REAL ESTATE CONTRACTS ARTICLES
Implied Warranties for New Homes
Question: Four years ago we bought a new home in Buckeye from a homebuilder. Last week during heavy rainfall we had a major roof leak. The next day, when we called the homebuilder’s sales representative that sold the home to us, she said that we only had a two-year warranty for our home. She then said that, similar to a two-year warranty for an automobile battery or tires, the homebuilder had no obligation four years later to do any roof repairs. Is our sales representative correct? Answer: No. Under centuries old English and American common law, a homebuilder impliedly warranted…
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Resolving Earnest Money Disputes
Question: We signed the standard Arizona Association of Realtors purchase contract (“AAR Purchase Contract”) to buy a home in Glendale. We deposited $12,000 earnest money. The seller, however, didn’t disclose that there was a “pickleball” home next door with loud pickleball tournaments on weekends. Our broker, who is a family friend, told us of this pickleball problem after talking to one of the seller’s neighbors during our home inspection. Therefore, we cancelled the AAR Purchase Contract during the 10-day inspection period. The seller says that we have no right to cancel the AAR Purchase Contract because of a pickleball hobby.…
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Recourse for Unknown Tenants
Question: We recently purchased an investment home in the San Tan Valley for $425,000 cash. When our real estate agent showed us the home, this home had some furniture in the living room and in two of the bedrooms. Our real estate agent said that he thought that was furniture left behind by the last owner. Two days later we signed the purchase contract to buy the home. After escrow closed, and we had the keys, we went to the home with two contractors to start the repairs to the home. To our surprise, there was a family of four…
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When Is a Mortgage ‘Due on Sale’ Clause Triggered?
Question: Last week we went to an estate planning seminar in our Litchfield Park community center. We now have the forms to transfer our home to a Revocable Living Trust (“RLT”). Our home, however, still has a $220,000 mortgage. In reviewing this $220,000 mortgage, there is a “due on sale clause” in the mortgage that requires us to pay off this $220,000 mortgage if we transfer the title to our home. Is that “due on sale clause” enforceable if we transfer the home into our RLT? Answer: Probably not. Most mortgages (called “deeds of trusts” in Arizona) have a “due…
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Renting Space in a Shopping Center? What You Should Know
Question: My wife is renting 1,200 square feet of space for her hair salon in a Gilbert shopping center. The lease for this 1,200 square feet is more than 45 pages long, including exhibits. We have a limited budget, and we cannot afford to have an attorney review this 45-page lease. Are there any key areas of this 45-page lease that my wife should review other than the amount of rent and the term of the lease? Answer: In my opinion your wife should focus on the language in the lease relating to the following five areas: (1) default clause,…
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Lease Renewal Allowed Even With Late Notice of Renewal
Question: Nearly five years ago we signed a lease for a 2,500 square foot office suite in a north Scottsdale office building. The five-year lease included an option to renew the lease for another five years, with six months’ notice prior to the expiration of the five-year lease. If the five-year lease is renewed, the only modification of the five-year lease would be a consumer price index (“CPI”) increase in the monthly rent. We want to stay in our office suite for another five years, especially with only a CPI increase in the monthly rent. Therefore, eight months before our lease…
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Mediation Before Litigation Under AAR Purchase Contract
Question: We signed the standard Arizona Association of Realtors (“AAR”) contract to purchase a home in north Phoenix and deposited $25,000 earnest money in escrow. We then received the Seller Property Disclosure Statement (“SPDS”) from the seller. On the SPDS, lines 64-68, the seller denied having any prior roof problems. We then closed the purchase of the home. One month later there was a major thunderstorm, and we had major roof leaks in both the living room and the kitchen. A roofing contractor said that we need a new roof at a cost of at least $30,000. Our broker said…
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‘Contract for Deed’ is Allowed Under Arizona Law
Question: We are buying a 40-acre parcel of land in Apache County for $400,000, with a $40,000 down payment. Instead of a standard purchase contract, however, the seller wants to use what he calls a “contract for deed.” In other words, although we will initially pay the $40,000 down payment, we will not get the deed to the 40 acres until we make five years of monthly payments to pay off the remaining $360,000. The seller is from Iowa, and he says that he has always bought and sold land with a “contract for deed.” Is this “contract for deed”…
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