Best Practices for Writing Special Stipulations in a Sales or Leasing Contract
What is a Special Stipulation in a contract?
In most real estate transactions, a preprinted purchase and sale agreement or contract is used. Realtors® in Georgia typically use forms written by the Georgia Association of Realtors® (GAR). Other transactions where licensed agents are not involved often include a contract form found from the internet or previously written by an attorney. Special stipulations are used in a sales contract or lease to add additional items that are not currently preprinted in the contract form being used or to amend or change any of the preprinted language within the contract form.
Caution when writing Special Stipulations:
There are good reasons why you should have concern and caution when writing special stipulations in a purchase and sale agreement or lease agreement. Remember, you are writing language that needs be clear, be legal, be ethical, and should hold up in court if contested. You are protecting a buyer or a seller. Real estate agents are protecting their clients and representing their brokers. Writing special stipulations is typically a recommended job for an attorney. As Realtors®, we have access to preprinted special stipulations forms from GAR to address many of the common things that cause the need for special stipulations. Use those forms if at all possible.
Your Special Stipulations should answer these questions:
WHO: Who is the person responsible for carrying out the special stipulation?
WHAT: What is the specific item(s) to be taken care of?
WHERE: Where specifically is the item that needs to be addressed?
WHEN: By what specific time period should the item be completed?
HOW: By what method will the item be addressed specifically?
WHO’S COST: Who is paying for the item to be addressed?
CONSEQUENCES IF NOT FULFILLED: What are the specific consequences if the item is not addressed correctly or within the time period allowed?
An Example of a POORLY written Special Stipulation:
A buyer who is purchasing a home from a seller would like the carpet replaced in the home at the seller’s expense. The seller thinks this is a reasonable request, because the carpet is badly soiled, and he is getting a full price offer. So, in the contract, the buyer or buyer’s agent writes a special stipulation to address this request. Below is a poor example of how to address the carpet request.
(Poor Example): Seller to replace all carpet in home with new tan carpet similar to existing carpet.
This poor example does answer some of the questions we discussed earlier, but leaves a lot of questions unanswered. It does not say when it should be replaced, at who’s expense, or what the consequences are if not done. It does try to answer the What, Where, and Who but does a poor job at those as well. I see this type of poorly written special stipulation all of the time in contracts. You can do much better than that.
An Example of a CORRECTLY written Special Stipulation:
Using the same carpet example above, below is a well-written special stipulation to address the agreement between the buyer and seller.
(Good Example): Seller agrees to replace, at Seller’s full expense, all of the carpet and pad in the entire home with new carpet 3 days prior to the closing date set forth herein. The carpet make and model shall be Mohawk Hallmark Beige #1234, 16oz. weight, with a new 8 lb pad. Carpet shall be installed by Quick Carpets, Inc. (555-555-5555) out of Dalton, GA or another licensed carpet installation professional approved by the Buyer in writing. If Seller fails to comply, $5,000 shall automatically be deducted from Seller’s net proceeds at closing and held in escrow with closing attorney made payable to Quick Carpets, Inc. Those funds shall be disbursed upon Buyer’s written approval to attorney post closing.
NOW LET’S SEE IF WE ANSWERED ALL OF THE QUESTIONS?
Seller (WHO) agrees to replace, at Seller’s full expense (WHO’S COST), all of the carpet and pad in the entire home with new carpet (WHAT – part 1 & WHERE) 3 days prior to the closing date (WHEN) set forth herein. The carpet make and model shall be Mohawk Hallmark Beige #1234, 16oz. weight, with a new 8 lb pad (WHAT – part 2). Carpet shall be installed by Quick Carpets, Inc. (555-555-5555) out of Dalton, GA or another licensed carpet installation professional approved by the Buyer (HOW) in writing. If Seller fails to comply, $5,000 shall automatically be deducted from Seller’s net proceeds at closing and held in escrow with closing attorney made payable to Quick Carpets, Inc. (CONSEQUENCES IF NOT FULFILLED) Those funds shall be disbursed upon Buyer’s written approval to attorney post closing.
All questions are answered! This should arm you with a better understanding on how to write good language in your next special stipulation. Bravo Group, LLC, the Broker, nor it’s affiliated licensees are attorneys; therefore, we do not represent this information to take the place of an attorney’s legal council or contract language. This is merely an informational guide to better educate yourself in real estate transactions.