Connecticut Real Estate Attorney Law Blog

Most of the great State of Connecticut uses broker form contracts when an offer to purchase residential real estate is made.  The majority of Fairfield County uses a binder form followed up by an attorney drafted contract.  I have prepared a summary of real estate transactions in Connecticut for further reading on that topic.  In either case, the selection of the proper contingencies and the drafting of those contingencies is essential.  When the broker is preparing the contract, it is generally considered "OK" (i.e. not the practice of law) to include either standard form contingencies or simple contingencies added to the form contract.  Of course, as a real estate attorney, I would always suggest that an experienced real estate attorney review any proposed contract prior to signature by their client (or add an attorney review contingency!).  Contingency provisions on residential real estate contracts are some of the most important elements of the contract and are especially important for the protections that they provide for the buyer.  Plus, contingencies can be drafted to cover almost any situation.

Ther purpose of this blog post is to give an introduction to the proper use of contingencies in real estate contracts, and then in future posts I will discuss some specific issues relating to some common contingency provisions used in real estate contracts in Connecticut (most of which are generally applicable in other areas also).

In general terms a contingency describes an event that must happen for the contract to be binding.  We are all familiar with the mortgage contingency or the inspection contingency.  So for instance a buyer will add a contingency (or check the appropriate box on the form contract) that states in general terms that they have lets say thirty days to obtain a mortgage approval in an amount no less that $150,000 at a rate of no ore than 6%; or that they have seven business days to obtain a satisfactory home inspection, to use the two most common contingencies we all deal with on a daily basis.  So what does adding the contingency mean?  Basically in these instances, while the buyer has signed a contract to purchase a piece of real estate, her contractual duty to fully perform the contract is contingent upon certain events occurring, in this example a mortgage approval and a satisfactory inspection.  Contingencies can be drafted to cover other events as well, protecting either the seller or the buyer.

Sounds simple so far, correct?  As in most issues dealing with real estate and especially real estate law, the devil is in the details.  The proper contingency provision should contain clear provisions that not only state what the contingency is, but what the obligations of both parties are and the consequences of failing to meet the contingency provision.  So for instance in our mortgage contingency example, does the contingency require that the buyer diligently pursue their application?  What happens if they are simply not approved by the deadline, but are not denied?  What happens if the deadline passes and the buyer is not approved, but also has not requested an extension?  What happens if they obtain an approval, but it is verbal or it contains numerous conditions?  For the inspection, what if the seller does not provide access?  Or the buyers' report states items "should" be repaired or have reached the limit of their useful life?  Or if the buyer simply says the premises are unacceptable without giving the seller the opportunity to make repairs or adjust the sale price?  Or if the time to inspect passes?  Most or all of these questions can and should be addressed in the properly drafted contingency provision.

Most broker form contracts, even in an area such as New Haven that has a Board of Realtors approved standard form contract, are different.  So for instance, the agency form contract for the party making the offer may differ from the form contract being used by the listing agent.  Thus it is essential that the agent first know their own contract and hopefully be comfortable with it, and second be able to spot what is different about the 'other' broker's contract and then be able to point that out to their client.  This of course is where the real estate attorney should also come into the picture.

Hopefully that provides an introduction to the use of contingencies.  I will continue bloggin on this topic in the future with a discussion of some particular common (and not so common) contingency provisions.

For more information feel free to contact me directly through my website or email me at attybegemann@comcast.net.