Settlement date? What settlement date?

As comprehensive and detailed as is our Standard Agreement, it is little more than a meaningless assembly of words until those crucial blank spaces are assigned names, dates and numbers. Then it becomes an offer or a binding commitment to sell and buy under very clear terms.

While not all of the blanks have to be completed (many blanks default to a specific number of days if no number is inserted), can we all agree that one of the essential blanks that has to be completed is that calling for the settlement date?  Apparently not!  For some reason, I have received a spate of calls and one assignment to defend a salesperson in a suit, all relating to the lack of a settlement date written into the agreement of sale!

In most of the transactions where the agreement lacks a settlement date, the sale was made contingent upon the sale and settlement of other property with the right to continue marketing. That standard contingency (SSP-CM) allows the seller to terminate the agreement when: 1) the seller accepts an agreement of sale from another buyer; or 2) the buyer’s property is not sold by a specified date. If buyer’s property is not sold by that specified date, the seller is not required to terminate the agreement of sale, and can choose to wait. In our difficult market, this is what many sellers are doing.  Meanwhile, the buyer remains obligated to continue his marketing efforts.

How long is the buyer obligated to try and sell his property under the SSP-CM? Ordinarily, up until the date for settlement. If the buyer has not sold his property by then, the agreement of sale terminates and the buyer is no longer obligated to market his property. Understand that the SSP-CM alone does not give the buyer the right to terminate his purchase agreement if his existing home is not under an agreement of sale by the date specified in the contingency. That right is the seller’s alone.

The Standard Agreement makes clear in paragraph five (5)(D) that the settlement date inserted in the agreement is indeed a drop-dead date. Nothing extends the settlement date, not even the sale and settlement contingency. If the buyer’s property is not sold by the settlement date, the agreement is null and void, the buyer is to be reimbursed his deposit money and there is no surviving obligation.

No agreement should ever be executed without inserting a settlement date. In its absence, how can we determine when the agreement is terminated? If our seller receives no better offer, why would she release the buyer from his obligation to sell his property? And for how long will the buyer remain obligated to market his property?

Yes, at some point, the buyer is likely to pull his property from the market and cease his good-faith effort to sell it. And I believe there are circumstances where a court would side with the buyer and declare that it was never the intent of the agreement to create indefinite obligations. It could also be argued that the agreement is void from the start because it fails to have a settlement date and therefore violates Pennsylvania’s statute of frauds (Pennsylvania’s law that requires agreements of sale to be in writing and contain certain elements in order to be enforceable).

Our Standard Agreement is comprehensive and detailed because we endeavor to cover all contingencies without the necessity of resorting to lawsuits and court interpretation. When we don’t include essential elements in the agreement, we invite litigation, which is an expensive and time-consuming way of resolving issues that arise between buyers and sellers.