Attorney Transaction Killers Series - Drafting an Attorney Review Provision

Strategies for Avoiding Attorney Drafting Delays

As was described in the Attorney Transaction Killers Series, the deal used as the basis for the case study had a fatal flaw - it simply took too long to get the review completed.  It dragged on for over 2 weeks.  It is imporant in any real estate transaction to get the deal done quickly.  In my opinion, there are two approaches to attorney review:

• The attorney for the purchaser should reduce the offer to writing, secure its execution, and submit it to the other party to the transaction.  The benefit is that you have a binding agreement if accepted.  If it isn't the offer isn't accepted, there are at least deadlines for a counteroffer. 
• The offer is submitted on standardized forms with a rider or addendum for attorney review.  The benefit is that you have an accepted offer with a contingency for rejection by the buyer or tenant if specific terms are not accepted.

Sample Attorney Review Rider

Here is a sample addendum or rider for attorney review for a sales contract:

Special Agreements

This Addendum is entered into this __ day of ________, 2009, by and between Seller and Buyer relating to the Residential Sales Contract, dated __________, identified more fully as Contract No. _______________ relating to the sale of a certain Property located at __________________________.

1.  Scope of Attorney Review.  Within three (3) business days after the acceptance of the the Residential Sale Contract (hereinafter referred to as the "Attorney Review Period"), Buyer or Buyer's Attorney on behalf of Buyer may propose to the Seller specific written modifications or additions to the Residential Sale Contract, provided that the Buyer or Buyer's Attorney shall not propose modifications relating to the following terms and provisions:

a.  Sales Price as set forth in Paragraph ___ of the Residential Sale Contract.

b.  Personal Property set forth in Paragraph ___ of the Residential Sale Contract.

c.  Financing Contingency set forth in set forth in Paragraph ___ of the Residential Sale Contract.

d.  Closing Date set forth in Paragraph ___ of the Residential Sale Contract.

e.  [Insert specific paragraphs not subject to modification or change.]

2.  Submission of Proposed Modifications.  Any proposed written modification or addition to the Residential Sale Contract shall be submitted on the approved Amendment to Residential Use on Form No. ____ currently used by the ____________ Association of Realtors by no later than the expiration of the Attorney Review Period. 

3. Negotiation of Proposed Modifications.  If the Buyer or Buyer's Attorney has proposed written modifications to the Residential Sales Contract as provided in Paragraph 2 of this Attorney Review Addendum, Seller and Buyer shall have an additional three (3) business days (hereinafter referred to as the "Negotiation Period") to negotiate the resolution of the proposed modifications as follows:

a.  Seller shall accept or reject the proposed modifications submitted by Purchaser.

b.  If the Seller rejects the proposed modifications submitted by the Purchaser, Seller and Buyer shall negotiate in good faith to reach an agreement regarding the proposed modifications. 

c.  In the event that Seller and Buyer reach an agreement regarding the proposed modifications, Buyer and Seller shall within the Negotiation Period execute an Amendment to Residential Sale Contract incorporating the accept terms of the proposed modifications.

d.  In the event that the Seller and Buyer are unable to reach an agreement regarding the proposed modification, Buyer shall have the option to elect to cancel or otherwise terminate the Residential Sales Contract by serving written notice of such election on or before the end of the Negotiation Period.  Upon the deliver the notice of cancellation, the Residential Sale Contract shall terminate and be of no further force and effect with the Earnest Money Deposit returned by Seller to Buyer without any deduction.

e.  If the Buyer fails to cancel or otherwise terminate the Residential Sales Contract as provided in Paragraph 3(d) of this Attorney Review Addendum, Buyer shall be conclusively deemed to have waived the contingency for attorney review and the Residential Sale Contract shall remain in full force and effect without any modification.

[Signature Block]

Comments

The Addendum for Attorney Review is set forth as an example and shall not constitute legal advice or create an attorney-client relationship between the author and reader.  For more information on the drafting of attorney review provisions, please contact your Broker or a licensed attorney in your state.

Interested in obtaining professional representation for your transaction?  Contact Ryan Shaughnessy at PREA Signature Realty at 314-971-4381 or send an e-mail to Ryan@PREASignatureRealty.com.

Attorney Review Series