What happens when the Seller refuses to sign the Release and Cancellation of a Contract? I have updated this post for the new Far Bar As-Is Contract used from November 1, 2021. This is not a short answer but I suspect there’s $$ involved so take the time or give me a call, Chris, at 561.626.8550.
In the Palm Beach County and Jupiter area of Florida we use the FAR_BAR_AS_IS_6 Contract most of the time. In this Contract the Buyer gives a deposit at the same time or shortly thereafter both parties execute a Contract and often a secondary deposit after a period of time. If there is a financing contingency then they are applying for a loan. If there is an HOA or Condo rider then they are doing that. MOST of the time the option to cancel the Contract is of the Buyer but it can also be the option of the Seller.
If one party chooses to exercise their option to cancel then they must send a TIMELY ( AS “TIME IS OF THE ESSENCE”) notice of cancellation in the form of a simple letter to the Seller using the address on the Contract, signed by all Buyers, and delivered to the Seller via mail, fax or personal delivery (NO TEXT MESSAGES) to them OR their real estate agent (ASSUMING THE AGENT IS IN A SINGLE OR TRANSACTIONAL AGENCY) that reads something like this…
Please be advised that I/We are notifying you as per (FOR EXAMPLE) Paragraph 12 of the Contract between us dated xx/xx/xxxx that the (FOR EXAMPLE) As-Is condition of the property is not acceptable and that I/We are canceling the Contract between us.
This is a notification to the other party that does not include the language “by signing below.” Although I have been told that the current Release & Cancellation form DOES qualify as a notice of cancellation from one party to the other regardless of whether it is signed by the other party. Still, I like the format above as it is clear that it does not need to be signed by the recipient party.
So, let’s assume that a notice similar to the above and/or their Release & Cancellation form was sent to the other party but they are refusing to sign it. We will assume the notice was given inside of the applicable timeline so then the Contract is now cancelled. But what about the Escrow Funds?
The Escrow Funds are a separate matter from the Notice to Cancel the Contract but are spoken to on the Release & Cancellation form we use.
Now, most agents will not send the notification letter noted above but send only the Release Cancellation Form and IF the other party signs it then both parties agree. But what if the say the Seller refuses to sign the form? Then we are in a sticky area as far as the Escrow Funds are concerned. The Escrow Agent should not disperse the funds without identical instructions from all the parties they are holding the funds for. They can, but in doing so they open themselves up to a FREC complaint (for a brokerage) and/or litigation. If the funds are being held by a Florida Real Estate Brokerage then that Brokerage must implement a method to resolve the situation along a timeline which begins once they have a ‘good faith doubt’ as to what party is entitled to the Escrow Funds. It is best, in my opinion as we discuss in this blog, to have the Escrow Agent be a Florida real estate brokerage as they, and only they, have the least expensive option available to resolve the situation which is an Escrow Dispersal Order (EDO) from the Florida Real Estate Commission.
Note as well that the Release and Cancellation form acts asa release of liability.
Should the property be placed back on the market in the local MLS? In our local MLS there is nothing which would prohibit this. If the listing agent believes that proper notification was sent and the Seller instructs them to place the property back on the market so as to solicit other offers then this is perfectly OK. In fact, some would argue that the Seller (and their agent) has an obligation to market the property aggressively so as to enter into a Contract with a third party for the most they can get so as to minimize the adverse affect of the other party should they wish to make a claim against them. Should one party not release the other by signing the Release and Cancellation then Paragraph 16 (FAR BAR As-Is) would be implemented.
(16) DISPUTE RESOLUTION: Unresolved controversies, claims and other matters in question between Buyer and Seller arising out of, or relating to, this Contract or its breach, enforcement or interpretation (“Dispute”) will be settled as follows:
(a) Buyer and Seller will have 10 days after the date conflicting demands for the Deposit are made to attempt to resolve such Dispute, failing which, Buyer and Seller shall submit such Dispute to mediation under Paragraph 16(b).
(b) Buyer and Seller shall attempt to settle Disputes in an amicable manner through mediation pursuant to Florida Rules for Certified and Court-Appointed Mediators and Chapter 44, F.S., as amended (the “Mediation Rules”). The mediator must be certified or must have experience in the real estate industry. Injunctive relief may be sought without first complying with this Paragraph 16(b). Disputes not settled pursuant to this Paragraph 16 may be resolved by instituting action in the appropriate court having jurisdiction of the matter. This Paragraph 16 shall survive Closing or termination of this Contract.
Note Paragraph 17:
(17) ATTORNEY’S FEES; COSTS: The parties will split equally any mediation fee incurred in any mediation permitted by this Contract, and each party will pay their own costs, expenses and fees, including attorney’s fees, incurred in conducting the mediation. In any litigation permitted by this Contract, the prevailing party shall be entitled to recover from the non-prevailing party costs and fees, including reasonable attorney’s fees, incurred in conducting the litigation. This Paragraph 17 shall survive Closing or termination of this Contract.
NOTE a notice to the agent for the other party is considered notice to that party so long as that agent representing them and receiving the notice is acting in a Transactional or Single Agency relationship with them. Most agents in Florida are Transactional but watch out for the limited services listings as many of these are No Brokerage relationship listings.
First, the release and cancellation I AM TOLD acts a notification from one party (typically the Buyer) to the other party (typically the Seller) that they are cancelling the Contract between them. This can also be done via a letter and some would ague should be. This notification is made through the agent for the other party when that agent is acting as a Transactional (to one or both parties) or Single Agency. So the agent for the Buyer types this form up, gets the Buyer to sign it, and sends it to the agent for the Seller. This can be in an email but NOT in a text message. So now the Seller constructively has been notified. Does the Seller have to sign it? What happens if they do not?
OK, Does the Seller have to sign this? NO, they do not have to do anything. Should they? If the notice to cancel was made in a timely manner, say within the Inspection Period or before the Loan Approval Date then they probably should. The As-Is clause is very one sided. The As-IS condition is acceptable at the sole discretion of the Buyer. The Loan Approval contingency has some conditions though and before you sign, perhaps you should look into if the Buyer complied with those conditions.
What happens if the Seller refuses to sign it? Well, it’s a mess for sure. First, the Listing Agent can (and many argue they should) mark the property as being available again in the MLS and try to procure another Buyer. Second, this form is also a release of liability for the Brokers and the Buyer/Seller when signed by both parties. If it’s not signed then there is a potential liability issue “hanging out there.” Third, and perhaps most important, this form is the “identical instructions” required for the Escrow Agent, noted on the Contract, to disburse the Escrow Funds to one party or the other or some negotiated split. Without “identical instructions” the Escrow Agent can not (should not) disburse the funds.
