Florida's Laws & Regulations Regarding Real Estate Contracts
Calculating time periods
Florida Realtors has three residential contracts. Two are Florida Realtors/Florida Bar contracts(FR/Bar), the standard Residential Contract for Sale and Purchase and the “AS IS” version, and one is the Florida Realtors Contract for Residential Sale and Purchase (CRSP).
Time periods for these Florida Realtors/Florida Bar (FR/Bar) contracts are calculated using calendar days – which means that weekends do count. However, any specified time period or date that ends or occurs on a Saturday, Sunday or national legal holiday will extend to the next calendar day that isn't a weekend or observed holiday. See Standard F in either version of the Florida Realtors/Florida Bar contracts.
The Florida Realtors Contract for Residential Sale and Purchase (CRSP) is calculated using business days. As such, if any deadline falls on a Saturday, Sunday or national legal holiday, performance is due on the next business day. Additionally, all time periods end at 5 p.m. local time (i.e. where the property is located) of the appropriate day. See paragraph 11(b) of the Contract for Residential Sale and Purchase.
Florida Realtors also has a Commercial Contract and a Vacant Land Contract. For both of these contracts, calendar days are used, except when computing time periods of 5 days or less, which are calculated without including Saturday, Sunday or national legal holidays. Similar to the Florida Realtors/Florida Bar Contracts, if a time period ends on a weekend or national legal holiday, the time for performance is extended until 5 p.m. of the next business day. See paragraph 3 of the Commercial Contract and paragraph 10 of the Vacant Land Contract.
Canceling a listing agreement
If a seller decides to cancel a listing agreement such as an Exclusive Right of Sale Listing Agreement before its termination date, it is up to the broker to let the seller out of the agreement. There is no unilateral right to terminate the Exclusive Right of Sale Listing Agreement. If the broker agrees, the agent can use the Modification to Listing Agreement form. The document offers two options, listed midway through the form: conditional termination and unconditional termination. The listing broker and seller should carefully review the difference and select one of these options so they both understand what rights and obligations, if any, extend past the negotiated early termination.
Canceling a contract
- A buyer who has an AS IS Residential Contract for Sale and Purchase has a very strong right of cancellation during the inspection period. Paragraph 12 of that contract states that the option to terminate resides in the buyer’s “sole discretion” and the buyer’s deposit is to be returned to him/her.
- Members of the military have special ability to terminate a contract if they get permanent change of station orders requiring them to move 35 miles or more from the property location. The service member must provide a notice to the seller or the mortgagor along with either a copy of the official military orders or a written verification signed by his/her commanding officer. (Section 689.27(2)(a), Florida Statutes)
- After a seller has accepted a buyer's offer on a property, the buyer does not automatically have a three-day right to cancel, unless the contract includes that as a specific provision. None of the Florida Realtors contract forms provides for this right.
- A contract may have different contingencies that allow for either party to cancel. As with any contractual interpretation question, the language of the contract is paramount in determining the rights of the parties, so our advice is to always suggest to the parties that they seek legal advice from a licensed professional if they wish to gather further information about contract rights.
Authorization to sign closing documents
- A seller may issue a power of attorney authorizing someone else to sign closing documents.
Florida law allows a power of attorney to be used in Florida real estate transactions. This document should state the specific powers the seller is granting to the attorney-in-fact. If a power of attorney will be prepared and signed in another state or country, it is important to contact the closing agent to confirm that the power of attorney will be effective and address any concerns in advance of closing. The power of attorney must comply with Florida law. The seller must sign the power of attorney in the presence of two subscribing witnesses, and it must be properly notarized. There may be additional requirements if the document is prepared and signed outside the United States, such as having the principal visit a U.S. embassy or consulate for notarial services, or having a foreign notary’s document authenticated.
- In the case of a deceased person, the personal representative assigned during probate has the authority to sign documents and make decisions concerning the disposition of the estate. Remember, a person’s position as an heir to the deceased does not necessarily make him or her an owner until probate is closed. In addition, it is important to know that a power of attorney (even a durable one) cannot survive the death of the principal.
More about time periods
- All listing agreements in Florida are required to have a definitive termination date. A licensee may be disciplined by the Florida Real Estate Commission (FREC) for failing to include a definite expiration date in a listing agreement. An agent and seller should choose a mutually agreeable termination date, which they can always modify or extend by mutual assent. (Section 475.25(1)(r), Florida Statutes)
- The Extension Addendum to Contract gives members a quick, easy way to modify common contractually defined time periods (loan approval/commitment periods, inspection period, title review period, etc.). Simply check the box (or boxes) for the time period(s) you wish to modify and have the addendum executed by the parties. As always, if you are concerned about the proper way to modify a contract, refer your customer to a legal professional for assistance.
- If a buyer needs additional time to secure financing, you should request that the seller grant an extension for the closing date, and also request an extension to the financing contingency term. Extending the closing date doesn’t automatically extend the buyer’s time in which to obtain financing. Generally, a contract that’s contingent on financing includes a timeframe during which the buyer can apply for and secure financing. Depending on the contract’s terms and financing contingency, buyers may risk losing their escrow money if they can’t secure financing before their financing contingency term expires.
Leasing after closing
If a property is subject to a lease after closing, the buyer and seller should carefully review occupancy and leasing language in the contracts to get a full picture of their rights and obligations in this matter, and they should consult a lawyer if they need help understanding or complying with these terms. Here is a brief summary of these sections as covered in the Florida Realtors/Florida Bar (FR/Bar) contracts, arranged chronologically:
- Seller shall deliver copies of the lease(s) and a written disclosure of the facts and terms to the buyer within five days after the Effective Date.
- Buyer may terminate the contract by delivering written notice to seller within five days after receipt of the lease(s) and written disclosure if buyer is not satisfied with them.
- Seller shall furnish Estoppel Letter(s) (or seller’s affidavit if seller is unable to obtain an Estoppel Letter) to buyer at least 10 days prior to closing.
- Buyer may terminate the contract by delivering written notice to seller within five days after receipt (but no later than five days prior to the Closing Date) if an Estoppel Letter or seller’s affidavit differs materially from the lease(s) or representations in seller’s written disclosure just described in point 1.
If parties don’t close on the closing date, the contract still exists. The issue then becomes why the contract failed to close and whether either (or both) parties breached the agreement.
Offers and counteroffers
- A seller is not required to accept any offer. No one can force a seller to execute a contract, even if the offer contains all the requirements stipulated in a listing agreement. Remember, a seller’s decision is not always based on dollar amount alone, and therefore, it should not be evaluated in a vacuum. For example, perhaps the higher offer included an earlier closing date.
- There is no law that requires a buyer or seller to communicate in writing his or her decision to reject the other’s offer.
- There is no Florida law that requires the seller to negotiate with each buyer in the order in which the offers were received.
- A counteroffer serves as a rejection of an initial offer. Therefore, the initial offer is no longer on the table.
- If a seller receives multiple offers on a property, the seller is technically permitted to counter more than one offer at a time, in writing. However, doing so can be complicated. If the seller counters in writing more than one offer and each counter is accepted before the seller is able to communicate an intent to withdraw her counter to one of the buyers, the seller could be bound to multiple written contracts and thus have potential liability to those buyers.
There is no appraisal-to-the-purchase-price contingency built into the core FloridaRealtors/Florida Bar Contract. If a buyer wants to have the option to get out of the contract if the property fails to appraise to the purchase price, he or she should use Comprehensive Rider F, Appraisal Contingency.
Use of addenda
If an executed contract has inconsistencies between pre-printed provisions and an addendum, handwritten and typed terms will generally prevail over pre-printed terms that are in direct conflict.
Assigning rights in a contract
In order for a buyer to assign his or her rights in a sales contract to another party, the parties must have an assignable contract. Then Buyer 1 (assignor) and Buyer 2 (assignee) should enter into a written Assignment of Contract Agreement, which should be drafted by one of their attorneys.
Location of a closing
Florida does not have a law mandating that a real estate closing take place in the county where the real property is located. However, many sale/purchase form contracts include pre-printed provisions indicating where the closing must take place.
A single agent and a transaction agent must present “all offers and counteroffers in a timely manner, unless a party has previously directed the licensee otherwise in writing.” Therefore, if the seller has previously directed his or her single or transaction agent in writing that he or she shouldn’t be presented with any offers written on a certain contract form then it would not be a violation for the seller’s single or transaction agent to refuse to present it to the seller. If the seller hasn’t so previously directed his or her single or transaction agent in writing, then the agent must present the offer in a timely manner. (Sections 475.278(2) and (3)(a), Florida Statutes)