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Newsletter
AGREEMENT OF SALE DRAFTING TIPS – LITTLE THINGS DO MATTER
As we become more comfortable in drafting Agreements of Sale, many things that we take for granted when preparing them are sometimes worth a second look. Here are a few of these basic items and some drafting tips.
Identity of Parties. Many times an investor purchaser will want the term “or their assigns” behind the names of the buyers. The investor-buyer may wish to purchase this in the name of a “soon to be created” business entity. If you are representing the seller, there are two important things to remember: a) the Pennsylvania Department of Revenue has taken the position that any assignment of the Agreement of Sale is a fully transfer taxable event and an additional transfer tax (double tax) will need to be collected at closing and b) consider agreeing to the Assignment language only if the original buyer remains liable for a failure to settle by the assignee for any reason.
Property Identification. If the property is advertised as containing a specific amount of land, including that acreage in the description is beneficial to the Buyer. Naturally, a Seller would not wish to include any representation, since without such representation, the Buyer merely gets what the Seller owned. As many of you are aware, the integration clause provides that a Buyer does not rely on any representations, including those concerning the amount of land, unless this reliance is expressly incorporated into the Agreement of Sale.
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Deposits. When representing a Seller, the listing agent will seek to obtain as much deposit as is reasonably possible, in light of current market standards. If your buyer is unable to place a substantial deposit, then it would be wise to not limit the Seller to that insufficient deposit as their sole remedy in the event of Buyer’s default. Your client may not be happy with the $1,000.00 deposit as damages for Buyer’s default as their expenses may well have exceeded the sum in preparing for their move into their new residence.
Be careful with multiple deposits if you are representing a Seller. If a dispute arises before any subsequent deposits are due, only those deposits actually paid can serve as liquidated damages, leaving your Seller with a $1,000.00 deposit as his nominal damages. Advise your Sellers accordingly!
If your client is purchasing new construction, builders may be insistent on holding the deposit themselves. If the builder holds the deposit it is not regulated by law other than by whatever is contained in your Agreement of Sale. Given the financial pressures on many builders in our current economic situation, it may be wise to attempt to have a non-interested party hold the deposit monies.
THE INVESTOR’S SPACE
CAN A LANDLORD GARNISH A TENANT’S WAGES?
Prior to the Pennsylvania Legislature’s 1996 amendments to the wage exemption statute, landlords were prohibited from attaching an individual’s wages, salaries and commissions by garnishing that person’s employer. Effective January 29, 1996, the Commonwealth of Pennsylvania passed Act 5 of 1996 which permits a landlord on a judgment for damages to the physical condition of a property arising out a residential lease to attach the tenant’s wages, salaries and commissions in the hands of its employer with certain limitations.
What are “damages”? The Act defines damages as the “abuse of the physical makeup of the leasehold premises”, including but not limited to the “abuse of walls, floors, ceilings or any other physical makeup of the leased premises.” 42 PaC.S.A. Sections 8127(h).
Are there limits? Yes. The amount of the attachment may not exceed ten (10%) percent of the tenant’s periodic net wages or a sum not to place the tenant’s net income below the poverty income guidelines, whichever is less. Once you are completely paid, you have thirty (30) days to satisfy the judgment or possibly face a penalty of one (1%) of the original judgment amount for each day it remained unsatisfied after the thirty (30) day period. The tenant does not need to make a written demand upon the landlord to satisfy the judgment.
To implement the attachment, the Act requires that the district justice or judge specifically state the amount of the judgment award that is attributed directly to the damages to the residential property. Please make sure that you specify which part is unpaid rent and which part is physical damage as you cannot attach for unpaid rent!
Does the employer send the attached wages directly to you? No they do not. Once the garnishment judgment is entered against the tenant/employee, the employer is required to send the attached wages to the court within fifteen (15) days from the last pay period in each month. The court records the wages received against the judgment and then sends them to the landlord.
THINGS TO REMIND YOUR CLIENT AFTER SETTLEMENT…
Do you have a will? Now that they own property, your clients would be best served by consulting an attorney to have a simple will set up so that there is no issue as to what happens with the home after the passing of a spouse.
Are your clients currently unmarried but will be getting married sometime after the settlement? Please make sure you tell them to change the tenancy on their deed after the wedding from joint tenants with rights of survivorship (a divisible joint interest which could be attacked by creditors of just one spouse) to tenants by the entirety (an indivisible joint interest which cannot be attacked by the creditors of one spouse only).
ABOUT THE AUTHOR…
Andrew J. Monastra, Esquire is a real estate attorney and owner of Heartland Abstract, Inc. located in Pottstown, Pennsylvania. You may contact him to discuss real estate issues at his office (that’s it on page 1) at 740 East High Street, Pottstown PA 19464. His telephone number is 484-941-0912 and his e-mail address is Andrew@monastralaw.com.
He has been involved in over 10,000 real estate closings, either as lender’s counsel, title insurance agent or buyer/seller counsel.
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