALTOR’s)
point of view. The particulars of MSC-1080 are discussed below:
PAGE 1
A
A blank “Reference” line is included at the top of all MR forms. This is for
identification purposes, for ease of reference and in case pages become separated. If
used, to the extent possible it should be completed in a consistent manner on all MR
form documents used in any given transaction, for instance, by inserting the name(s)
of all persons and/or entities which constitute the Buyer. Signature is not required.
B
Identify all persons and/or entities who are to acquire an ownership interest in the
subject property (i.e., the “Buyer”) at “B” (whether one or more), by using their full
and complete legal names. They should match exactly the names which are set forth
at “P” (See discussion below).
C
Identify the brokerage company (“REALTOR”) which is to serve as the Buyer’s sole
and exclusive agent at “C”.
3-5
D
Pursuant to the Buyer’s Agency, a REALTOR is authorized to “advertise for, show
and procure” a variety of types of property that may be chosen from. Pursuant to 20
CSR 2250-8.090(5)(A)1, a description of the type of property sought by the buyer or
tenant must be included. A REALTOR should check each box (commercial,
residential, rental or farm) that the Buyer is interested in. If a different type of
property or particular type of interest therein is specifically being sought (e.g., cell
towers, easement rights or other property interests), the “other” box should be checked
and appropriate explanation inserted at “D”.
6-7
E
Establish the day and month through which the Buyer’s Agency is to remain in effect
at “E” (the “Agency Period”). Extension of the Agency Period can be accomplished
via a separate written amendment or by executing a new “updated” Buyer’s Agency,
but if the parties desire to change terms of an existing agreement between them, as
further discussed at General Condition 7 below, it is permissible (and probably easiest)
to do so via email.
8-9
The terms “acquire” or “acquisition,” as used in the Buyer’s Agency, specifically
includes “any purchase, option, exchange or lease of property or an agreement to do
so.” A REALTOR should always make sure that any agreement it enters into is
customized, as may be necessary, to accurately reflect the true intentions and
agreement of the parties. If, for example, the parties do not intend for REALTOR to
seek rental properties or to be paid if in fact Buyer enters into a lease, then appropriate
deletions should be made.
9-11
This sentence specifically recites and acknowledges that the efforts and services
61
provided by REALTOR constitute legal consideration sufficient to make the Buyer’s
Agency a legally enforceable agreement.
11-13
The Buyer’s Agency constitutes an exclusive representation agreement. It specifically
sets forth the obligation of a Buyer to refer all inquiries and prospects that Buyer may
receive during the Agency Period from any source.
14-16
F
As discussed in connection with the Listing Contract, the “Motivating Factors”
section is designed to comply with applicable Standards of Practice under the NAR
Code of Ethics and §339.750 RSMo. Disclosure of certain “motivating factors” of a
client in buying or leasing property is allowed, provided the client consents to such
disclosures. If such disclosure is authorized, check the “DOES” box at Line 15 and
set forth the applicable details at “F”. Additional pages can be added if necessary. If
such disclosure is not authorized, check the “DOES NOT” box and leave “F” blank.
17-19
G-I
Consistent with the MR form listing agreements and Authorization to Show, and
MREC regulations cited and discussed above in this Manual, this section is designed
to implement the same and Standard of Practice 16-13 under the NAR Code of Ethics.
If a prospective client entering into a Buyer’s Agency is currently a party to another
exclusive buyer representation or agency agreement regarding the same type of
property interest to be acquired, then mark the “IS” box at “G” and fill in the date the
existing agreement will expire at “I”. If the Buyer is not subject to such an existing
exclusive agreement, then mark the “IS NOT” box at “H” and insert “N/A” or “Not
Applicable” at “I”.
21-28
J
This section provides separate option for a REALTOR to be paid a specific dollar
amount (the “Flat Fee”, which is to be specified at “J” if applicable), independent of
any other “Additional Compensation” that may (or may not) be earned under the
Buyer’s Agency. This separate “Flat Fee” (which is collectively referred to in the
Buyer’s Agency along with the “Additional Compensation” further discussed below as
“Compensation”) may (by checking the applicable box at Line 26 or 27) be due and
payable either as of the “Effective Date,” or at the same time any Additional
Compensation is payable. If no Flat Fee is or will be required, then check the “not
applicable” box at line 28 and fill in “0”, “zero,” “N/A” or “Not Applicable” at “J”.
See also discussion of Lines 53-57 below.
There is no principled basis to construe RESPA to prohibit charging a percentage plus
a flat rate, still, REALTORS are strongly encouraged to consult with legal counsel
before seeking to customize the terms of the Buyer Agency in this regard. The “Other
Provisions” section of the Buyer’s Agency (or a separate addendum thereto) may be
appropriate to use for this purpose. If a Buyer does not consent to any advertising or
other specific activities to be conducted on its behalf (regardless of whether or not
there is a separate fee to do so), then those portions of the Buyer’s Agency authorizing
such activities should be deleted. (See, e.g., Line 10).
62
29-39
Establish the amount of “Additional Compensation” which Buyer agrees to pay
REALTOR upon consummation of the purpose of the Buyer’s Agency. The “trigger
event” in this regard is if the “Buyer enters into a contract to acquire any type of real
estate described above…” As an exclusive agreement, the right to payment is not
limited to prospects procured by REALTOR. Insert a specific dollar amount (at “K”)
or a percentage of the sale price (at “L”) to establish the amount of Additional
Compensation due.
Note: If payment of Additional Compensation is to be based on a percentage of lease
rental payments, or on any other terms, then appropriate revision and explanation
should be made and set forth here and/or at the “Other Provisions” section, as
necessary and appropriate to customize the Buyer’s Agency as intended by the parties.
Consistent with tradition and practice, REALTOR agrees to endeavor to collect part or
all of any Additional Compensation due under the Buyer’s Agency from the seller or
listing broker (i.e., at the closing). This will likely be available in most circumstances
(but not always) because a majority of properties are listed on a local MLS or
otherwise offered on a cooperative and commission sharing basis. In such cases, any
amount so paid is to be credited against the amount of Additional Compensation
otherwise due REALTOR from Buyer.
Pursuant to MREC regulations, REALTOR is obligated to make full disclosure to
Buyer of any amount so received. See, e.g., 20 CSR 2250-8.150(2) which requires,
among other things, that “all monies received by the broker” be set forth on a closing
statement signed by the parties, a copy of which must also be retained by REALTOR.
Failure to collect a portion of a listing commission does not relieve Buyer of its
obligation to pay any Compensation provided for in the Buyer’s Agency. If a
REALTOR is willing to be paid only if the source of payment is the property owner or
listing agent, then appropriate revision and explanation will be required.
39-49
The Buyer’s Agency contemplates that REALTOR shall be entitled to payment of the
agreed upon Compensation if a contract is entered into by Buyer during the Agency
Period (or within a specified time thereafter) regarding any property presented or
described to Buyer by anyone during the Agency Period. Establish the length of any
such “Protection Period” at “M”. While this does not automatically guarantee
payment of Compensation, in order to preserve any such Protection Period rights,
REALTOR must provide Buyer written notice including the names of the prospective
sellers or property address, before or upon expiration of the Agency Period. Similar to
the Listing Contract, presenting a listing to a Buyer during the Agency Period qualifies
as such a notice under the Buyer’s Agency.
Note: The Buyer’s Agency states that any obligation to pay REALTOR Compensation
thereunder will survive the termination thereof. Similar to the MR form RES, LND
and FRM listing agreements and Authorization to Show (but unlike the COM forms),
it contains an exception to the “Protection Period” obligation to pay Additional
Compensation (as well as any Flat Fee amount which is not payable unless a property
is acquired by Buyer) if the Buyer enters into a new exclusive buyer or tenant agency
or transaction brokerage agreement, and the new broker is paid a commission on
closing of the subject transaction.
63
PAGE 2
50-52
This sentence is designed to satisfy MREC regulations which require all agency and
transaction brokerage agreements to specify whether or not REALTOR is authorized
to cooperate with and compensate other brokers acting pursuant to any recognized
brokerage relationship.
53-57
If a contract fails to close due to the fault of the seller or failure of a contract
contingency, REALTOR is entitled to keep the Flat Fee (if any) that is due and
payable as of the Effective Date (i.e., “up-front”), but nothing more. Buyer’s failure
to close for other reasons does not waive any right of REALTOR to payment of
Compensation under the Buyer’s Agency.
58-110
This portion of the Buyer’s Agency form is effectively the same as General
Condition 13 of the Listing Contract regarding “Owner Consent to Brokerage
Relationships”. In order to avoid unnecessary duplicative explanation, please refer to
the discussion of General Condition 13 of RES-1010 at Article VIII of this Manual.
PAGE 3
111-122
This section of the Buyer’s Agency sets forth specific obligations agreed to by the
Buyer. They include the duty to exclusively work and communicate with
REALTOR regarding any sellers introduced by REALTOR for the acquisition of
property by Buyer; to supply financial or other personal data regarding Buyer as may
be reasonably necessary and requested; to be generally available during working
hours to view properties; and to consult with REALTOR before visiting homes for
sale or contacting listing brokers.
General General Condition (1) sets forth language, similar to General Condition 11 of the
Condition Listing Contract, acknowledging that properties are to be shown to Buyer on a
nondiscriminatory basis, in compliance with applicable fair housing laws and on an
(1)
equal opportunity basis with respect to each of the protected classes set forth in
Article 10 of the NAR Code of Ethics
General Effective November 1, 2010, Missouri adopted sweeping changes to its mechanic’s
Condition lien law. See § 429.016 RSMo. General Condition (2) sets forth language
notifying Buyer that the requirements of § 429.016 RSMo. may affect the ability to
(2)
get mechanic’s lien coverage under a title insurance policy (which is required by
RES-2000 and other MR standard form sale contracts). Additional information is
available on the MR website which addresses these changes (that primarily effect
new construction and investment properties), but REALTORS should advise their
clients to consult with legal counsel if they have any questions regarding these
requirements.
General As further discussed in Article I of this Manual regarding the explanatory “Note”
Condition found at Lines 166-177 of RES-2000, General Condition (3) is designed to make
clear that, while it is appropriate for a REALTOR to assist in arranging for
(3)
inspections or other professional advice that may be necessary or appropriate in any
given situation, REALTORS themselves are not expert on such matters. Ultimately,
it is the responsibility of the Buyer to “select and engage” any such experts and
consultants. Like General Condition 9 of the Listing Contract, it also specifically
disavows that REALTOR is making any representation or warranty regarding any
64
legal, tax or other specialized matters mentioned therein.
General This language was added, beginning in 2014, to allow for the possibility that
Condition REALTOR may recover (in addition to any other rights or remedies) the costs of
litigation, including reasonable attorney fees, if it becomes necessary for REALTOR
(4)
to sue for enforcement of its rights following a breach by Buyer. Although courts
are generally hesitant to require a party to pay for the litigation costs and attorney’s
fees incurred by another, absent contractual language providing for such, there is no
real prospect to begin with. At a minimum, this should at least help serve to
encourage resolution of any disputes short of litigation.
General
Condition
(5)
N
General Condition (5) (“Other Provisions”) is designed to provide limited space for
the parties to negotiate and set forth (at “N”) any special or unique terms, or changes
to the pre-printed language of the form Buyer’s Agency, which are agreed upon. As
discussed elsewhere in this Manual, excessive use of this tool should be avoided.
145
The Buyer’s Agency form is stated to be binding upon the parties thereto and their
heirs and personal representatives.
General As further discussed regarding General Condition 14 of the Listing Contract in
Condition Article VIII of this Manual, General Condition (6) is designed to comply with the
required “Minimum Brokerage Services” provisions of Missouri law, set forth at
(6)
§ 339.780.7 RSMo. and applicable to all “exclusive brokerage agreements”.
General General Condition (7) specifically allows for execution of the Buyer’s Agency in
Condition multiple counterparts (i.e., allows Buyer to sign one counterpart and REALTOR to
separately execute another counterpart). Both counterparts must, of course, be
(7)
otherwise identical in content. This language is designed to accommodate situations
where, for whatever reason, both parties are unavailable to execute the same
original. Facsimiles and scanned images of a signature to the Buyer’s Agency, such
as a pdf sent via email, as well as any other electronic form deemed valid in
accordance with the Missouri Uniform Electronic Transactions Act, are to be treated
as an original signature and document. At the request of a party, the other agrees to
sign a conformed original. Like General Condition 15 of RES-1010 (discussed in
Article VIII), per the last sentence, the parties specifically agree that changes to the
Buyer’s Agency may be made via email.
Note: If changes via email are not approved, insert “N/A” or “Not Authorized” at the
email address lines in the signature blocks on page 4 of the Buyer’s Agency.
PAGE 4
General General Condition (8) is based on the same language contained in the MR form
Condition sale contracts and listing agreements. A “check the box” provision is included to
indicate if such “Franchise Disclosure” (that the Franchisor is not legally liable for
(8)
the actions of REALTOR) is applicable. Although not technically required by the
specific language of 20 CSR 2250-8.080(2) (which by its terms is limited to “listing
agreements, contracts for sale and closing statements”), application to an exclusive
Buyer’s Agency agreement falls at least within the “spirit” of the regulation and is
therefore deemed appropriate to include.
65
General This section establishes the date on which the Buyer’s Agency is to become effective
Condition (i.e., the date adjacent to the signature of the last party to sign it, unless specified
otherwise). The “Effective Date” is also the date on which REALTOR® becomes
(9)
authorized to act as the sole and exclusive agent for Buyer with respect to the type of
property described therein. See also the discussion of Lines 17-19 above.
Note: A licensee may not negotiate or enter into a brokerage service agreement with
a buyer or tenant if (s)he knows, or has reason to know, that such prospective client
(“Buyer”) has a written unexpired exclusive agreement with another broker (at least
for the same type of real estate service currently being provided), unless the Buyer
initiates the discussion and provided the licensee has not, directly or indirectly
solicited the discussion. 20 CSR 2250 8.090(5)(E). In such a case, REALTOR may
negotiate and enter into a Buyer’s Agency which will take effect after expiration of
the current pending exclusive agreement. See also Article 16 of the NAR Code of
Ethics and the Standards of Practice thereunder.
O
Above the first blank line, print the name of the actual brokerage company
(REALTOR) serving as the Buyer’s exclusive agent, followed by the signature,
printed name, email address (if authorized by General Condition 7), mailing address
and title of the individual broker/agent authorized to enter into the Buyer’s Agency on
its behalf, and the date on which it is signed.
178-181
REALTORS are reminded of their obligation to provide “a legible copy of every
written agreement or other authorization to the buyer or tenant at the time the
signatures are obtained”, and to keep a copy in its offices.
20 CSR
2250-8.090(5)(D). This language acknowledges the Buyer’s receipt of a copy of the
completed Buyer’s Agency.
182-186
REALTORS are also reminded (and this language is designed to acknowledge
satisfaction) of their obligation to provide, at the earliest opportunity during or
following the first substantial contact with a buyer or tenant who has not entered into a
written brokerage relationship agreement for services in a residential real estate
transaction, a written copy of the current broker disclosure form prescribed by the
MREC. See, § 339.770 RSMo.
P
Obtain the signature of all persons and/or entities comprising the “Buyer” in the first
line of each of the signature blocks at “P”, followed by the printed name, email
address (if authorized by General Condition 7) and date of signature of each such
Buyer. Additional signature blocks may be added if necessary.
Q
Insert an address for all such Buyers identified (for mailing purposes) at “Q”.
Note: This presumes that only one mailing address is needed for all Buyers. If there
are multiple Buyers with different addresses and they do not agree that only one of
them needs to receive any notice mailed to them pursuant to the Buyer’s Agency, then
additional mailing addresses should be included.
198-204
This section should be completed if REALTOR intends to designate, at the time the
Buyer’s Agency is first signed, one or more of its affiliated licensees to serve as
designated agent(s) for the client/Buyer. If so, any such designated agent is to be
identified (at “R”), and the form signed and dated (at “S”) by REALTOR’s designated
broker or office manager or supervising broker authorized for such purposes.
66
Otherwise, the blanks should be completed by indicating “To be determined” or “Not
Applicable” (as the case may be). Future identification of a designated agent may also
be accomplished by using MR form DSC-7000.
PAGES 5 & 6
Pages 5 and 6 of MSC-1080 set forth the applicable statutory duties and obligations
of limited agents, dual agents and transaction brokers as established by the referenced
Missouri laws.
67
XI.
REFERRAL AGREEMENT (MSC-4015)
The MR form Referral Agreement (“Agreement”) is designed to allow for referral of a
REALTOR’s existing client or prospect to another licensed real estate broker, and to establish
the amount of any compensation to be paid to the referring REALTOR (upon closing of a subject
transaction involving the referred client). The entire Agreement is to be generated and
completed by the referring REALTOR, and then sent to the Destination Broker, who is to sign
and return it to the referring REALTOR to indicate its agreement to the terms thereof.
The Agreement is designed to be used only by and between licensed real estate brokers.
§339.150.2 RSMo. technically also allows for payment of part of a fee, commission or other
compensation received to “a person regularly engaged in the real estate brokerage business
outside of the State of Missouri,” but it is (at best) unclear whether this language is truly intended
to apply to unlicensed persons. Therefore, the Agreement should not be used for such a
situation. Subject thereto, it may be used in connection with any type of transaction (e.g.,
residential, farm, land, condos, commercial). The particulars of the Agreement are described
below.
A
Check the applicable blank to indicate whether the client being referred is a
prospective seller or buyer. If the referred client is interested in a lease
transaction or some other specific interest in real estate, provide sufficient
explanation at the “Special Needs and Instructions” section (“C”).
B-D
In the first section of the Agreement (“Client Information”) insert the name,
address and relevant contact information for the client to be referred at “B”.
Provide appropriate explanation of any specific or special needs and instructions
which have been identified by the client or are known to the referring REALTOR
at “C”. Additional pages may be attached and referenced if needed. If available
and agreed to by the client, insert the client’s email address at “D”.
Note: Before providing any personal or confidential information about a client to
another person, a REALTOR is cautioned and encouraged to always obtain that
client’s prior informed written consent. A Referring REALTOR may also want to
make sure that Destination Broker has signed the Agreement before identifying
and providing contact information regarding the client.
E-G
At the beginning of the second section of the Agreement (“Destination Broker”)
identify at “E” the name of the actual brokerage company to whom the referral is
being made, followed by its address, phone and fax number, the printed name of
the designated broker authorized to enter into the Agreement on its behalf, and his
or her email address. This is designed to accurately identify the Destination
Broker and its current contact information. If the client and Referring Broker
identify and agree upon a specific agent at the office of the Destination Broker
who is to handle the referral, set forth his or her name, phone number and email
address at “F”. Otherwise, this section may be left blank at the time the Referring
Broker initially prepares the Agreement. If the Destination Broker appoints a
specific agent to handle the referral, it should complete this information before
returning the signed Agreement to the Referring Broker.
The paragraph at the end of the second section provides that a referral payment is
to be paid only upon closing of a transaction involving the referred client.
68
Establish the amount of any referral payment to be made (at “G”) by specifying a
percentage of the gross amount of the applicable commission (i.e., the “listing” or
“selling” side) by checking the applicable box.
Note: The Agreement is not designed to allow for the payment of a specific
dollar amount (either at a closing or “up-front”), as a basic non-refundable
payment in exchange for the fact of simply making a referral. As always, a
REALTOR should make and include appropriate revision and explanation, as
may be necessary under the circumstances, such that the Agreement accurately
reflects the intentions and understanding of the parties thereto.
H-I
In the third section of the Agreement (“Referring Broker”) identify (at “H”) the
name of the actual brokerage company making the referral, followed by its
address, phone and fax number, the printed name of the designated broker
authorized to provide the referral on its behalf, and his or her email address. This
is designed to provide the Destination Broker with current contact information so
that it may keep the Referring Broker abreast of the status of any possible
transactions, and to follow up if any questions or further advice or consultation is
needed or desired. If the referral was generated or procured by a specific agent in
the Referring Broker’s office (e.g., a licensee who may have an expectation of
payment of all or some portion of a referral payment, or a long-standing
relationship and awareness or understanding of any special needs, requirements or
preferences of the client), then that agent should be identified at “I”. This should
assist recordkeeping activities and any further necessary dialogue between the
brokerage companies regarding the client and its activities.
J
Use this section to include any “Special Terms and Agreements” reached
between the parties. Note in this regard, for instance, that the form Agreement
does not specify whether or not payment of a specified referral fee is to be made
on a “one-time basis” only, or if multiple payments (e.g., in the event of multiple
transactions) are contemplated. As always, a REALTOR should address, as
specifically and with as much detail as reasonably possible, the exact terms of the
relationship contemplated by the parties to the Agreement.
K
The Agreement does not specify a default time period for which it is to remain in
effect. That issue is essentially “case specific” and depends on the facts and
circumstances involved in any given situation. It would be appropriate to insert
(at “K”) any specific or limited time period agreed upon for which the Agreement
is to remain in effect.
Note: As a pure legal matter, any agreement that is not specific as to duration or
time for performance (i.e., that might last “forever”) is not favored in the eyes of
the law and may be susceptible to challenge of invalidity based on an argument of
“void for vagueness” or violation of the “Rule Against Perpetuities.” The basic
premise of the latter is that in order for there to be an enforceable covenant and
obligation pursuant to an agreement between parties, the triggering event must
happen, if at all, within the lifetime of a living person plus an additional 21 years.
Accordingly, an Agreement that is stated to last “forever” (or without any
expiration date) may be subject to challenge, but an Agreement that is limited in
duration as set forth above should withstand legal scrutiny in that regard.
69
Further note that the Agreement does not purport to create any sort of “Protection
Period” rights (like the MR form exclusive listing and brokerage service
relationship agreements).
L-M
The Agreement is to be signed and dated (at “M”) by the Referring Broker before
it is sent. It will typically be sent along with an explanatory cover letter or similar
communication from the Referring Broker. Such a letter should not be used as a
substitute to set forth terms and conditions of the referral that are not included in
the Agreement itself (at least unless it is specifically referenced and incorporated
therein as a part thereof). Nevertheless, a copy of any such communication
should be retained in the REALTOR’s files, along with the Agreement itself, to
help protect and defend against any possible claims.
Upon receipt from a Referring Broker, the Destination Broker (assuming it agrees
with the terms set forth therein), should cause its designated broker to sign and
print his or her name and the date thereof (at “L”). Unless specified otherwise in
the Agreement (which may be necessary or appropriate in certain circumstances)
the date of the Destination Broker’s signature is designed to constitute the
“effective date” of the Agreement.
It should be expected that after making a referral, a Destination Broker will likely
enter into a separate new listing (or buyer or other) agency or transaction
brokerage agreement with the referred client. In such case, it is considered to be
“best practice” to make appropriate reference in that new agreement to the
cooperative relationship between the Destination Broker and the Referring Broker
(so the client’s informed consent thereto can be acknowledged and confirmed).
REALTORS are also reminded of their obligations to make sure that an accurate
and complete closing statement setting forth (among other things) “all monies
received by broker in the transaction, (and) the amount, and payee(s) of all
disbursements made by the broker…” is prepared and signed by the parties. 20
CSR 2250-8.150(2). While (at least arguably) these requirements do not apply to
payment of a referral fee, nevertheless, it is still considered “best practice” (and
the most conservative approach) to disclose the same.
70
XII.
RESIDENTIAL LEASE (RES-3010)
The MR form Residential Lease (“Lease”) is designed primarily for use in connection
with the rental of a single family residence. Revisions may be necessary for use in connection
with multi-family units, apartments, mobile homes or to accommodate individual circumstances
and preferences. For an office lease or commercial property, a REALTOR should use MR form
COM-3000 or COM-3010. The Lease should not be used as a sublease (e.g., if a Premises is
already subject to an existing or “master” lease). A REALTOR should advise his or her client to
consult an attorney for assistance in preparing an appropriate form for such situations. The
particulars of the Lease are discussed below.
No two properties (including rental properties) are identical. Likewise, no single form
lease is perfect for all situations. As always, a REALTOR is advised to encourage his or her
clients to seek legal counsel to obtain legal advice and any specific language or revised terms
that may be appropriate under the circumstances.
PAGE 1
A
Complete the Reference (identification) line in a consistent manner at the top of
each page of the Lease. This is for identification purposes, ease of reference and in
case pages become separated, to facilitate filing and organization. The names of the
parties, Premises address (or both) may be inserted. Signature is not required.
Immediately below the Reference line is a series of self-explanatory labeled boxes
and blanks. These areas are technically not part of the Lease per se, but rather are
again designed to provide a brief summary of the basic items noted and facilitate
recordkeeping.
B
Insert the full and complete legal name of all persons (or the legal entity) holding an
ownership interest in the subject Premises (i.e., comprising the “Landlord”) at “B”.
For further discussion on this topic, see the discussion of “B” at Article I of this
Manual regarding the Contract.
C
Insert at “C” the full and complete legal name/identity of each person/entity that is
to acquire a leasehold interest in the Premises. The discussion above regarding
proper identification of the Landlord equally applies to the Tenant here.
5-10
Pursuant to Section 1 of the Lease, the defined term “Premises” includes both the
improvements located at the address referenced (which is to be completed at “C”)
and all items of personal property identified, if any (which is to be listed at “E”). A
schedule of personal property can also be attached, if it is voluminous or more
convenient to do so (in such case, check the box at Line 9).
Note: If the Premises is single unit located within a larger building at the subject
address, the specific unit or apartment to be leased should be identified at “D” (as
well as in the first block below the Reference line). If available, a valid legal
description which specifically identifies the subject Premises can and should be
attached (in this case, the box at Line 6 should be checked, in addition to completing
the address information).
11-13
If any parking space(s) is/are to be included along with the Premises, check and
71
complete the boxes at Lines 12 and 13 appropriately (e.g., identify the location of
any offsite parking in the blank at Line 12). The number of parking spaces included
with the Premises should be specified at “F”. Indicate whether they are to be made
available on a reserved (exclusive) or unreserved (first-come, first-served) basis by
checking the applicable box at Line 13.
Note: If a Premises is only served by public (“street”) parking, or is to be separately
contracted for with a separately owned private garage or parking facility, then Lines
12-13 should be left blank.
14-15
With certain exceptions as noted herein, the Lease is designed with the basic
assumption that the Monthly Rent due thereunder (as further discussed below)
constitutes the full and complete payment due from the Tenant, including for the use
of any parking spaces or other amenities or services that may be made available.
Again, however, unique circumstances, market conditions and bargaining leverage
and demands of the parties can and do vary. If any separate charges or fees are
intended to apply, with respect to parking spaces or otherwise, then the parties
should specify such (in the “Special Agreements” section of the Lease or by
addendum, preferably with the assistance of an attorney).
Section
2
The time period during which the Lease is to be in effect between the parties (its
“Term”) can be for either: (1) a fixed length (in which case the box at Line 17
should be checked and the blanks completed to specify the time period agreed
upon); or (2) on a month-to-month basis (in which case the box at Line 19 should be
checked and the commencement date inserted at Line 20). A month-to-month Term
requires a full thirty (30) days’ prior notice of termination, delivered in advance of
the next Monthly Rent payment date (which is to be established at “L” as further
described below), in order to be effective.
Note: By default, the Term of the Lease is designed to expire at noon on the last
day specified. A precise time of day is not specified for the commencement date of
the Term.
If desired, the parties may customize the precise timing for
commencement and termination of the Term.
Section
3
Section 3 of the Lease provides flexibility for the parties to agree that the Term of
the Lease can be extended by Tenant beyond the initial time period set forth in
Section 2. If so, the number of separate renewal options which Tenant may exercise
is to be set forth at “G”. The additional length of time by which the Term is to be
extended for each option is to be set forth at “H” (check the applicable box to
establish whether the renewal is to be for a period of years or months, and insert
“N/A” in the box which is inapplicable). In order to exercise a renewal option,
Tenant must deliver to Landlord written Notice thereof at least ninety (90) days in
advance (unless a different timeframe is specified at “I”). Tenant must not be in
default under the Lease at that time.
All the same terms and conditions set forth in the original Lease equally apply to an
extended Term (if a renewal option is exercised). By default, the only exception to
the foregoing statement is that Monthly Rent is to be increased as described at “J”
(which may be either a fixed amount, percentage increase or as otherwise agreed
upon by the parties). Failure to exercise any renewal option constitutes a waiver of
all further such rights (if any). The renewal options afforded by Section 3 are also
72
personal to (may only be exercised by) the initial named Tenant under the Lease.
Such rights are not available to any assignee or subtenant of Tenant (unless
Landlord separately agrees in writing).
Note: If prior to the end of the Term the parties desire to extend the duration of the
Lease, but Tenant has no (or did not timely exercise a) renewal option, then the
parties can specify a new extended Term and establish a new amount of rent due for
the Premises by completing Sections 1 and 2 of the MR form “Residential Lease
Amendment” (RES-3015, or the “Amendment”). The parties should clearly specify
any changes agreed upon with respect to both Monthly Rent and/or Additional
Charges to be due from Tenant. The Amendment can also be used to reflect
changes to the amount of Security Deposit held (at Section 3), the address of a party
for Notice purposes (at Section 5), and for any other changes agreed upon (at
Section 4) with respect to the extended Term.
35-42
The base amount (“Monthly Rent”) which Tenant is required to pay throughout the
Term is to be inserted at “K”. At “L”, establish the actual day each month on which
Tenant is required to make such payment. Typically, this is the first (1st) day of the
month (but it need not be). Monthly Rent is to be paid in advance. Upon execution
of the Lease, any partial (per diem) Monthly Rent is also to be paid (if the Term
commences other than on the Monthly Rent due date). Accordingly, the blank at
Line 37 should specify the same day as the Monthly Rent due date (“L”) on Line 36.
Any fees or other amounts to be paid by Tenant to Landlord under the Lease, other
than Monthly Rent, are collectively referred to as “Additional Charges”. This
would include (for example) any additional charges to be assessed for parking as
discussed above. Pursuant to Lines 40-41, any Additional Charges require 30 days
prior notice before they are due and payable (unless otherwise specified).
Note: Certain Additional Charges may fluctuate and/or be payable other than on a
monthly basis. For example, although the Lease form does not contemplate that
Tenant is responsible for payment of real estate taxes, a Landlord may seek to “pass
through” this expense to a Tenant. In such case, Landlord must give Tenant at least
30 days prior notice of any payment due for taxes. Other Additional Charges may
be set (fixed) equal amounts due on a regular basis (e.g., flat rate parking or storage
charges). In this situation, Landlord may want to “otherwise specify” (i.e., indicate
clearly that all regular installments of Additional Charges of a fixed amount be paid
at the same time as Monthly Rent), to avoid having to give separate Notice each
month.
Monthly Rent and Additional Charges are collectively referred to in the Lease as
“Rent”. All Rent is to be paid when due without set-off, counterclaim, deduction or
a grace period whatsoever. Terms of a Lease are traditionally considered to be
“independent covenants”. This means that a breach by one party does not
necessarily give the other party an excuse or option not to perform its own Lease
obligations. In other words, even if a Landlord is in breach of the Lease, the Tenant
is still technically required to pay all Rent due from it. Various legal issues
regarding the landlord/tenant relationship have and continue to evolve over the
years. It is very important that (as further discussed with respect to Section 17
below) a REALTOR not try to “play attorney” or attempt to explain the legal rights
and remedies of a party, or procedures to follow with respect to exercising the same
73
in the event of a default (or perceived default) by the other party. All such issues
and disputes should only be handled by an attorney.
Note: The Lease specifically provides (at Line 42) that no grace period is allowed
with respect to the payment of Rent. Likewise, Section 17 does not include any
prior Notice or grace period before a default of the Lease may be deemed to exist. If
prior Notice or any so-called “grace” or “cure” periods are desired, appropriate
revisions will be needed. Many tenants (and even courts of law, particularly where
a default is not “egregious” or “material”) may require prior written notice and
“reasonable” cure rights. Such Notices are, in fact, customarily provided (and
encouraged) in such situations.
43-46
These lines provide options for the parties to elect the amount(s), if any, that are to
be paid as a “late charge” if Tenant fails to timely pay any Rent when due.
Complete “M” if there is to be a monthly late charge. Complete “N” if there is to be
a daily late charge (or complete both, if that is intended). If no late charges are
intended, the blanks should be marked “zero” or “N/A”. The late charges are
expressly stated to be “in addition to all other rights and remedies”. Therefore, they
do not affect Landlord’s right to declare Tenant in default.
47-48
Insert at “O” the identity and address of the person or entity (typically, the Landlord
or its bank) which is to receive all payments of Rent from Tenant under the Lease.
This direction from Landlord can be changed from time to time (if/as necessary)
upon written Notice to Tenant. Landlord’s property manager (if applicable) may
also be designated at this section.
These lines were added (effective January, 2014) to allow Landlord to establish a
service charge (to be set forth in the blank at line 49, if any, and otherwise marked
“zero” or “N/A”) in the event a Rent check is returned on account of insufficient
funds. After the first such occurrence, Landlord may require future payments to be
made via cashier’s check, money order, wire transfer or certified funds.
49-51
PAGE 2
52-58
Section
5
This section authorizes monthly electronic payments of Rent during the Term. The
box at Line 52 should only be checked if the parties so agree. In such cases, the
referenced “Account” information is to be provided and Tenant agrees to execute any
necessary forms in connection therewith. Tenant must keep sufficient amounts in the
Account to cover all payments and must notify Landlord of any change in the
Account information.
Establish the amount of “Security Deposit” (if any) to be paid by Tenant upon
execution of the Lease at “P”. If no Security Deposit is required, the blanks should
be marked “zero” or “N/A”. Identify (by checking the applicable box at Line 61) if
Landlord or its property manager is to hold the Security Deposit.
Note: By statute, the amount of Security Deposit that can be required for a
residential lease in Missouri may not be more than an amount equal to two (2)
months of the Monthly Rent due. If Landlord requires additional prepaid rent or
other security, then Landlord should consult with his or her attorney for assistance.
Note in particular in this regard that lease guaranties from third parties are often
required (e.g., for college-age students or other Tenants with no, or only suspect,
74
credit history). Background and credit checks are an important part of the Tenant
screening process and again, owners/Landlords should be strongly encouraged to
consult with legal counsel or other appropriate professionals to prepare any desired
lease guaranty and/or application and background investigation authorization
forms.
Residential security deposits are governed in Missouri by §535.300 RSMo. The
purposes for which a Landlord may withhold amounts from a Security Deposit are
essentially as stated in Lines 62-65. Landlord must return the full amount of the
Security Deposit within thirty (30) days after termination of the Lease unless (and
to the extent) a written itemized list of damages (e.g., repair costs) is delivered to
Tenant.
The Lease is designed to allow for refund of the Security Deposit to be made by
one check, payable jointly to all persons and/or entities constituting the Tenant, and
mailed to one address (as set forth on the signature page as further discussed
herein). The Security Deposit does not constitute liquidated damages and Landlord
is not precluded from recovering any additional damage that may be incurred as a
consequence of a Tenant’s actions. The Security Deposit may be held in an
interest bearing account and any interest earned is to be paid to Landlord (or its
designated property manager) if Landlord sells the Premises, assigns the Lease and
transfers the Security Deposit to the new owner, the initial Landlord is released
from any further liability with respect thereto.
Note: If a broker is to serve as Landlord’s property manager and hold the Security
Deposit, it must be maintained, intact, in an escrow account other than the property
management account(s), pursuant to Section 339.105 RSMo, unless the owners (all
parties having an interest in the funds) agree otherwise in writing. See, 20 CSR
2250-8.200(2). A REALTOR should also complete and enter into a Property
Management Agreement (MSC-1000) if it is to collect Rent and/or perform other
property management services with respect to the leased Premises. It is required
by regulation and, among other things, establishes the amount of compensation to
be paid for providing the services agreed upon. See, e.g., 20 CSR 2250-8.090(9).
Effective January 1, 2014, the last sentence of Section 5 was added. It is intended
to establish a whether a separate fee (independent of the Security Deposit) is to be
charged for the cost of conducting a professional cleaning of the carpets and
flooring at the Premises upon the expiration or earlier termination of the Term. If
so, the amount thereof should be set forth at Lines 77-78 (or they should be marked
“zero” or “N/A”).
Section
6
The Premises must be used for residential purposes only, in compliance with
zoning and other applicable laws. Flexibility is provided to specify (at “Q”) the
maximum number of persons per bedroom who will be allowed to occupy the
Premises. Occupancy limits are sometimes established by local zoning codes. A
REALTOR should make sure to not specify a larger number than may be permitted
in this regard. Any adult who has not signed the Lease must be reported to
Landlord and approved before taking occupancy.
Section
7
The Lease is generally designed to provide, to the full extent permitted by
applicable law, for the “joint and several” liability of all adults who occupy the
75
Premises. Each such person is deemed a “Tenant” under the Lease and is charged
with full responsibility for the actions of all other such “Tenants” and their guests,
invitees, employees, agents, occupants or other persons located at the Premises at
any time. Landlord may proceed directly against any one or more person
constituting the Tenant, and the discharge in bankruptcy or otherwise of any such
individual will not affect or release the liability or obligation of any other
individual constituting the Tenant under the Lease. Delivery of Notice to any adult
occupant is deemed to constitute Notice to all such Tenants.
Section
8
Section 8 of the Lease sets forth the respective rights and obligations of the parties
with respect to the condition of the Premises. It assumes that Tenant has inspected
the Premises and (except as may be noted at “R”) accepts possession in its “as-is”
condition. Accordingly, if there are any “punch-list” items for Landlord to fix up
(or major renovation work), they should all be listed and detailed as part of
“Landlord’s Work”. Any such Landlord’s Work is to be completed prior to the
scheduled Term commencement date. If there is no “Landlord’s Work” to be
performed, insert “N/A” or “Not Applicable” at “R”.
If for any reason Landlord is unable to deliver possession of the Premises to Tenant
with all of Landlord’s Work (if any) completed within 3 days after the scheduled
commencement date, the Lease limits Tenant’s rights to either elect to: (a)
terminate the Lease (by delivering Notice to Landlord prior to delivery of
possession) or (b) a full abatement of Rent until possession is delivered. This is
designed to provide flexibility and simplicity. If large sums are involved in
connection with the Landlord’s Work, or in the event of other unique situations, the
parties are encouraged to consult with private counsel to customize language more
detailed to their situation.
The Lease contains various “boiler-plate” language regarding the Tenant’s
obligation to keep the Premises clean and in generally good order, condition and
repair, but Landlord is responsible for upkeep and maintenance required with
respect to the basic “bones” of the building in which the Premises is located (e.g.,
foundations, exterior walls, roof, utilities and structural portions). Excepted from
this is any damage caused by the negligence, willful misconduct or neglect of
Tenant (or others on behalf of Tenant as discussed at Section 7). Tenant is solely
responsible for any such damage and Landlord is given the option to perform such
repairs and charge Tenant the cost thereof, plus interest thereon at the “Default
Rate” (3% over prime). Check the applicable boxes at Lines 113-115 to indicate
which party is responsible for maintenance of the lawn (if any); for snow and ice
removal; and extermination of rodents and insects (although it remains to be the
responsibility of the Landlord for the actual treatment of any wood destroying
insects, such as termites). Again, additional customization may be needed in
certain circumstances (e.g., if separate fees are to be charged for such purposes).
PAGE 3
Section
9
Section 9 of the Lease establishes Tenant’s obligation to return the Premises to
Landlord upon expiration of the Term in substantially the same condition as when
received (normal wear and tear excepted) and to remove all of its personal
property. Consistent with the discussion of the Security Deposit at Section 5
76
above, Tenant is responsible for any necessary repairs or clean-up not completed
prior to surrendering possession.
Section
10
Tenant is not permitted to assign the Lease or sublet all or any portion of the
Premises to anyone without Landlord’s prior written consent. The parties should
be encouraged to consult with legal counsel if they intend to permit an assignment
or sublease of any kind.
Section
11
Notice is provided that illegal drug use and possession is a violation of law and
may be just cause to immediately evict Tenant and terminate the Lease. Serious
ramifications may also befall a property owner (Landlord) who turns a “blind eye”
toward illegal drug activities which are occurring at the Premises. A REALTOR
should report any suspicious activities noted at the Premises to his or her client and
strongly encourage that they obtain the assistance and advice of legal counsel and
the proper governmental authorities in this regard.
Section
12
The Lease provides that Tenant is responsible to pay for all utilities (including
connection fees) that “are separately metered for the Premises”. Lease terms often
vary with respect to allocating responsibility between the parties for payment of
utility bills. Any special terms between the parties in this regard can be specified
at “S” and/or in the “Special Agreements” (Section 35).
Note:
Situations where the parties may want to customize rights and
responsibilities for utility services include (but are not limited to) those where the
Premises is part of a larger, multi-unit building or complex; the Premises is served
by both separately metered and common utility services; the Premises is served by
common utilities only; utilities are to be kept in the Landlord’s name and
separately billed (on a flat-rate, estimated or “pass-through” basis) to Tenant.
Section
13
Section 13 of the Lease establishes a Tenant’s right to “quiet enjoyment” of the
Premises (for so long as Tenant is not in default). This essentially means that a
Tenant is entitled to peacefully enjoy the use and occupancy of the Premises
without unreasonable interference of those rights by or on behalf of Landlord.
Landlord does, however, reserve the right to inspect the Premises, make necessary
or desirable repairs and to show it to prospective buyers or tenants. Any such
access by Landlord is only to take place at reasonable times and upon prior Notice
(except in the event of an emergency).
Section
14
Section 14 makes clear that Landlord is not responsible for any injury, damage or
loss caused by Tenant or any other person, acts of God or any other cause.
Landlord is responsible for its (or its property manager’s) “willful misconduct or
extreme and reckless indifference and disregard …”, but Tenant otherwise agrees
to indemnify and defend Landlord (and its property manager) from and against all
liability for injury and damage otherwise arising with respect to the use and
occupancy of the Premises. The Lease also provides that Landlord has no
responsibility of any kind with respect to safety or security at the Premises. Tenant
is required to report any criminal incidents in or near the Premises and, if Landlord
does establish security procedures, abide by the same.
Note: Despite the terms of the Lease, there may be unique situations (e.g., if a
Premises was the subject of prior incident(s) involving criminal activity or lack of
77
basic safety) where a Landlord may be held responsible to take certain precautions
or establish some basic means of security. There are always exceptions, but the
general rule is that Landlord is exonerated from liability except in only egregious
situations.
Section
15
Pursuant to Section 15 of the Lease, Tenant is required to maintain general liability
insurance (and provide proof thereof prior to taking occupancy). Tenant may (but
is not required to) carry insurance on its own personal property located at the
Premises. Landlord is required to maintain fire and extended homeowners/hazard
casualty (with replacement coverage) and liability insurance. Each party waives
any rights it may have against the other on account of any insured loss (to the
extent of such insurance proceeds plus any deductible), including any subrogation
rights of their respective insurers.
Note: The Lease does not specify the amount of general liability insurance
coverage that is required to be carried. This and the parties’ respective
responsibility for payment of required insurance coverages are among things often
negotiated between a Landlord and Tenant (e.g., many Landlord’s will passthrough its insurance costs, particularly in multi-tenant facilities or where common
areas and facilities are included as part of the Premises). The parties should
consult with legal counsel for specific advice and language in these situations.
Section
16
Section 16 of the Lease sets forth the basic rights and obligations of the parties in
the event the Premises is damaged by fire or other casualty. If the damage is only
partial (i.e., the Premises is not wholly destroyed or uninhabitable), then unless
Landlord elects to terminate the Lease it is required to repair the Premises to make
it wholly habitable. If Landlord fails to do so within 1 month of the date of the
casualty, then Tenant may terminate the Lease by giving Notice thereof to
Landlord. If the Premises is totally destroyed or rendered uninhabitable then the
Lease may be terminated by either party (in which case any prepaid Rent is to be
returned, along with the balance of any Security Deposit, to Tenant). Rent is to be
“equitably” (meaning fairly and as may be just under the circumstances) abated
until the Premises is repaired in the event of partial damage. Rent is wholly abated
in the event of total damage (until the Premises is repaired or the Lease is
terminated).
78
Section
17
As discussed above at Section 4 regarding the payment of Rent, the Lease does not
provide for any prior Notice or opportunity to cure either a monetary or nonmonetary default that may be committed by Tenant. Nor does the Lease does
purport to limit any right or remedy available to Landlord in the event of a default
by a Tenant. It also contains a number of other “boilerplate” provisions (e.g., that
any failure to exercise, or partial exercise, of any right does not constitute a waiver
of any other or further right to do so; that acceptance of restricted endorsements or
partial payment will not prejudice Landlord’s rights to recover the full balance due
or pursue other remedies). As a practical matter (since, among other things, most
Landlords want to retain a rent-paying Tenant who generally observes the terms of
a lease), most Landlords will elect (and are well advised) to provide written Notice
of an alleged default and a “reasonable” opportunity to cure the same.
Note: It can be a very risky proposition for a Landlord to proceed to declare and
seek to enforce a default without providing prior Notice and opportunity to cure,
even if the Lease does not technically require such (particularly if the alleged
breach is “de minimus” or not “material”). Again, the parties should be instructed
by a REALTOR to seek specific legal advice with respect to the declaration of a
default under the Lease and enforcement of any rights pursuant thereto.
Effective January 1, 2014, the Lease specifically provides that any payment
received by Landlord will be applied in the following order: First, to costs and
expenses of reletting following a breach by Tenant (including attorney fees,
advertising and renovation costs); Second, to any Additional Charges or other
indebtedness; and Third, to any Monthly Rent due and payable. Any deficiency is
to accrue interest at the Default Rate until fully repaid.
Section
18
A Tenant who remains in possession of the Premises following the expiration (or
earlier termination) of the Term without Landlord’s written consent is deemed to
be “holding over”. In addition to constituting a default which allows a Landlord to
pursue any other right or remedy available at law or in equity, Tenant may be
required to pay (in addition to all other charges payable by Tenant) 2 times the
amount of Monthly Rent last due for each day that Tenant “holds over”. The
nature of the relationship between Landlord and Tenant during the “holding over”
period is a “tenancy at sufferance” (meaning Tenant remains in occupancy without
permission or agreement of Landlord and can be evicted at any time).
PAGE 4
Section
19
Section 19 requires Tenant to pay Landlord’s costs and attorneys fees if Landlord
enforces the Lease by court action (even if such action does not take place until
after the Lease is terminated). Unlike the Contract and various other MR forms,
this is not a “prevailing party” provision. Residential tenants generally do not
enjoy such rights against landlords because of their unequal bargaining power and
the parties’ relative risks at stake.
Section
20
Any “Notice” (meaning any “notice, consent, approval, request, waiver, demand
or other communication”) required under the Lease must be in writing. The
addresses to use for this purpose are to be set forth on the signature page of the
Lease. Delivery of a Notice by registered or certified mail is expressly allowed,
but the Lease does not seek to restrict delivery of Notice by any other means (e.g.,
the law may allow for effective notice to be given to a Tenant via posting a notice
79
on the door of the Premises, and in certain cases, even by publication of legal
notice in a newspaper). Unlike the Contract and other MR forms (where the parties
are actively represented by brokers) Notices under the Lease must be delivered to
the other party directly (or to the Landlord’s property manager if such is approved
and so indicated, as further discussed below with respect to the signature blocks on
page 6 of the Lease). A new address for payment of Rent or delivery of Notice
may be designated by providing fifteen (15) days prior Notice thereof. Refusal to
accept a Notice also constitutes delivery. Actual delivery of (or refusal to accept) a
Notice should always be documented.
Section
21
The Lease sets forth a variety of (self-explanatory) Rules and Regulations
regarding the use of the Premises and any common areas. The Rules and
Regulations may be revised from time to time (upon Notice to Tenant) and failure
to comply constitutes a violation of the Lease. Any additional (or revised) Rules
and Regulations which Landlord may have in place or otherwise require should be
set forth in the “Special Agreements” (Section 35) or attached to the Lease and
referenced therein.
Section
22
Section 22 is designed to allow the parties to specify whether or not the Lease
provides Tenant with an option to purchase the Premises (in which case MR form
RES-3000 should be completed and attached) or allows for pets (in which case MR
form RES-3020 is to be completed and attached). Indicate the parties’ intentions in
this regard by checking the applicable boxes.
PAGE 5
Section
23
Section 23 of the Lease is a fairly standard “boilerplate” acknowledgement that all
agreements and understandings between the parties regarding the subject written of
the Lease (i.e., the Premises) are wholly contained therein. In other words, there
are no “side” agreements or separate understandings or promises. Any subsequent
changes to the Lease must be in writing and signed by both parties (i.e., by
Landlord or its property manager if so designated, and by at least one adult
occupant on behalf of Tenant). Again, the MR form Amendment (RES-3015) can
and should be used for the purpose of setting forth any changes agreed upon.
Note: Although the Lease provides that any change or Amendment signed by one
adult occupant constituting the Tenant is to be binding upon and enforceable
against all persons and entities constituting the Tenant, the most conservative (and
best) approach is to obtain the signature of all persons and/or entities constituting
the Tenant. Doing so will serve to reduce (if not eliminate) potential claims that a
document signed by only one person was not authorized by or enforceable against
anyone else constituting the Tenant.
Section
24
Disclosure regarding lead-based paint hazards is required by federal law in
connection with the sale or lease of any residential property built prior to 1978.
REALTORS should attach to the Lease completed MR form DSC-3000 for
applicable leasing transactions.
Section
25
Section 25 specifically allows for execution of the Lease in multiple counterparts
(i.e., allows Landlord to sign one counterpart, and Tenant to separately execute
another counterpart). Both counterparts must, of course, be identical. This
language is designed to accommodate situations where, due to travel schedules,
80
location of the parties, timing or whatever other reason, both parties are unable to
execute the same original. Nevertheless, it is still preferred practice to have each
party sign the same actual Lease form which is signed by the other. The last
sentence specifically acknowledges and approves that (like a fax) a scanned image
of a signature to the Lease, such as a pdf sent via e-mail, or any other electronic
form is deemed valid in accordance with the Missouri Uniform Electronic
Transactions Act, is to be treated as an original signature and document.
Section
26
The “Governing Law” language at Section 26 acknowledges that the terms of the
Lease are to be construed under both Missouri law and applicable federal law. For
instance, in addition to the discussion at Section 24 regarding lead-based paint
disclosure requirements, members of the military are afforded special rights (such as
to terminate a lease or stop an eviction) in certain situations (See, e.g., the Soldiers’
and Sailors’ Civil Relief Act, Title 50 U.S.C.A. §§500 et. seq.). The parties should
consult with an attorney for specific legal advice in this regard.
Note: The Lease is not approved for use in any state other than Missouri. The Lease
may not comply with the laws and regulations of any other State. REALTORS
should not allow any client to use the Lease in connection with the rental of real
estate located outside Missouri, and should strongly encourage such clients to obtain
a form lease which has been approved by legal counsel licensed in such State.
The Lease also includes a “partial invalidity” provision whereby if any portion of the
Lease is deemed to be invalid, illegal or unenforceable in any respect, then the Lease
will not be deemed to terminate, but rather, to the fullest extent permitted by law, will
remain in full force and effect.
Section
27
Section 27 is designed to satisfy the disclosure obligations mandated by 20 CSR
2250-8.110 for those situations where a licensee will directly “acquire an interest in,
sell, buy, exchange, rent or lease any real estate” pursuant to the Lease.
Accordingly, if a REALTOR is a direct party to the Lease, (s)he should mark the
appropriate box at Line 284.
Note: If the licensee’s interest in the transaction is only indirect, a REALTOR should
disclose in a separate writing (or in “Special Agreements” Section 35) the nature of
his or her interest involved.
Section
28
At Section 28, identify the source(s) of any commission or compensation due to the
Broker(s) involved in the transaction(s) by checking the applicable box(es) at Line
287, as required by 20 CSR 2250-8.096(1)(A)2. If both Landlord and Tenant are
responsible to pay a commission or compensation, then their respective obligations
can be clarified by setting forth a specific percentage or dollar amount. “Special
Agreements” Section 35 may be used for this purpose.
Note: If any compensation due to the Broker(s) is to be provided from more than one
source, all sources must be identified (i.e., check one, neither, or both of the boxes, as
applicable). If applicable, “Special Agreements” Section 35 may also be used (or a
separate page attached) to identify any other source of payment (e.g., an employer,
relocation company, family member) or other specific terms and details of any
special agreement reached between the parties regarding payment of a commission or
other compensation to the Broker(s) that may be contrary to what their existing
81
agency representation and/or broker cooperation agreements provide for (which
otherwise governs by default). See also §§339.100.2(6) and 339.800 RSMo. for
statutory provisions regarding the various possibilities and consequences of payment
of broker compensation.
This Section also includes a mutual representation by the parties that there is no other
broker(s) involved in the transaction on their behalf, and an indemnity clause with
respect to any claim made to the contrary.
Section
29
At Section 29, the Broker preparing the Lease should fill in both blanks (indicated by
“T”) with the printed name of the applicable brokerage company(ies) involved, and
check the applicable box in each section (i.e., one box in Lines 299-305 and one box
in Lines 307-311). That Broker should also complete and sign the appropriate
signature block information at Lines 314-318. The Broker (if any) representing the
recipient of the Lease offer should then complete and affix its own signature at these
lines.
Note: A dual agent or transaction Broker representing or assisting both parties
should check the appropriate box in each section (i.e., at both Lines 301 and 309, or
at Lines 303 and 311, as the case may be) and sign and complete both signature
blocks (i.e., Lines 314 & 318). This “Brokerage Relationship” disclosure is
intended to satisfy the confirmation requirement set forth at 20 CSR 2250-8.096, and
is not a substitute for, and does not excuse a broker from, making any earlier required
agency disclosure regarding its brokerage relationship. See, 20 CSR 2250-8.095.
MR form DSC-1000 (Real Estate Brokerage Relationship Disclosure) may be used
for this purpose.
At Line 293, the parties confirm they have received the MREC Broker Disclosure
Form. The Broker(s) MLS ID No. should be included (at Line 314) if required.
Section
30
Section 30 of the Lease is designed to notify the parties that a franchisor is not
responsible for the acts of its franchised broker. See, 20 CSR 2250-8.080(2).
Section
31
Section 31 of the Lease sets forth the permission of the parties to disclose
information, including rental rates, regarding the transaction to (among others)
professional users of real estate data.
Section
32
Section 32 addresses the provisions of the USA Patriot Act (Public Law 107-56) and
Presidential Executive Order 13224 (effective September 24, 2001). This Section
contains a representation and warranty by each party that (s)he/it is not a “Specially
Designated National and Blocked Person” as defined therein, and is not prohibited
from transacting business thereunder (or any other anti-terrorism law). See the
discussion of Section 29 of RES-2000 at Article I of this Manual for further
information on this topic.
Section
33
Section 33 of the Lease specifically provides that “Time is of the essence” with
respect to each party’s obligations (meaning that strict compliance with stated
timeframes and deadlines is required). It also clarifies that all time periods
referenced are deemed to mean “Central Time.” The last sentence makes clear that
any reference to a “day” is intended to mean a 24-hour calendar day (7 days a week).
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PAGE 6
Section
34
Section 34 of the Lease makes clear that unless and until the Lease has been signed
by both parties and delivered to the other, there is no deal and the parties are not
bound. Negotiating and submitting an offer to enter into a Lease is not enough and
does not constitute an “option” or reservation of space. As discussed above with
respect to Section 25, “E-signatures” exchanged via email should suffice. As further
discussed elsewhere in this Manual, an offer to enter into a Lease may also be
withdrawn before it is accepted.
Section
35
Space is provided at Section 35 to allow flexibility to negotiate and agree upon
special terms and/or minor changes to the Lease. Additional page(s) can be
incorporated by reference (e.g., “See Exhibit A attached hereto and incorporated by
reference as if fully set forth herein”). As discussed elsewhere throughout this
Manual, all parties should avoid excessive use of (or “abusing”) this tool for purposes
other than very limited applications such as set forth herein. REALTORS otherwise
expose themselves to the possibility of being charged with engaging in the
unauthorized practice of law. Parties who desire customized terms, or results which
differ from that provided (or allowed for) by the pre-printed terms of the Lease,
should be advised to consult with their own attorney for legal advice.
Note: Pursuant to 20 CSR 2250-8.100(3), “Any change to a contract shall be
initialed by all buyers and sellers.” The Lease is a form of contract. Accordingly, if
hand-written language is added to an otherwise fully typed Lease offer at the “Special
Agreements” section, or if any other terms or language is changed via interlineations
made throughout the Lease or any form attached thereto, a REALTOR should ensure
that all such changes are initialed by both parties.
338-339
These lines confirm the parties’ agreement to enter into the Lease and that the date
thereof is to be the date of the signature of the last party to sign.
340-342
Consistent with the discussion of Sections 6 and 7 above, these lines again confirm
that all adult occupants at the Premises are deemed to be a Tenant and must sign the
Lease. Failure to do so constitutes a default. Consistent with Section 20, it also
confirms that address set forth in the left column of the Tenant signature block may
be used for purpose of effectively delivering a Notice under the Lease to all Tenants.
U-Z
All adult persons who are to occupy the Premises (and therefore constitute the Tenant
under the Lease) should sign (and date) the Lease before the offer is delivered at “U”.
Failure to have all individuals constituting Tenant sign the Lease may result in it
being enforceable against only the individual signator(s).
~The address and relevant contact information for purpose of Tenant Notices should
be set forth at “V”.
~If Landlord intends to accept the offer as presented, Landlord should sign (and date)
the Lease at “W”. The address and contact information for Landlord should be
completed at “X”.
~If Landlord has authorized its property manager to sign the Lease and accept the
Security Deposit, Rent payments and Notices on its behalf, then property manager
should sign and date the Lease at “Y”, and fill in its address and contact information
at “Z”.
~Note: If in fact a REALTOR is to serve as a property manager on behalf of an
owner/Landlord, then as further discussed above, REALTOR should first enter into a
Property Management Agreement with the owner(s) (See MR form MSC-1000).
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