The Importance of Completing Paragraph 21 of One to Four Family Residential Contract

The Importance of Completing Paragraph 21 of One to Four Family Residential Contract

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After reviewing thousands of TREC One to Four Family Residential Contracts, I have come to understand the importance of the parties fully completing Paragraph 21 entitled “Notices”.  I have seen contracts where the paragraph was completely empty, others with only e-mail addresses for one or both parties, and others that only listed the realtor contact information.

While the contract itself is legally sufficient if the parties/property are identified, the consideration is clear and the contract is executed by both parties, let me give you some of the main reasons why it is in your client’s best interest to have their contact information fully completed in Paragraph 21:

  1. Throughout the contract, there are provisions that hinge on giving the other party notice. If there is nothing in Paragraph 21, it gives the other party a legal advantage of determining on their own where they can send such notice.
  2. If the realtor’s contact information is entered in this paragraph, it could arguably add an additional legal duty owed to the client, and puts the onus on the agent to quickly communicate what was sent to them by the other party. A best practice would be to complete the paragraph with the client’s information and add “cc realtor at [realtor’s e-mail address]”. That way, you should receive notices at the same time as your client without taking on additional legal or fiduciary risk.
  3. If there is an Earnest Money dispute, having a fully completed Notice paragraph could mean the difference between your client getting the Earnest Money or not. Paragraph 18C provides that either party can send a release of earnest money for execution upon the termination of the contract. It also provides that if one party stonewalls the demand of the other, the title company shall promptly provide a copy of the demand to the other party, and if they don’t respond in writing within 15 days, the title company may disburse funds to the party demanding the EM without recourse. Title companies RELY on this the protections of this provision, but can only safely do so if the Notice provision is completed. Just as important, if the realtor’s information is in the Notice provision, then the title company can legally rely on that contact information and send the notice to the realtor who then may be caught in the crosshairs of what should only be between the parties.    

While the Notice provision may not be on the top of mind when preparing or reviewing an offer, there can be unintended consequences for both the parties and/or realtors. As always, agents should discuss this information with their broker and counsel before making changes to procedures.

This is for informational purposes and is not a substitute for legal advice.

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