5.3 FAR/BAR Contract Provisions, Contingencies & Timelines

FAR/BAR Contract Provisions, Contingencies & Timelines

Core Principle: The FAR/BAR Contract (jointly developed by the Florida Association of Realtors and The Florida Bar) is the standard legal instrument for residential real estate transactions in Florida. Brokers must master the mechanical differences between the Standard Contract and the 'AS IS' Contract, precise timeline calculations, contingency management, title cure obligations, and statutory closing extensions.

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1. The Two Primary Contract Forms: Standard vs. "AS IS"

Florida real estate practitioners primarily utilize two distinct versions of the FAR/BAR contract, each creating fundamentally different rights, obligations, and risk allocations for buyers and sellers.

┌──────────────────────────────────────────────────────────────────────────┐
│                     FAR/BAR CONTRACT SELECTION MATRIX                    │
├──────────────────────────────────────────────────────────────────────────┤
│  STANDARD FAR/BAR RESIDENTIAL CONTRACT:                                  │
│  • Seller MUST repair functional defects up to pre-agreed limits.        │
│  • Default Limits: 1.5% General Repair, 1.5% WDO, 1.5% Permits.          │
│  • Buyer CANNOT cancel simply because defects exist if seller repairs.   │
├──────────────────────────────────────────────────────────────────────────┤
│  FAR/BAR "AS IS" RESIDENTIAL CONTRACT:                                   │
│  • Seller has NO contractual obligation to inspect or make any repairs.  │
│  • Buyer has UNRESTRICTED right to cancel within Inspection Period.      │
│  • Default Inspection Period is 15 calendar days from Effective Date.    │
│  • Full refund of all earnest money deposits upon timely cancellation.   │
└──────────────────────────────────────────────────────────────────────────┘

Comprehensive Comparison Matrix: Standard vs. "AS IS"

Latent Defect Disclosure: Johnson v. Davis (1985) & Rayner v. Wise Realty

CRITICAL LEGAL RULE: Selling a property "AS IS" does NOT relieve the seller or the listing broker of the legal duty to disclose known latent defects.

• The Rule of Johnson v. Davis (480 So. 2d 625): Where the seller of a home knows of facts materially affecting the value of the property which are not readily observable and are not known to the buyer, the seller is under a mandatory legal duty to disclose them to the buyer.
• Application to "AS IS" Contracts: The Florida Supreme Court affirmed that "AS IS" clauses protect sellers only against open, patent defects and unknown defects. An "AS IS" clause does not protect a seller who fraudulently conceals or fails to disclose known material roof leaks, structural cracks, unpermitted additions, or sinkhole activity.
• Broker Liability (Rayner v. Wise Realty): Real estate brokers and sales associates have an independent legal duty under F.S. 475.278 and Florida case law to disclose all known material latent defects to prospective buyers, regardless of whether representing the seller or buyer.

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2. Contract Formation Milestones & Calculation of Time

Determining the Effective Date

The Effective Date is the foundational reference point from which all contract deadlines and contingency periods are calculated:

• Definition: The Effective Date is the calendar date when the last party signs or initials the contract (or final counteroffer) and delivers or communicates acceptance to the other party.
• Example: Buyer signs offer on May 1. Seller counteroffers on May 2. Buyer initials counteroffer and delivers signed copy to listing broker on May 3 at 4:30 PM. The Effective Date is May 3.

CALCULATION OF CONTRACT TIMELINES (FAR/BAR Standards)

  Day 0: Effective Date (May 3) ──► Day 1 starts May 4 at 12:00:01 AM
  
  STANDARD TIME COMPUTATION RULES:
  1. Calendar Days: All timelines are calendar days, NOT business days.
  2. Day Count: Exclude the day of the event; include the final day.
  3. Weekend/Holiday Rollover: If a deadline falls on a Saturday, Sunday, or national
     legal holiday, it automatically extends to 5:00 PM of the NEXT business day.
  4. Time of the Essence: Strict compliance with all deadlines is mandatory.

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3. Financing Contingency & The Loan Approval Period

Paragraph 8 of the standard FAR/BAR contracts outlines the financing contingency, governing the buyer's mortgage qualification and deposit protection.

┌──────────────────────────────────────────────────────────────────────────┐
│                     FINANCING CONTINGENCY MILESTONES                     │
├──────────────────────────────────────────────────────────────────────────┤
│  Effective Date ────► Within 5 Days: Buyer must make formal loan app     │
│                              │                                           │
│                              ▼                                           │
│                   30-Day Loan Approval Period                            │
│                              │                                           │
│            ┌─────────────────┴─────────────────┐                         │
│            ▼                                   ▼                         │
│   LOAN APPROVED                       LOAN DENIED / UNABLE               │
│   Buyer provides written notice;      Buyer provides written notice;     │
│   Contingency satisfied;              Cancels contract before period     │
│   Deposit moves toward closing.       expires; Full deposit refunded.    │
│                                                │                         │
│                                                ▼                         │
│                                     BUYER REMAINS SILENT:                │
│                                     Financing contingency waived;        │
│                                     Seller may cancel within 3 days.     │
└──────────────────────────────────────────────────────────────────────────┘

Critical Financing Rules & Duties

1. Loan Application Window: The buyer must make formal loan application within 5 calendar days from the Effective Date and use good faith, diligent effort to obtain loan approval.
2. Loan Approval Period: Default duration is 30 calendar days from the Effective Date (unless otherwise specified in the contract).
3. Definition of "Loan Approval": Written approval from the lender stating that the buyer has satisfied all credit, income, and financial underwriting conditions (subject only to normal closing conditions such as appraisal and title commitment).
4. Buyer's Mandatory Notice Duties: Prior to the expiration of the 30-day Loan Approval Period, the buyer must deliver written notice to the seller stating one of the following:
   • Approval Obtained: The buyer has obtained Loan Approval and proceeds to closing.
   • Approval Not Obtained (Cancellation): The buyer was unable to obtain loan approval and elects to cancel the contract, receiving a full refund of the earnest money deposit.
   • Financing Contingency Waived: The buyer waives the financing contingency and elects to proceed without mortgage protection.
5. Consequence of Buyer Silence: If the buyer fails to deliver any written notice prior to the expiration of the Loan Approval Period, the financing contingency is deemed waived by the buyer. However, under current FAR/BAR provisions, the seller has the unilateral right to cancel the contract within 3 calendar days following the expiration of the Loan Approval Period if the buyer remained silent.

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4. Title Evidence, Examination & The 30-Day Defect Cure Period

Paragraph 9 of the FAR/BAR contract governs title examination, title commitments, and title defect resolution.

TITLE DEFECT RESOLUTION WORKFLOW

  [ Seller Delivers Title Commitment ] (At least 15 days before closing)
                    │
                    ▼
  [ Buyer Examines Title & Objects ] (Delivers written defect notice within 5-15 days)
                    │
                    ▼
  [ Seller 30-Day Cure Period Begins ] (Seller must use diligent effort to cure defects)
                    │
         ┌──────────┴──────────┐
         ▼                     ▼
  [ DEFECT CURED ]      [ DEFECT UNCURED AFTER 30 DAYS ]
  Proceeds to Closing   - Diligent Cure Extension: Up to 120 days for permits/probate
                        - OR Buyer Elects: Accept title as is OR Cancel with full refund

• Title Evidence Timeline: The seller must provide an Owner's Title Insurance Commitment to the buyer at least 15 calendar days prior to the closing date (or within a specified timeframe).
• Buyer Title Objection: The buyer must examine the title commitment and deliver written notice of title defects (e.g., unreleased liens, boundary encroachments, gaps in chain of title) to the seller within the specified examination period.
• Seller's 30-Day Cure Period: Upon receiving written notice, the seller has 30 calendar days ("Cure Period") to cure the title defects and deliver marketable title.
• Extended Cure Period (Up to 120 Days): If the seller is unable to cure the defect within 30 days despite diligent effort (e.g., clearing probate or resolving complex survey encroachments), the seller may elect an extension of up to 120 calendar days to cure.
• Buyer Options if Defect Remains Uncured: If title defects cannot be cured, the buyer may either:
  1. Accept title "as is" without reduction in purchase price, OR
  2. Terminate the contract and receive a 100% refund of all earnest money deposits, releasing all parties from further liability.

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5. Mandatory Closing Extensions: Force Majeure & TRID Rules

Standard FAR/BAR contracts incorporate statutory and common law extension mechanisms to handle external delays without placing either party in default.

Force Majeure Clause (Standard FAR/BAR Provision)

• Events Covered: Acts of God, hurricanes, tropical storms, floods, earthquakes, fires, civil unrest, or disruptions of essential services (electric, internet, banking, county clerk recording offices).
• Automatic Extension: If Force Majeure prevents a party from performing or prevents closing, all contract deadlines and the Closing Date are automatically extended for the duration of the event plus a reasonable time (up to 7 calendar days after restoration of essential services).
• 30-Day Cancellation Limit: If Force Majeure delays closing for more than 30 calendar days beyond the original Closing Date, either party has the right to terminate the contract by written notice, and the buyer receives a full deposit refund.

CFPB TRID 3-Day Closing Disclosure Extension

Under federal TILA-RESPA Integrated Disclosure (TRID) regulations, a lender must deliver the final Closing Disclosure (CD) to the borrower at least 3 business days prior to loan consummation.

• Contractual Extension: If the lender's delivery of a revised Closing Disclosure requires a delay to satisfy federal 3-day waiting periods, the FAR/BAR contract provides an automatic extension of the Closing Date for up to 7 calendar days without penalty, preserving the transaction and preventing buyer default.

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6. Contract Default Remedies: Liquidated Damages vs. Specific Performance

When a party breaches a binding purchase contract without legal excuse, Florida law provides specific legal remedies.

┌────────────────────────────────────────────────────────────────────────┐
│                     DEFAULT REMEDIES UNDER FLORIDA LAW                 │
├────────────────────────────────────────────────────────────────────────┤
│  BUYER DEFAULTS:                                                       │
│  1. Liquidated Damages: Seller retains earnest money deposit.          │
│     (Standard listing split: 50% Seller / 50% Broker up to comm. cap)  │
│  2. Specific Performance: Seller sues to force buyer to close (rare).  │
│  3. Sue for Compensatory Damages: Actual unliquidated monetary loss.   │
├────────────────────────────────────────────────────────────────────────┤
│  SELLER DEFAULTS:                                                      │
│  1. Specific Performance: Buyer sues in equity to force conveyance.    │
│     (Real estate is unique; courts compel execution of deed).          │
│  2. Return of Deposit + Damages: Buyer recovers earnest deposit and    │
│     sues for out-of-pocket inspection, appraisal, and title costs.     │
└────────────────────────────────────────────────────────────────────────┘

Broker Split of Liquidated Damages (Deposit Forfeiture)

Under standard Florida listing agreements, when a buyer defaults and the seller elects to retain the earnest money deposit as liquidated damages:

• 50/50 Split Rule: The forfeited deposit is typically divided equally between the seller and the listing broker (50% to Seller / 50% to Broker).
• Commission Cap Limitation: The broker's share of the forfeited deposit can NEVER exceed the full amount of the agreed brokerage commission that would have been earned had the transaction closed.

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7. Master Summary Table: Critical FAR/BAR Deadlines & Exam Traps