April 2011-Home repairs prior to closing can sometimes be a key component of agreements of purchase and sale: e.g., we'll buy your house if you fix the windows, patch the roof, etc. When buyers and sellers agree that something will be fixed, both should ensure that the nature and scope of the repairs agreed upon are clearly documented.
When a dispute arises, courts ask, what was the intention of the buyer and the seller with respect to the repairs? The best evidence of intention is clearly worded language in the agreement. An ambiguous clause can cause confusion among the parties and may give either side footing to take opposite positions.
To that end, buyers and sellers should consider setting out the exact repairs to be completed: an agreement to "repair the plumbing" is likely too vague. Consider also how the parties will confirm that the repairs have been completed (e.g., producing invoices or an inspection) and whether the repairs will be capped at a certain cost.
Another consideration is whether agreements with respect to repair should merge on closing; that is, whether, by the purchaser accepting deed/transfer the obligations of the seller to repair will end -even in the event the repairs are not completed.
A good example of all of this is last year's Superior Court decision, Rosenhek v. Breda. The buyer waived a home inspection in exchange for the seller performing certain repairs before closing. The seller was to "eliminate standing water on flat roof and around skylight". When the roof leaked a couple of years later, the purchase sued the seller.
The Court found that the seller didn't do enough prior to closing to eliminate the water. To have completed that repair, the Court found that, on the evidence, the seller was really required to slope the roof to allow for appropriate draining.
However, the Court also found that it was not the intention of the parties that the obligation to repair the roof would survive closing and the purchaser ultimately lost. The Judge noted that the purchaser could have sought confirmation that the repairs were completed prior to closing and, failing such confirmation, could have then either terminated the agreement of purchase and sale or sought to extend the repair obligations after closing.
Although it is not always easy in the often fast paced environment of buying and selling homes, taking the time to clarify your intentions, in writing, with your advisors, can go a long way to reduce confusion and conflict, both before and after closing.