From the July 18, 1994 Massachusetts Lawyers Weekly

Real Estate: Residential P&S Agreements: Drafting Considerations,

Part I
By William V. Hovey

My entry into residential sale transactions is usually at the "post-offer" stage where most of the major points have been addressed and the parties have agreed to sign a so-called "standard" purchase and sale agreement.

However, on ma-ny occasions I have been successful in producing a much fairer and more comprehensive agreement. In the event you too are given the opportunity to participate in drafting the final agreement, I offer the following comments and caveats relative to single-family house sales.

Parties - One Individual Seller

When a single individual is the seller, it is essential to ascertain if such person is married since there is still a right of dower on death.1 Accordingly, the single seller should warrant or represent as to marital status and, if married, the seller's spouse should join in the agreement for the purpose of releasing dower in case the individual seller dies before the closing.

Parties - Executor

If the selling executor has already been appointed, a certificate of the executor's appointment, the will and any codicils should be examined for assurance that the executor has authority to sell.2 If the selling executor hasn't been appointed, copies of the probate petition, will and any codicils should be reviewed, and, depending upon when the return day is in relation to the closing date, the sale may have to be conditioned on the procurement of the appointment of a temporary executor, and perhaps procuring a license to sell. A closing within any appeal period is safe so long as there is no appearance on file prior to the recording of the executor's deed.3

Since an executor has a duty to obtain the highest price,4 a buyer should require the selling executor to obtain assents to the sale from devisees of the realty in question to minimize the risk of losing the sale.

If an executor sells to a purchaser for value pursuant to a power of sale in the will, the executor conveys title free from claims of creditors, legatees and devisees.5 And even though the will does not contain an express power of sale, such a power may be implied if the executor can not carry out the duties or obligations imposed by the will without so selling.6

Parties - Administrators

An administrator, having no title or implied power to sell, must obtain a license to sell and, like an executor, must obtain the highest price for the real estate. Heirs should assent to the sale to maximize the buyer's chances of acquiring title. Also the closing can safely occur within the license appeal period if the docket is clear at the time of deed recording.7

Parties - Trustees

Whether the seller is a testamentary trustee or a trustee of a nominee trust, a Massachusetts business (corporate) trust, or other non-testamentary trust, the trust instrument should be examined to confirm the trustee's authority to sell. Non-testamentary trustees should also include the book and page or document number of the trust in the sales agreement. Buyers from trustees of a nominee trust should require that the trustees deliver a certificate of their authority to sell and a certificate of the beneficiaries that none of the beneficiaries is a corporation selling substantially all its assets or - if an individual - has died or is under any other legal disability.

Parties - Corporation

If time or distance do not permit verification of the existence of the corporate seller prior to signing the agreement, a certificate of the clerk setting forth the authorizing vote should accompany the agreement.

Description - Street Address

Usually the sole description of the property in the agreement is a street number which may be a sufficient identification. However, if the property consists of more than the house lot, e.g. also an adjoining vacant lot which typically wouldn't have a number at all, the buyer may not be able to force the seller to convey the second lot. Accordingly, a buyer should attempt to minimize this risk by including, after the street address, language such as "being all of the real estate owned by Seller on or off Elm Street in Utopia."

Description - Area

A seller should avoid a representation as to area unless such representation refers to a recorded plan, since an incorrect area statement may give the buyer an opportunity to avoid the agreement.8

Description - Record Reference

A better procedure is not only to recite the book and page or document number of the seller's deed, but also to attach a copy of the deed or transfer certificate of title to the agreement.

Description - Vacant or New Lots

If in dealing with unimproved land there is no plan of record showing the parcel, the description should be in terms of compliance with subdivision and zoning bylaws or other minimum dimensional requirements, e.g. " ... having (a) not less than 200 feet of frontage on Elm Street, (b) an area of not less than 40,000 square feet, (c) a lot width of not less than 200 feet at any point and (d) a lot depth of not less than 200 feet at any point, all as approximately shown on a sketch attached hereto."

Included and Excluded Property

By far one of the most time consuming aspects of a sale concerns the items to be included - whether or not there will be an additional charge to the buyer for such items - and the items to be retained by the seller. Real estate fixtures in Massachusetts can be whatever the parties want them to be, but, in the absence of agreement, if the removal of an unspecified item would cause material damage to the structure, then such item is probably a fixture.9 To avoid a confrontation at the closing, exhibits listing included items, other than those in the printed form, and excluded items should be made part of the agreement.

Quality of Title

Most printed agreements require the seller to deliver a "good and sufficient quitclaim deed" conveying "good and clear record and marketable title" free from encumbrances, with certain exceptions.

A good and sufficient quitclaim deed is, I believe, a deed (a) properly executed in accordance with existing statutory requirements, (b) in form acceptable for recording or registration and (c) with a warranty from the grantor that the grantor did not, during the period of the grantor's ownership, encumber the property except as specified in the deed.10

A deed from a trustee of a nominee trust or Massachusetts business trust would ordinarily be a quitclaim deed, but a deed from a testamentary trustee, executor or administrator would generally be without covenants since such a fiduciary usually did not get involved in the management of the property.

But regardless of the relationship of the seller to the property, one should be aware of the statute11 that provides "If real property upon which any encumbrance exists is conveyed by deed or mortgage, the grantor, in whatever capacity he may act, shall before the consideration is paid, by exception in the deed or otherwise make known to the grantee the existence and nature of such prior encumbrance so far as he has knowledge thereof."

A "good and clear record title" "rests on the record alone, which must show an indefeasible unencumbered estate";12 a "good marketable title" "embraces an actual title which may rest on disseisin for twenty years or more, and is established by evidence independently of record."13

It is important to many buyers that they can obtain an owner's and a loan title insurance policy and appropriate language must be added to the agreement, since most printed form agreements I have seen do not specifically make provision for such policies. A lender's requirements for financing a purchase would typically not be satisfied by merely a "good and clear record title"; instead the title policy required by most lenders would also have to be free of mechanics liens, rights of parties in possession and boundary line exceptions.

One of the more troubling printed encumbrance exceptions is "easements, restrictions and reservations of record, if any, so long as the same do not prohibit or materially interfere with the current use of said premises." This language would arguably require a buyer to complete the purchase even if there was an underground utility line easement over a substantial portion of the property. Such an easement might prohibit the construction of any improvements such as a building addition, swimming pool or tennis court in the easement area, or allow the easement holder to remove any such improvement at a future date, but would not affect the use of the property for residential purposes. Accordingly, if the buyer is unable or unwilling to have the title searched before signing the agreement, or if the seller will not specify all encumbrances, the buyer should at least add something similar to the following to this exception clause:

"and do not prohibit the construction of improvements on any unimproved portions of said premises."

The printed exception as to "provisions of existing building and zoning laws" is really not a title exception and compliance with all federal, Massachusetts and municipal laws and regulations including building, zoning and subdivision laws should be dealt with elsewhere in the agreement.

Although proposed municipal betterments don't come up that often, the buyer may have to incur an additional expense if the property will be subject to a betterment assessment. The reason is that the buyer's lender will ordinarily require that the betterment be paid off in order to give the lender a first position.

Therefore, consider giving the buyer some say in the matter by adding "and approved by Buyer" after the exception, "any liens for municipal betterments assessed after the date of this agreement," or, having the seller make a representation "on knowledge and belief" that there are no existing or proposed betterments.

Endnotes

1 G.L. c. 189, § 1.

2 Marsh v. Drowne, 1 Mass. App. Ct. 777, 307 N.E. 2d 595 (1974) (executor's authority).

3 G.L. c. 215, § 9A. It is also safe if an appearance has been entered and is then withdrawn.

4 Thornton v. McWalter, 329 Mass. 768, 110 N.E. 2d 105 (1953); Boston Safe Deposit & Trust Co. v. Lewis, 317 Mass. 137, 57 N.E. 2d 638 (1944).

5 Massachusetts Conveyancers Association Title Standard No. 10.

6 May v. Brewster, 187 Mass. 524, 73 N.E. 546 and Cronan v. Adams, 189 Mass. 190, 75 N.E. 101.

7 G.L. c. 215, § 9A.

8 Mabardy v. McHugh, 202 Mass. 148, 88 N.E. 894.

9 Winslow v. Merchants' Insurance Co., 4 Metc. 306.

10 G.L. c. 183, § 11. The statutory form of quitclaim deed is form (2) in the appendix to chapter 183; "Quitclaim Covenants" are defined in section 17 of chapter 183.

11 G.L. c. 184, § 21.

12 O'Meara v. Gleason, 246 Mass. 136, 140 N.E. 26 and Coons v. Carstensen, 15 Mass. App. Ct. 431, 446 N.E. 2d 114.

From the September 12, 1994 Massachusetts Lawyers Weekly

Real Estate: Residential P&S Agreements: Drafting Considerations,

Part II
By William V. Hovey

Here follows more comments and caveats to agreements for the purchase and sale of single-family houses.

Plan For Conveyance

If a plan is required, the buyer should have the agreement provide as much specificity as possible, e.g., "endorsement by the Planning Board of Utopia that no approval is required under the subdivision control law" and provide for the buyer's written approval of the plan "which approval shall not be unreasonably delayed or withheld." Moreover, if a definite subdivision plan is involved, the closing should be on an ascertainable date, e.g., "the third or next business day," after any appeal period has expired without the entry of an appeal.

Where "the property lines shown are the lines dividing existing ownership, and the lines of streets and ways shown are those of public or private streets or ways already established, and ... no new lines for division of existing ownership or for new ways are shown," a certificate to that affect on such plan by a registered land surveyor will allow the plan to be recorded without planning board endorsement.1

Payment Of Purchase Price

Recent failures of banks and mortgage companies and buyers' use on out-of-state funds has made the payment of the sales price a difficult and sensitive issue. Assuming there is no seller financing, a seller should at the very least require certified, cashier's, treasurer's or bank checks on Boston clearing house funds. Delete "in cash" from the printed form for safety in handling and Internal Revenue Service reporting reasons. A seller should also consider adding an option to require a wire transfer to the seller's bank.

And since the buyer's lender is typically not a party to the purchase agreement, the seller would be well advised to make the mortgage commitment contingent on the lender agreeing to comply with the purchase price provisions.

If there is to be seller financing, it is essential to attach drafts of the actual note, mortgage and other financing documents to be executed at the time for performance to avoid re-negotiating the transaction at the closing, or, perhaps giving either party the chance to assert that the agreement is unenforceable as an "agreement to agree."