The California Residential Purchase Agreement and Joint Escrow Instructions (C.A.R. Form RPA) was revised in both June and July. Three significant changes that every agent should know:
(1) a new contingency specifically for insurance has been introduced;
(2) delivery of notices and documents now defaults to the Designated Electronic Delivery Address as stated in the Broker Section; and
(3) the Cooperating Broker Compensation paragraph in the Broker Section has been removed.
A separate contingency just for insurance
The revised RPA includes a new contingency just for insurance. Specifically, the insurance contingency makes the purchase agreement contingent upon the buyer’s assessment of the availability and affordability of property insurance for the desired policy. (See paragraph 8D of the RPA.)
This separate contingency for insurance is more straightforward than reliance on either the loan or the investigation contingency. But agents should understand that the insurance contingency also applies to the buyer’s ability to obtain insurance required by the lender. Buyers cannot remove their insurance contingency and then use the loan contingency to cancel if they cannot obtain lender-required insurance. Doing so would result in a breach of contract.
The Designated Electronic Delivery Address as written in the Broker Section is now the default when delivering notices or documents such as the Notice to Buyer to Perform or Demand to Close Escrow.
Under the newly revised RPA, the Notice to Buyer to Perform, the Demand to Close Escrow or any document or notice will be deemed delivered and received if sent to an agent’s “Designated Electronic Delivery Address,” which is the email address written in the Broker Section on the last page of the RPA. This is now the default. Moving forward, once the document is delivered to the designated email address, delivery is considered complete.
The prior system was challenging because it was advised for listing agents to verify that the notice had been “personally” received by the buyer’s agent, and sometimes, the buyer’s agent would try to evade any communication to get extra time for their client. This change is a welcome fix, but agents should still exercise caution. Agents should be careful about exactly which email address is stated in the Broker Section. Make sure that the stated email address is one that the agent is currently using and be alert to the possibility that transaction management software may auto-populate an unwanted email address. Otherwise, the seller could deliver a Notice to Buyer to Perform, and the buyer’s agent might be completely unaware that it was sent.
If an agent would like to return to the previous system of delivery and “personal” receipt, they may check the box that attaches the Designated Electronic Delivery Address Addendum (C.A.R. Form DEDA). But even attaching the DEDA will not return you entirely to the prior system of personal receipt since “delivery” has been slightly redefined to mean delivery to the inbox of the authorized agent.
Removal of the Cooperating Broker Compensation paragraph in the Broker Section
In July, C.A.R. made the decision to remove all references to cooperating broker compensation from all C.A.R. forms, including the purchase agreements. In the RPA this meant removing the Cooperating Broker Compensation paragraph in the Broker Section on the last page.
Other Changes in the June 2024 revised RPA
The above changes are perhaps the most significant changes to the RPA, but not the only ones. Other changes include:
The Fair Appraisal Act Addendum (C.A.R. Form FAAA) is no longer a separate addendum. The FAAA has been removed from the C.A.R. forms library. Instead, the notice has been placed directly in the body of the RPA and other purchase agreements. This is one less addendum that agents need to worry about.
A Notice to Buyer to Perform (C.A.R. Form NBP) with multiple demands will be enforceable even if some of the demands are void. For example, a NBP might demand that the buyer remove contingencies for both appraisal and documents. But let’s say the seller hasn’t provided all of the required documents. This means that the buyer will still have five extra days from the time the documents are delivered. Under the new rule, the NBP is still effective in demanding the removal of the appraisal contingency even though it would be void regarding the demand for the removal of the documents contingency. The practical effect of this change is that the burden will be on the buyer to figure out which demands are valid and which can be ignored.
The RPA clarifies small holes in walls need not be repaired. The revised RPA states that the seller does not need to repair the holes left after the removal of any wall hangings (such as pictures and mirrors), brackets, nails or other fastening devices. This was always the intent of the RPA, but now it is stated explicitly.
The buyer is advised not to remove their document contingency until they have received the documents. This is a clarification intended to make explicit how the contract has typically been interpreted. A buyer who removes their document contingency can no longer cancel based on that contingency. (However, the buyer may still have a right to cancel under paragraph 11G which seeks to replicate the statutory cancellation rights based on delivery of the Real Estate Transfer Disclosure Statement (C.A.R. Form TDS) and related documents).
If you have questions about the newly revised RPA, please call Sara Naheedy Law APC to discuss. We are happy to help you with your real estate law needs!