| Did you know that utilities cause more post-closing phone calls than any other aspect of a Purchase & Sale Agreement?
In a seller’s market, such as what we’re experiencing now, delayed possession is common. Due to this, many contracts include a delayed possession rental agreement.
Form 65B creates an issue regarding utilities you may not realize exists. The majority of contracts are submitted into escrow with services of escrow requested rather than waived (Form 21 line 14)*. However, paragraph 5 of form 65B states tenant (seller) is responsible for payment of utilities during the term of the agreement. When a contract is submitted into escrow with Form 65B and waived on page one, the parties need to understand that escrow has no involvement with utilities. When Form 65B is submitted into escrow and services for utilities is “selected” on page one – escrow needs to call the brokers. It is then explained that “selected” instructs escrow to pay any final utility bill* as of the closing date, not end of possession. When escrow calls, an interesting conversation begins. Usually one of two things has been assumed:
– The parties assume form 65B overrides page one of the contract, incorrectly believing utilities have been waived.
-Alternatively, some assume by marking “selected” on page one of the contract, it negates paragraph 5 of form 65B.
Are you scratching your head yet? It’s beneficial to everyone to take an extra look at how utilities will be handled when you add the element of delayed possession.
An addendum to clarify the matter is typically a good idea. If services are not waived, they will be paid to the close date only.*
Always call your escrow closer if you are unsure of how a contract directs them to handle utilities.
*Pertains to providers with lien-rights, not to all utility providers |
