Counting Days in the RPA
DO YOU KNOW HOW TO COUNT DAYS IN THE RPA?
Counting “Days” in RPA/Purchase contract starting with the acceptance date
The very first step in checking the timeframe is to figure out when “acceptance” of the contract occurred. This has a very particular meaning in the RPA-CA. It is the day when the offer (or final counter offer) is accepted in writing and then delivered back and “personally received” by the other party (or the agent for the party, depending on whether paragraph 31 of the RPA-CA or paragraph 3 of the Counter Offer form is filled in).
For example, imagine the buyer makes an offer on Monday, and the seller signs an acceptance of that offer on Tuesday. The accepted offer, however, is delivered back to the buyer’s agent on Wednesday. In this case, Wednesday is the day of acceptance (assuming paragraph 31 of the RPA-CA is filled in with the agent’s name). For purposes of counting the contract, that day, Wednesday, is day zero. The next day after acceptance, Thursday, is day one. (See paragraph 30A of the RPA-CA).
How to count the days after acceptance: As stated above, the day of acceptance is day zero, and the next day after that is day one. “Days” means calendar days unless otherwise specified. This means that you will then count every day including Saturdays, Sundays and holidays. However, the very last day for performance cannot be a Saturday, Sunday or holiday. In that case, the last day is the next business day. All of the time periods in the RPA-CA are counted in this manner. The only exception is for placing the earnest money deposit into escrow, where you count only business days. (See paragraphs 30F, 30G, and 3A(1) of the RPA-CA).
Check the buyer’s compliance day: After determining the acceptance date, and counting the days accordingly, check the provision of the contract that seller is relying on in demanding the buyer’s performance. For example, if the seller is demanding that the buyer remove the inspection contingency, then the buyer must be given at least 17 days under paragraph 14B(3) (unless changed). Remember, if the last day is a Saturday, Sunday or holiday, then the seller cannot demand performance before that last day. The NBP can be delivered no earlier than 2 days before the expiration of the applicable time frame.
Most of the contingencies must be removed within 17 days. Other deadlines include: 7 days for the buyer to deliver verification of down payment and closing costs; 7 days for the buyer to deliver a prequalification letter; 17 days for the buyer to sign and return certain statutory disclosures such as the TDS, the NHD and the lead disclosures; 3 business days to put the earnest money deposit into escrow; and an additional 5 days to remove contingencies after delivery of any report, disclosure or information for which seller is responsible (See STEP TWO below for further explanation of this extra 5 days). These are the default time periods as stated in the contract, but the buyer and seller can agree to make them longer or shorter.
Two days before expiration is the earliest allowable delivery of the NBP: The contract specifies that the NBP cannot be delivered any earlier than 2 days before the expiration of the buyer’s time. This means, for example, if the seller is demanding that the buyer remove contingencies by day 17, then the earliest the NBP can be delivered is day 15.
STEP TWO: Make sure the seller has fulfilled all seller obligations.
The obligation to deliver all disclosures and allow buyer investigations: The seller should be in full compliance with all of the seller obligations at the time the NBP is delivered. What this typically means in practice is that the seller should have delivered all of the required disclosures and reports within 7 days per the contract. A seller who has not met that basic obligation, but nonetheless demands that the buyer remove all contingencies, is putting the cart before the horse. It’s necessary to deliver disclosures before the buyer’s obligation to remove inspection and disclosure contingencies arises. Thus the seller’s NBP, if sent out before all disclosures have been made, will likely be defective. The buyer may thus be able to challenge any subsequent cancellation based upon that defective notice.
The RPA-CA specifies that where the seller has sent out disclosures, reports or other information late, then the buyer will have an additional 5 days after receipt to remove contingencies if those 5 days go beyond the 17 day contingency period. (See paragraph 14B(3) of the RPA-CA). For example, if the seller promised to deliver a wood pest report, but that report was only delivered to the buyer on day 15, the buyer would have until day 20 to remove contingencies regarding that report. However, if the report was delivered on day 10, then the buyer still has the full 17 days.
The other critical obligation of the seller is to make the property available for inspection, which must be done during the initial 17 day inspection period of the contract. A seller who cannot make the property available for inspection is in no position to demand that the buyer remove disclosure and inspection contingencies.
The earnest money deposit: On the other hand, there really is no seller precondition that must be met before the buyer is obligated to place the earnest money deposit into escrow. The NBP to the buyer to put the deposit into escrow could be sent over despite the seller not yet having delivered disclosures, since the seller disclosures are only required by day 7.
Seller repairs not required to be completed until prior to final verification: A common misconception among buyer’s agents is that unless repairs are complete, then the inspection contingency need not be removed. However, under the terms of the RPA-CA, seller repairs are not required to be completed until just prior to final verification. So this would typically not be a precondition to the buyer removing contingencies. Thus if the buyer does not remove contingencies by day 17, the seller can properly send over a demand to remove contingencies (assuming, let’s say, a 30 day escrow) despite the fact that the seller has yet to complete repairs.
STEP THREE: The NPB (Notice to perform) (or DCE (demand to close escrow)) must be correctly filled out indicating what the buyer has failed to do, and the seller must sign it.
Use Form NBP: One common mistake is when the listing agent merely sends over the Contingency Removal form (Form CR), and demands that it be signed and returned. But the CR form is simply not a demand and does not qualify as a NBP. The listing agent needs to use the NBP and should not attempt to substitute any other form as a demand.
Check the correct box(s): The notice to perform must specify exactly what action is demanded. Failure to fill it out by not checking the correct box(s) will make the demand pointless and defective.
Do not write in a shorter specified time on the NBP: Another common mistake is for the listing agent to change the “2 days” space to something less than two days. Do not write in “1 day” or “48 hours.” Neither of these times are the equivalent of “2 days” and could render the NBP defective. This time period is set in the contract under paragraph 14E.
The only time this box should be changed is if the time period in paragraph 14E has already been modified on the contract itself, or if the seller wants to give the buyer more time than is required by the contract in paragraph 14E.
The seller must sign the NBP or DCE: This is a direct requirement of the contract. Without the seller’s signature, the NBP or DCE is ineffective. (See 14E(ii)).
STEP FOUR: The NBP (or DCE) must then be delivered to and “personally received” by the buyer’s agent (or the buyer). After which, the listing agent should obtain some type of verification that it was in fact received.
Buyer’s agent or buyer?: The RPA-CA requires that the notice be “personally received” to be effective. But depending on how the RPA-CA is filled out, the notice may be personally received by either the buyer’s agent or the buyer. If the broker box on the last page of the RPA-CA is filled out, then the notice may be delivered to the individual real estate agent for that buyer. If that section is not filled out, then the notice must be personally received by the buyer himself or herself.
Email, mail, messenger, fax or otherwise: The RPA-CA allows for delivery by any method – it doesn’t matter. However, it is recommended to use the same method of delivery by which every other document was sent. If you have a transaction in which the buyer has received every document sent over by email without a problem, then it makes good sense to use the same method for delivery of NBP.
Verification of personal receipt: Ideally, of course, the buyer’s agent will initial the confirmation of receipt. But that obviously will not happen most of the time. The second best solution is to obtain proof from the buyer’s agent him or herself that the NBP was received. This is sometimes conveniently generated when the buyer’s agent emails the listing agent back and angrily wants to know why a NBP was delivered. Indeed, any statement in writing, text, messenger or voice mail in which there is a recognition of the notice received will constitute solid proof of actual receipt.
A third possibility is conversation notes by the listing agent written contemporaneously where the buyer’s agent admits in some fashion to having received the notice. This is not ideal, but sometimes it’s the only way to document personal receipt. To create such a record the listing agent should note the time and date of the conversation, the general substance of the discussion, and the acknowledgement of receipt by the other agent. It should be signed and dated.
Lastly, if the notice is met with a complete absence of any response whatsoever, and there has never been any previous issue with communications or delivery, then the listing agent should send out the notice using several different methods three days in a row. Having undertaken this extraordinary effort to deliver the notice, any claim of non-receipt by the buyer’s agent would surely ring hollow, absent a very good excuse.
****The RPA-CA does allow for a simpler method of proof of delivery, but it must be incorporated into the agreement. By checking the "Other" box under 5A and attaching form DNA (“Delivery of Notices Addendum”), then merely using the chosen delivery method is sufficient to establish personal receipt. (P2PB WILL START DOING THIS IN 2017)*****
STEP FIVE: Count the days.
The first day of receipt is day zero: Having established that the notice was personally received, then that day of personal receipt is day zero. It doesn’t matter what time of day the notice was received, whether it was at eight in the morning or eleven at night, it is day zero. The next day after that is day one whether or not it is a Saturday, Sunday or holiday. And the day after that is day two. Day two lasts all day long until 11:59 at night. It is only after day two has passed that the seller has a right to issue a cancellation.
The final day cannot be a Saturday, Sunday or holiday: The final day is usually day two. But no matter how many days the buyer is given to perform, the final day cannot be a Saturday, Sunday or holiday. If so, the final day skips to the next business day. For example, let’s say the notice is delivered on Thursday, but personal receipt is only established on Friday. Friday is therefore counted as day zero. The next day, Saturday, is day one, and the day after that, Sunday, is day two. But with a two-day NBP, Sunday cannot be the last day. Therefore, the final day skips to the next business day on Monday. The buyer has all day Monday to perform. If the buyer does not, then the seller can cancel on Tuesday.
STEP SIX: The day after the last day to perform, the seller may then sign and deliver a cancellation using form Cancellation of Contract (Form CC).
Check the applicable boxes on the top and bottom portion of the CC form: If the seller is canceling because a buyer refused to remove a contingency then the seller will check box 1B on the top portion of the form. If the buyer has not taken a contractual action, then it is 1C. If the buyer has not closed escrow after being given a DCE then the seller will check "other" and write in “Buyer has failed to close escrow after being given a Demand to Close Escrow.”
Buyer may remove contingencies prior to the seller’s cancellation: Continuing with the same example from STEP FIVE, the seller may cancel on Tuesday. But what happens if on Tuesday prior to the seller canceling, the listing agent receives a contingency removal from the buyer as demanded? In that case, the seller no longer has any right to cancel. Even if the seller were to attempt to cancel the parties would remain in a binding contract.
Cancellation is a unilateral act regardless of whether there is an open escrow: The ten reasons for cancellation as outlined confer upon the seller a right to cancel unilaterally. It is irrelevant whether the buyer “agrees” to the cancellation. As long as the seller has properly followed the correct procedure, the seller’s cancellation will be effective.
But what if there is an open escrow? The answer is that the RPA-CA provides the seller with a unilateral right to cancel the contract, and the seller may therefore cancel the contract without the buyer’s consent. Escrow may require signatures from both parties to cancel the escrow, but the fact of an escrow being open does not affect the validity of the seller’s cancellation. The buyer’s refusal to sign the bottom portion of the CC form does not preserve the buyer’s right to buy or render the seller’s cancellation ineffective.