Category: Real Estate

A bad contingency clause can produce a dissatisfied buyer

Almost every real estate sale agreement includes some contingencies: conditions that, if not met, will allow the seller or buyer to cancel the sale. The two most common are a financing contingency and a property inspection contingency.

Be sure when you’re writing a contingency that you identify what the contingency actually is. Don’t write “Buyer’s obligation is subject to Buyer obtaining a property inspection,” or (even worse) “This transaction is subject to Buyer obtaining a property inspection.” The actual contingency isn’t the inspection, but the buyer approving the inspection. What if the buyer obtains an inspection, but doesn’t like what the inspector has to say?  The buyer has satisfied the contingency, but is dissatisfied with the property, and likely to be dissatisfied (or worse) with the attorney or agent who drafted the contingency clause.

Instead, write “Buyer’s obligation is subject to Buyer obtaining and approving a professional inspection of the property on or before _______, 2018.”   When the actual contingency is the buyer being happy, say so.

On what day does your lease start? It’s a multiple-choice question

The Chinese New Year, which in 2018 is on February 16, is one of several days that people around the world mark as New Year’s Day. We think of January 1 as New Year’s, but in colonial America until 1752, New Year’s Day was March 25. The Hebrew new year, lunar like the Chinese calendar, is on September 9 this year, and the Cambodian new year will start in mid-April.
Leases should be simpler than the calendar, but they aren’t. On what day does a commercial lease start? The landlord and tenant take on some obligations the day they sign the lease. The tenant’s right to possession may start on a second day, the tenant’s obligation to pay property taxes and insurance may start on a third day, and the tenant’s obligation to pay rent may start on a fourth day. Before you sign your next lease, be sure you understand what starts when. If you don’t understand the various start dates when you write and sign the lease, the jury won’t understand them when its members read it.

Don’t write a contract that counts time in “business days” unless you’re sure of the answer

Christmas is an appropriate time to write about how lawyers use “business day” to measure time in a contract. We don’t often encounter problems when we measure long periods in days: for example, “Buyer has 30 days from receiving the survey to notify Seller of Buyer’s objections to the survey.” If the buyer receives the survey on April 16, the buyer has until May 16 to notify Seller of Buyer’s objections. Everyone can count to 30 when you’re counting every day.

Many contracts measure short periods in business days, for example, “Buyer has 5 business days from receiving the title report to notify Seller of Buyer’s objections to the title report. The buyer wants to measure the period in business days because the buyer might receive the title report on the Friday before a three-day holiday weekend, perhaps on December 22, 2017, and doesn’t want Saturday, Sunday, and Christmas Day (today!) to count against the review time.

To leave nothing to chance, some careful drafters provide a definition of “business day.” I’ve seen a definition of a business day as a day that the courts in Multnomah County are regularly open for business. I’ve also seen definitions of “business days” as days on which banks are open for business, a definition that got mushy 40 years ago when Fred Meyer Savings & Loan began to open its offices on Sundays.

Most days don’t trip us up. No one in the United States would seriously argue that December 25 is a business day, nor Thanksgiving, nor July 4, nor New Year’s Day.

But Oregon has one day that’s a trap for the careless drafter: Columbus Day.  Read more in the continuation about how Columbus Day bit the Oregon Department of Revenue in the pocketbook . . . .