By Harvey S. Jacobs January 22, 2011
Picture the happy home buyers completing their real estate settlement and driving from the settlement attorney’s office to their new home, only to discover there are no appliances in the kitchen and no washer or dryer in the laundry room. The charming chandelier in the dining room has been replaced by a cheap builder’s standard model, the built-in shelves and mirror in the basement wet bar are gone, the custom drapes covering the sliding glass doors leading to the back yard are gone, and the mature Japanese maple tree that once welcomed visitors in the front yard is now a patch of loose earth. How could this happen?
Most of the time, missing items are the result of misunderstanding and not outright deception. To minimize the possibility of these misunderstandings, the buyer and seller can take a few precautionary steps.
Sellers should familiarize themselves with the local customs relating to what conveys with a sale, and note on the listing agreement and sales contract any nonconformity with those customs. Sellers should carefully review the listing-agreement inclusions and exclusions addenda and confirm that they accurately list all the items they intend to sell (the inclusions) and those they intend to keep (the exclusions).
Buyers must diligently compare the listing agreement inclusions and exclusions at the initial home inspection and immediately raise an issue about any discrepancies. Buyers may, with the seller’s consent, wish to photograph the home inside and out on the date of contract to confirm what appliances, lighting fixtures and built-ins existed on that date.
Although standard sales contracts often provide the buyer with the opportunity to conduct a final walk-through inspection within five days of settlement, the buyer should schedule the walk-though for immediately prior to the settlement. This would reveal any changes in property condition between the time of last inspection and settlement.
If the property is owner-occupied, the listing agent will typically discuss inclusions and exclusions with the seller and use that information to enter the listing in the multiple-listing service database. These days, however, the listing agent might not always have the benefit of discussing those issues with the seller because many listed properties are bank-owned, in foreclosure or for some reason the seller is not available or cooperative. In such cases, listing agents must make their best efforts to identify what items of personal property and fixtures are in the home and will be conveyed to the buyer. It is worth noting that most listings contain a standard disclaimer such as: “information contained herein is deemed to be accurate, but should not be used without verification.”
The purchase and sale contracts used by all local real estate associations contain a provision called “Conveyances,” “Personal Property,” “Fixtures” or a similar name. These clauses are often supplemented with separate inclusions/exclusions addenda using a check-the-box approach. The purpose of these clauses or addenda is to provide buyers and sellers a list of what is being conveyed and what is excluded. As appropriate, each item should be checked “yes,” or “no.” Leaving any line items blank can lead to ambiguity.
By contract, the following items convey: all existing built-in heating and central air conditioning equipment; plumbing; lighting fixtures; storm windows; storm doors; screens; installed wall-to-wall carpeting; exhaust fans; window shades; blinds; window-treatment hardware; smoke and heat detectors; TV antennas; and exterior trees and shrubs. With the increasing appearance of integrated electronics such as flat-screen televisions, the forms now specifically exclude surface- or wall-mounted electronic devices.
Despite these efforts, there are still many gray areas that are the cause of disappointments, complaints and even lawsuits. For example, while the standard form language says that window shades, blinds and window treatment hardware convey, the actual window treatments themselves do not convey unless the box adjacent to window treatments is checked “yes.” Although installed wall-to-wall carpets typically do convey, area rugs and other floor coverings that are not installed wall-to-wall will not convey unless they are specifically added to the addendum. Even the language about surface- or wall-mounted components or devices does not adequately answer the question of whether the wall mounting brackets themselves convey. When in doubt, write it in.
Fixtures are also tricky. By contract, fixtures convey. But just what is a fixture? Practically speaking, an item becomes a fixture and thus conveys when it is “permanently” attached to the real estate through the application of plaster, concrete, bolts, screws, nuts, wire, or nails. Chandeliers and wall sconces directly wired into electrical junction boxes, and built-in appliances such as dishwashers, microwaves, stoves, and some refrigerators that become part of the kitchen decor, will usually be deemed fixtures and convey. However, this is not always the case.
Nationwide, there are varying customs regarding whether these appliances convey. For example, in California refrigerators customarily do not convey. So if you are buying your home from a Californian, you might be surprised to find an empty space where the refrigerator once stood. The best approach is to carefully review the contract clauses or addenda that list the most common fixtures and personal property items and check off all that are in the home. If some items not listed, write them in under the “other” clause.
Although not all possible misunderstandings can be anticipated, by taking a few basic precautions, paying careful attention to the contract terms and learning what the local customs are, buyers and sellers can reduce the possibility that misunderstandings will create last-minute aggravation on what should be a happy day for all.
Harvey S. Jacobs is a real estate lawyer with Jacobs & Associates Attorneys at Law in Rockville. He is an active real estate investor, developer, landlord, settlement attorney, lender and Realtor. This column is not legal advice and should not be acted upon without obtaining your own legal counsel. Contact Jacobs at (301) 417-4144, jacobs@jacobs-associates.com or ask@theho