Introduction to the New Residential Offer “Take 2” and the Updated Condominium Offer

Revised residential offers in the transaction flow


 Debbi Conrad  |    August 19, 2020
IntrotoNewOffer

The Real Estate Examining Board (REEB) at the Department of Safety and Professional Services (DSPS) has approved another updated version of the WB-11 Residential Offer to Purchase and an updated WB-14 Residential Condominium Offer to Purchase! The optional use date for the WB-11 “Take 2” and the WB-14 is August 1, 2020, and the mandatory use date is September 1, 2020. The changes to these residential offers clarify and improve the provisions to make them more user- and consumer-friendly. To follow along with this overview of the WB-11 “Take 2” and the updated WB-14, be sure to see the yellow-highlighted educational use copies of these forms at www.wra.org/FormsUpdate

2020 WB-11 residential offer to purchase “take 2”

The WRA Forms Committee and the Real Estate Contractual Forms Advisory Committee at the DSPS took a second look at the 2020 WB-11, primarily to improve the FIRPTA provisions and make them easier and less risky to use. There were concerns with the lack of security when forms containing Social Security numbers were sent to firms when the firms did not wish to hold, store or transmit such data. The revisions to the FIRPTA section are addressed in detail in “Hit Me FIRPTA One More Time” on page 9. 

During the course of the FIRPTA discussions, a few other provisions requiring clarification also were raised. Accordingly, a few other smaller modifications were made in the 2020 WB-11 “Take 2.” Those changes affected the definitions of Fixture, Party, and Conditions Affecting the Property or Transaction; the Radon Testing Contingency; and the sections for Closing, Earnest Money, Maintenance, and Delivery of Documents and Written Notices.

Fixture fix

Line 36 in the 2020 WB-11 includes the following in the list of fixtures: “in-ground pet containment systems (but not the collars).” A concern was raised that one cannot readily obtain new dog collars with the appropriate electronic chips in them to match and work with an installed system, especially older systems. Accordingly, line 35 of the WB-11 “Take 2” removed the exclusion of dog collars. The language now states: “in-ground pet containment systems, including receiver components.”

Closing date

The Closing provision now says if the closing date falls on a weekend or a federal or state holiday, the closing date shall be the next Business Day. Instead of “weekend,” the Closing language on lines 47-50 of the WB-11 “Take 2” now refers to “Saturday, Sunday” to remove any debate about what is included in a weekend.

Earnest money

The Earnest Money provisions on lines 56-70 of the 2020 WB-11 have been simplified and improved. Looking at the choices as to who shall receive and hold the earnest money — instead of indicating a choice between the listing firm, the buyer’s agent’s firm or a third party such as a title company written in the blank line — the WB-11 “Take 2” gives the choice of the listing firm, the drafting firm and “other identified” in the blank line. Although “drafting firm” is not defined, it should make intuitive sense to the parties and practitioners as well; it will be the firm drafting the offer. The same is true with the language for the default, for those cases where the drafting agent has failed to indicate affirmatively who will receive and hold the earnest money. The second default, if there is no listing firm, is now the drafting firm.

In addition, the language in the Earnest Money section was simplified and reorganized a little bit. The HELD BY subsection was eliminated, the BALANCE OF PURCHASE PRICE line was moved, and the CAUTION language was simplified.

Conditions affecting the property or transaction

There have been some corrections and new additions made to the definition of “Conditions Affecting the Property or Transaction” on lines 116-178 of the 2020 WB-11. Some additions are based on legislation delayed by the coronavirus and anticipated to pass at some point in time. The new language on lines 159-161 of the WB-11 “Take 2” is based on the pending bill making a few changes to the Real Estate Condition Report bill (AB 596) (added language is bold):

n. Nonconforming uses of the Property; conservation easements, restrictive covenants or deed restrictions on the Property; or, other than public rights of way, nonowners having rights to use part of the Property, including, but not limited to, private rights−of−way and easements other than recorded utility easements.

On line 173 of the WB-11 “Take 2,” there are additions/changes based on the pending riparian rights for flowages bill (AB 551):

t. A pier attached to the Property not in compliance with state or local pier regulations; a written agreement affecting riparian rights related to the Property; or the bed of the abutting navigable waterway is owned by a hydroelectric operator.  

There are also new items added at the end of the definition on lines 174-177 of the WB-11 “Take 2” to add missing items from existing statutes and to add the FIRPTA provision from the RECR bill (AB 596) in item x:

w.  Agreements binding subsequent owners such as a lease agreement or extension of credit from an electric cooperative.

x.   Owner is a foreign person as defined in the Foreign Investment in Real Property Tax Act in 26 IRC § 1445(f).

y.  Other Defects affecting the Property, including, without limitation, drainage easement or grading problems; or excessive sliding, settling, earth movement or upheavals.

Radon testing contingency

The Radon Testing Contingency, now on the bottom of page 4 and on the top of page 5 of the 2020 WB-11 “Take 2,” now refers to radon test results indicating an EPA average radon level of less than 4.0 picoCuries per liter (pCi/L) is needed to satisfy the contingency. In addition, a NOTE was added at the end of the contingency regarding sources for radon information to try to head off the proposed legislation calling for a radon brochure and additional radon language in the RECR. Line 246 of the 2020 WB-11 “Take 2” states: “NOTE: For radon information refer to the EPA at epa.gov/radon or the DHS at dhs.wisconsin.gov/radon.”  

Definition of party 

Line 449 of the 2020 WB-11 “Take 2” now includes a definition of Party: “‘Party’ means the Buyer or the Seller. ‘Parties’ refers to both Buyer and Seller.”

Maintenance 

The Maintenance section on lines 465-467 of the WB-11 “Take 2” refers to the date on line 1 of the offer, instead of the date of acceptance, and requires the seller to maintain the property in the same condition as of that date, except for ordinary wear and tear and with an added exception for changes agreed to by the parties.

Delivery of documents and written notices

The observation was made that both the seller’s and buyer’s email addresses are to all be written on one line, but sometimes there are multiple email addresses or email addresses that are too long to fit. Thus, there are now separate lines for seller email addresses on line 569 and buyer email addresses on line 570 in the 2020 WB-11 “Take 2.” 

Updated WB-14 Residential Condominium Offer to Purchase

The new and improved WB-14 Residential Offer to Purchase includes all the changes and modifications made in the 2020 WB-11 and in the WB-11 “Take 2.” The condominium offer is in the transactional flow. There were also a few distinctly condominium-related changes made in the newest condominium offer. As a result, the WB-14 has grown to 13 pages. Not to worry, however, much of page 12 consists of blank lines in a long Additional Provisions section, so there is plenty of room to write in your specific provisions!

Condominium disclosure materials

In the Condominium Disclosure Materials section on lines 107-121 of the 2020 WB-14, the provision now says, “Seller agrees to deliver to Buyer, within 10 days after acceptance of Offer, current and accurate copies of the Condominium disclosure materials required by Wis. Stat. § 703.33.” This section previously said, “within 10 days after acceptance of Offer, but no later than 15 days prior to closing.” This language was confusing; some agents believed there was a choice of deadlines and relied on the later deadline, putting them in breach of the contractual deadline of within 10 days after acceptance. Fifteen days before closing is the statutory deadline in Wis. Stat. § 703.33(1); it still applies but is no longer stated in the offer. The language also uses the term “deliver” rather than the ambiguous word “provide,” used in the 2011 version of the WB-14. There are delivery sections in all the offers such that licensees are very familiar with the concept of “deliver.”

Buyer rescission rights

The Buyer Rescission Rights subsection on lines 131-143 now refers to buyer rescission rights in any cases where disclosure materials delivered to the buyer are later amended in a way that would materially affect the rights of the buyer. Keeping consistent with the statutes, the buyer rescission rights arise when the materials are first delivered, when missing materials are delivered or the date therefore passes, or if a materially changed document is later delivered.

New contingency for additional condominium information

The optional Contingency for Additional Condominium Information on lines 149-166 indicates, “This Offer is contingent upon Seller delivering to Buyer, at Seller’s expense, within 10 days after acceptance of this Offer the information listed below that exists as of the date on line 1 of this Offer.” This contingency takes much of the information now in the Additional Condominium Issues subsection in the WB-14 and creates an optional contingency with the same delivery deadline as for the required disclosures; 10 days after acceptance of the offer. The contingency pertains only to those documents and information in existence as of the date on line 1 of the offer. If materials on the list are not desired, they would need to be lined out or referred as deleted in additional provisions or elsewhere. There is a line for Other, so other documents can be added to the list. This list of additional materials is referred to as the “listed materials.”

The buyer rescission rights for the listed materials are stated separately on lines 167-175 because they are not quite the same as the statutory buyer rescission rights for the required condominium disclosures. The buyer can rescind after the materials are received or after going through the request for a missing materials process, but there is no feature for the delivery of amended materials. 

Small condominiums defined

There is a new separate definition for a “small condominium” at lines 203-206, included in a separate section of condominium terminology/definitions on lines 176-214. A small condominium means a condominium with no more than 12 units.

Special assessments

The Special Assessments subsection on lines 544-557 refers specifically to condominium special assessments. There is also a definition of “levied” with regard to condominium special assessments: “‘Levied’ with regard to Condominium special assessments means the Association has adopted a resolution imposing fees on the Units, other than regular Association fees, for special projects or expenses.”

Maintenance — example of unit references

The Maintenance section says the “Seller shall maintain the Unit and any Limited Common Elements that may be used only by the owner of the Condominium Unit being transferred.” Instead of referring to Property, this is the language used throughout the WB-14 to be specific and consistent: “the Unit and any Limited Common Elements that may be used only by the owner of the Condominium Unit being transferred.” The condominium owner does not have independent control or rights over other Units in the condominium, the Common Elements, or even Limited Common Elements shared with others.

Debbi Conrad is Senior Attorney and Director of Legal Affairs for the WRA.

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