Posted By Larry Tolchinsky on September 27, 2016
For real estate transactions in Florida the real estate contract controls the deal. This is the common understanding of most real estate professionals. However, these contract terms are based upon long standing legal principles which have been codified and become part of Florida’s contract law. So, a more accurate statement is that Florida contract law is really what governs any conveyance of Florida real estate. Xanadu of Cocoa Beach, Inc. v. Zetley, 822 F.2d 982 (11th Cir. 1987).
Which means, that sellers and buyers should know something about Florida contract law before entering into one of the largest transactions they will make in their lifetime.
Here are 5 important things to know about Florida residential real estate sales contracts:
1. Real Estate Contract Forms.
Using standardized contract forms provided by a real estate broker is common in Florida. Any real estate professional with experience has used one.
Usually, these forms are issued or endorsed by one of several Florida Realtor’s association or in conjunction with the Florida Bar Association. You can review the form and download a pdf version online at the Florida Realtors site.
Forms work in most residential sales transactions. They can save time and money and they are legal to use under our law. However, here are four important issues to consider:
- First, these forms can be slanted in favor of one party versus another. The real estate agent can select which provisions to include and what items to check (shifting obligations from one party to another).
- Second, “standard” provisions can be omitted.
- Third, non-standard terms can be added and be made to look like they are “standard” (using an Addendum or handwriting in terms).
- Fourth, there’s no law that requires the parties to use a form. You don’t have to use the standardized contract provided by the real estate broker. It’s fine to draft and use your own real estate agreement. However, contracts related to Florida real estate do have to meet certain minimum legal requirements to be enforceable under our laws (for example, they have to be in writing).
2. The Buyer and the Seller.
The buyer and/or seller can be an individual, an LLC, a corporation, a partnership, an heir, a beneficiary and/or a Trust.
All of these parties can buy and sell Florida residential real estate as long as they are legally competent (over 18, not mentally incompetent and not under the influence of drugs or alcohol etc.) at the time that the contract is signed, and they are not contracting for something that is illegal or impossible. Baroudi v. Hales, 98 So. 2d 515 (Fla. 3d DCA 1957).
3. View the Contract as a Whole.
Hopefully, your deal will close without a problem.
However, if a problem arises, before or after closing, your contract will likely govern how the dispute is resolved. If the controversy gets before a judge, (which usually doesn’t happen until a mediation has occurred) he or she is going to read the entire contract. Not just a particular paragraph.
Why? One of the basic rules under Florida contract law is to read the entire document. This is the rule even if only a couple of paragraphs seem to apply to the conflict. The court will consider the whole agreement to determine what the buyer and seller intended when the deal was entered into by the parties.
For instance, your real estate sales contract has definite times and dates for the payment of deposits. If there is a dispute about the timeliness of a payment, you might assume that the language of the deposit section of the contract is the only thing that matters. However, that’s not how it works under Florida contract law.
The judge will review the agreement in its entirety. If he or she does not find language that says meeting deadlines is an essential term of the transaction (See “Time is of the essence” provisions below), then being late with the delivery of a deposit is not going to support a breach of contract claim.
4. When Does Ownership Transfer to The Buyer?
When a Florida real estate contract is signed, is the buyer now the owner? Is the transaction completed?
Long ago, as soon as the real estate contract was signed, the buyer owned the property. A deed was just evidence of the conveyance to be recorded in the public records to put the world on notice of the transfer. However, nowadays, the signing of a contract is when the “closing process” begins, where surveys and appraisals are ordered, title and lien searches are conducted, and inspections are made.
During this time, the contract is alive and executory. Meaning, the contract is not fully performed; the deal is not completed. The real estate contract is simply an agreement to convey real property, by way of Deed at a closing, only after the parties have performed their obligations under the agreement. See First Mortg. Corp. of Stuart v. deGive, 177 So. 2d 741 (Fla. 2d DCA 1965).
5. Time is Of The Essence, or not.
In Florida, real estate transactions should be final within a reasonable period of time. What is “reasonable” depends on the circumstances.
However, most often, Florida real estate contracts are very specific about deadlines. So much so, that most contracts have language that impacts these deadlines by saying that a deadline must be performed timely or, stated another way, must be performed on or before the exact date stated in the agreement. The common term used for this language is the phrase “time is of the essence.”
This phrase has special meaning in the law; there’s lots of law on the books interpreting this provision of a real estate contract.
If your real estate agreement has a “time is of the essence,” provision, then you need to be vigilant. That’s because a seller, for example, can cancel a contract if the buyer fails to pay the deposit on the date it is due under the agreement or fails to close on the stated closing date.
This is true even if the buyer argues that the seller told him or her he would postpone closing. Or, that he or she would waive that provision. See, Arvilla Motel, Inc. v. Shriver, 889 So. 2d 887 (Fla. 2d DCA 2004). Spoken words don’t work to alter a written “time is of the essence” provision.
Reviewing a Florida Residential Real Estate Contract
The best time to understand your Florida residential real estate contract is before it is signed. After it is signed, it’s a valid and binding legal document. You can still change it, but only if all of the parties agree, in writing, to do so.
That’s why having an experienced real estate lawyer on your side, working with you as you contemplate the transaction, is a prudent decision to make. Your best interests will be served in ways that relying on the experience of the real estate agent cannot. (See Agents and brokers are not attorneys.)
If you or a family member are purchasing or selling real estate in Florida, a good piece of advice before entering into a real estate contract is to talk with an experienced Florida real estate lawyer. Most real estate lawyers, like Larry Tolchinsky, offer a free initial consultation (over the phone or in person, whichever you prefer) to answer your questions.
If you found this information helpful, please share this article and bookmark it for your future reference.