The Residential Real Estate Contract in New Jersey, part 6 of 7

10. Condition of the Property at Closing

A property is usually shown at its best at the time of the selling process. It cannot be assumed that the house will stay well maintained between first inspection and closing, without a specific requirement in the agreement. The seller may have the best of intentions, but his personal needs, time requirements, and focus on his own move from the property may divert him.

The parties must also consider the condition of the utilities, the systems, and the physical structure itself. Will the appliances work as they did at the time the property was shown for sale? Who will pay for damage to the property by fire, or storm? Who will pay for damage caused by the seller, his guests, or his mover?

The agreement should consider these possibilities. It will usually provide that the risk of loss is upon the seller until title passes. That's fair, because the seller has control of the property until he gives up possession at closing, and he probably has insurance to cover much of the damage that could occur to the property. The buyer may want to be able to terminate the contract if the property is damaged beyond a specific measure.

A risk of loss clause is important in an agreement, for without it, the law places the burden of risk on the seller only until the conditions in the agreement are satisfied. Once the conditions are satisfied, the law shifts the burden to the buyer. But it would be difficult for the buyer to get insurance before he is the owner. The agreement between the parties can place the risk where it might be anticipated it would be. Clear language in the agreement, at least, has the effect of making the risk an obligation of the party charged with that risk.

11. Personal Property Included or Excluded

The general rule is that if you would need a tool to remove an item, the item is a fixture, and it is included in the sale. This rule would apply, for example, to the stove, TV antenna or satellite dish, built-in dishwasher, wall-to-wallcarpets, and the drapery hardware.

If the item can be removed without a tool, and without damage to the property, then the seller is free to take the item if not provided to the contrary otherwise in the agreement. Examples might be the refrigerator, free-standing bookshelves, fireplace equipment and screen not built in, and area rugs not fastened down.

The best practice is to identify items of particular importance, or items that might be in question. They should be discussed by the parties and listed in the agreement as in one of two categories - items to remain, or items to be removed.

12. Occupancy of the Property

The question of occupancy is frequently overlooked at the time of pre-contract discussion. The buyer has the right to expect that the property will be available to him at the time he pays for it. And he expects that the seller will have moved out.

The law supports his expectations. If the seller is not out, the buyer doesn't have to pay for the property until the closing. The closing may be delayed. But there are alternatives to delay.

The buyer can trust the seller and accept good-faith representations that the property will not be damaged. Or he can demand an escrow of funds to serve as security against possible damage and non-performance. Or he can wait. The buyer's assessment of the seller is important in deciding what to ask for.

But without written support for the position he wants to take, his options may be limited and his rights difficult to prove and enforce.

The important concept is that both parties think about the issue of occupancy before and after closing, so they can plan for all possibilities.

13. Tax and Other Adjustments

A New Jersey statute provides that taxes will be adjusted as of the day of closing. The usual agreement follows the same pattern. But there can be exceptions.

If the closing comes off as scheduled, then the usual pattern seems equitable. But what if the closing is delayed or otherwise doesn't follow the expected timetable? Suppose the buyer is delayed in closing, and the seller has moved from the property in anticipation of the closing. If the seller followed the agreement's timetable, shouldn't the cost of taxes and other carrying costs be shifted to the party who didn't? Usually the parties don't think about these exceptions.

The point is that if the possibility is considered in advance, it can be dealt with in the agreement. (to be continued)