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The Facts About Purchase and Sale Agreements: An Interview with Kara J. Scott of Kenyon Law Associates, LLP

Please tell us a little bit about your firm and the areas of law that you practice.

Kenyon Law Associates is one of the premier real estate law firms in southern Rhode Island. It was established in 1971 by Archibald Kenyon, who continues to practice law today. Since 1971, Kenyon Law has amassed thousands of title abstracts, which enables us to have a great deal of title information at our fingertips. The firm also maintains separate title abstracts on almost all subdivisions, condominiums and other developments in southern Rhode Island. Our four attorneys focus primarily on real estate matters, handling everything from condominium and residential developments, commercial leases, zoning and planning issues, to residential purchases and sales.

Is there something that most people in Rhode Island don't know about purchase and sale agreements that they should know?

Although the most frequently used purchase and sale agreement is a form created by the R.I. Association of Realtors and filled in by the listing or buying agent, there are a number of sections which have serious consequences for a buyer or seller. Even pre-printed form contracts should be reviewed by an attorney. Additionally, only a licensed realtor is permitted to use the realtor form contract, so an attorney is needed from the very beginning when someone is selling real estate without a realtor.

Can you briefly explain the main reasons why it's important to have a lawyer prepare and/or review a residential purchase and sale agreement?

First and foremost, an attorney will explain the legal ramifications of each and every section of the Agreement. Additionally, an attorney will draft proper language for any unusual circumstances or additional provisions. Any provision that is in addition to, or deviates from, the form contract should be written by an attorney, to best protect the client's interests. Language should be clear and unambiguous so all parties involved understand their rights and responsibilities under the agreement.

What is the Rhode Island state law regarding working with an attorney at this stage?

Rhode Island law gives all parties the right to choose their own attorney to assist and guide them through any stage of a real estate transaction. However, there is no law which requires a party to use an attorney. Unfortunately, many people believe they don't need an attorney and think they will save a few dollars, but if a problem arises the legal fees can end up being much higher. Buying or selling real estate is often the most important legal transaction in one's life, yet it is astounding how many people believe a lawyer costs too much. The peace of mind knowing you have a professional to guide you and protect your interests is priceless.

How reliable is it when a standard "fill in the blank" type of form is used for the agreement?

The realtor contract is a good place to start, but there are sections which can either be beneficial or detrimental, simply depending upon a word inserted in the blank or an initial in one place rather than another. For example, a section of the agreement requires the buyer and seller to initial lines regarding who pays for any special assessments. In a recent transaction, the parties had initialed a line in the agreement which said that the seller would pay the balance on any town assessments. The seller did not understand what that meant and it was not explained to him at the time he signed the agreement. When he learned that he was responsible for paying the nearly $10,000 balance of the town sewer assessment, he called me for help. Unfortunately there was nothing to be done because he had initialed that line in the agreement. He would have saved thousands if he had an attorney review the agreement before he signed it.

What are some of the most common unfavorable variations/items you've found in purchase and sale agreements?

In addition to the example given above, it is imperative that all parties understand the inspection contingency. The language was changed last year so now buyers are entitled to terminate the agreement if they are not satisfied with the inspection results. However, everything must take place within the inspection contingency period, which is only 10 days, unless it is extended by agreement of the parties. Not only must all inspections be completed within that period of time, but negotiations over repairs (if any) and notice of termination must also take place within that period of time.

So, buyers need to be aware of the time limitation, but also sellers should not grant too long of an extension if they are asked to do so, because it gives the buyers more time in which to terminate. Additionally, if there is a repair addendum, sellers must be sure to include language that the repair addendum does NOT extend the right to terminate. The standard purchase and sales agreement does not address whether a repair addendum extends the buyer's right to terminate, so it is best to include that language in the repair addendum.

Do you have any advice for potential home buyers or sellers before they sign the agreement?

It may appear self-serving, but truly, have an attorney review the agreement and explain everything to you (take notes or get an email or letter from the attorney so you have something to reference if you need it later). Spending a relatively small amount of money on legal fees at the very beginning can save much more in the long run. Think of it as preventive maintenance: it's the oil change which prevents engine failure.

What's the best way for people to contact you and your firm?

My email address is kjs@kenyonlawyers.com and my phone number is (401) 789-0217. You can also find me on LinkedIn at http://lnkd.in/iH6PmU or good, old-fashioned snail-mail is Kenyon Law Associates, 133 Old Tower Hill Rd., Suite 1, Wakefield, RI 02879.

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