Page 2 of the RPA-CA

Page 2 of the RPA-CA includes:

• Closing and Occupancy (cont.)
• Allocation of Costs
• Statutory Disclosures and Cancellation Rights

Examining the Contract - Point for Point (RPA-CA, Page 2)

• Tenant-occupied property

(i) Property shall be vacant. If the property is tenant-occupied, it is the seller's responsibility to deliver the property vacant unless otherwise agreed. The Property needs to be vacant before the scheduled close of escrow so that the buyer may make a final inspection. The seller has the obligation to comply with lease requirements, rent control and other laws affecting the landlord/tenant relationship. If these obligations make vacancy impractical or impossible, then one of the other options should be checked.

(ii) Tenant to remain in possession: C.A.R. Form PAA should be used and paragraph 3 checked, to indicate that the tenants are to continue to occupy the property.

(iii) Contingency: If the buyer and seller have not agreed whether the tenant should remain or should leave, this option allows the parties time to come to an agreement. If no agreement is reached, then either buyer or seller may cancel.

• Warranties

Third-party warranties are automatically assigned by the contract on close of escrow. Seller should give buyer any documentation concerning these warranties. The broker does not determine assignability of warranties

• Keys

Keys and means of opening all locks are to be delivered to the buyer at the time of possession. The buyer will pay for HOA key deposits.

. Allocation Of Costs

This paragraph allows the buyer and seller to determine who is going to pay for particular costs in the transaction. While custom and practice dictates which party pays for certain costs in many areas of the state, all of these items are in fact negotiable and there is no single statewide practice. This paragraph also explicitly reminds the buyer and seller that it only concerns the cost of the report, inspection, function or service and not any recommendations made by the report or inspection or service. Recommended repairs or services, unless written into this paragraph, are negotiable items.

Al. & 2. Wood Destroying Pest Inspection

Here the parties identify who is responsible to pay for an inspection for wood destroying pests and organisms and preparation of the report, including which company is to conduct the inspection and prepare the report. Be sure to specify if the report will cover detached garages and carports, decks or other identified structures. The inspection is for wood destroying pests and organisms and not all pests (such as rodents or ants, for example).

Roof coverings are not covered. A buyer wishing to inspect the roof must do so under the investigation of property, paragraph 9.

If the property is a single unit, condo or planned development, only the unit itself is inspected, not common areas.

The report is only applicable to accessible areas of the property. If the report shows inaccessible areas, and the buyer wants those areas inspected as well, the buyer may request a further inspection within the time specified. Since inaccessible areas are not specifically covered by this paragraph, as with any other item the buyer wants inspected pursuant to paragraph 9, the buyer is responsible for the cost. Of course, a buyer who is not satisfied with the report may exercise a right to cancel pursuant to paragraph 14. A seller may consider this fact in making a decision to pay or not pay for the inspection of inaccessible areas.

The Wood Pest Addendum (WPA) has language similar to that in 4A (1). The differences include: (1) the Wood Pest Report needs to be separated into section 1 and section 2 recommended repairs. Section 1 means active infestation or infection by wood destroying pests or organisms. Section 2 refers to conditions likely to lead to infestation or infection. These terms are defined in the Buyer's Inspection Advisory and (2) the addendum gives the parties an opportunity to decide in advance of the inspection (rather than negotiating after this information is received) which of them is going to pay for the cost of the recommended repairs.

A buyer who wants to address the issue of inaccessible area inspections up front, or pre-determine who is to pay for recommended repairs may check the box in 4A (2) and use the Wood Pest Addendum.

Bl. - 5. Other Inspections and Reports

If the buyer pays to have the septic system or well inspected, it is treated as any other investigation made by the buyer within the time period for the buyer's investigation. The buyer has the right to request that the seller make repairs within the designated number of days after receipt of the inspection report.

The paragraph determines if either party will pay for zone disclosure reports such as earthquake fault, seismic, flood and fire zones, and who will provide those reports. Private companies are available which, for a fee, provide zone disclosure reports on property transactions.

Two paragraphs have been added to write in common inspections for particular areas or types of properties.

Cl. & 2. Government Requirements and Retrofit

Smoke detector installation and water heater bracing requirements apply whether or not a property is for sale. However, the parties are free to negotiate who will pay for compliance of these requirements. Regardless of who pays, unless exempt, a statement of compliance is required to be signed by the seller and delivered to the buyer.

Here the parties specify who will pay for mandatory retrofit. Many communities require retrofit to be made as a condition of closing. Examples include the installation of low flow toilets and showers heads, weather stripping, and tempered glass in showers or sliding doors. Check with your city or county for local mandatory retrofit.

Dl. & 2. Escrow and Title Costs

Here the parties designate who is to pay for the title policy and escrow fees as well as who will provide those services. The title policy referenced here is for an owner's policy. The buyer is to pay for any required lender's title policy unless otherwise agreed.

The owner's title policy is clarified in paragraph 12.

Escrow fee refers only to the "bare" escrow fee and does not involve items such as notary fee, document fee, recording, etc. For VA transactions, the seller must pay the entire escrow fee.

El.-7. Other Costs

In this section the parties designate who is to pay for county and/or city transfer fees. If a particular cost is going to be split, check both boxes and write that down in the blank line following the tax or fee.

The county transfer tax is $.55 per $500. Half of that fee goes to the county and the other half goes to the city, unless the city has a separate transfer fee, in which case the county keeps the entire amount.

The city transfer tax or fee is set by the city. It is a fee charged upon sale (transfer) of property in addition to the county transfer fee.

Homeowner Association's fees and the cost, coverage and provider of a home warranty plan are covered.

Here the parties identify who is issuing a home warranty plan, if any, who is going to pay for it, and the limits on coverage and cost. Additional lines have been provided for other cost items that are common to the area or property.

5. Statutory Disclosures (Including Lead-Based Paint Hazard Disclosures) And Cancellation Rights

A.I California law creates a requirement for all sellers of one-to-four residential units (including lease options), unless exempt, to deliver to a buyer two mandated forms: a Transfer Disclosure Statement (TDS) and a Natural Hazards Disclosure (NHD) Statement, created by the legislature. If the property is in a Mello-Roos District, or subject to an assessment pursuant to the Improvement Bond Act of 1915, the seller must make a good faith effort to obtain a disclosure notice from the taxing authority and to deliver such notice to the buyer. Nothing in the law imposes a duty to discover a special tax or district not actually known to the agents. A Mello-Roos District is created under the Mello-Roos Community Facilities Act, which authorizes the district to issue bonds and levy special taxes to finance designated public facilities and services.

Additionally, if the seller has actual knowledge that there has been a release of illegal substances on the property or if the property is in or affected by an industrial use zone (a zone or district allowing manufacturing, commercial or airport use) or is located within one mile of a former military ordnance location which may contain potentially explosive munitions, this fact must be disclosed to the buyer. Seller exemptions from the TDS and NHD forms, and these other obligations include:

• Properties covered by a public report. (Re-sales cannot use this exemption.)
• Court ordered sales (i.e., probate, bankruptcy, etc.).
• Foreclosure, deed in lieu, REO properties.
• Transfers between co-owners or spouses.

Federal law requires sellers of all residential properties constructed prior to 1978 to provide a buyer with a Lead-Based Paint notice as an attachment to the contract, a disclosure of known lead paint, lead hazard reports, and a lead pamphlet (either the separate federal lead booklet or the state Environmental Hazards Booklet.)

The TDS and NHD are not warranties, nor are they a part of the contract. Do not attach them as supplements to the contract or the counter-offer.

Disclosures in the TDS do not eliminate the seller's obligations to disclose all known material facts.

NOTE: Some areas have "local option" disclosures, which are required by local ordinance.

A.2 The buyer is contractually obligated to return the statutory disclosure forms within a specified period. This way the seller knows that the disclosures have been received and can determine if the statutory right to rescind has expired.

A.3 This part of the clause provides that if a seller becomes aware of adverse material conditions of which the buyer is otherwise unaware, the seller will give the buyer a subsequent or amended written disclosure unless the condition is disclosed in a report obtained by the buyer.