RE: UTILITIES (RPA PARAGRAPH 10C)

RE: UTILITIES (RPA PARAGRAPH 10C)

1. The RPA Requires Seller to Keep Utilities on for Inspection.

The RPA requires your Sellers to have utilities turned on at the property through the date possession is turned over to the Buyer. I get calls every week from Sellers who are surprised to learn that they are in breach of contract because the utilities at the property have been turned off.

Specifically, Paragraph 10(c) states:

“Seller shall have water, gas, electricity, and all operable pilot lights on for Buyer’s investigations and through the date possession is made available to Buyer.”

This requirement is often a problem for short sale Sellers who have moved out of the property and cannot pay to keep the utilities on. Many short sale Sellers have had their utilities turned off by the utility company, owe a substantial amount in back charges and cannot afford to have them turned back on for the inspection.

If you represent a short sale or other Seller who cannot keep utilities on, then you need to address this issue by counter offer at the time the contract is made. If this issue is not addressed by counter offer, then your Seller will be in breach of the RPA if he/she cannot keep the utilities on for Buyer’s inspections and through the date of possession.

2. The Agent is Liable for All Damage if he/she Turns Utilities On.

Can the agent turn on the utilities in his/her own name? This is a bad idea for the following reason. The agent is liable for any personal injury or property damage that occurs when they turn the utilities back on.

For example, I had an agent in Orange County turn on the water for an inspection. The refrigerator had been removed by the Seller, and the water line to the ice maker was left on. When the water was turned on, the kitchen was flooded causing $20,000.00 in damage. The agent was liable for this damage.

For another example, an agent in San Francisco turned on the electricity for an inspection. There was a short in the wall, which resulted in a fire, which destroyed the property before the agent showed up for the inspection. The agent was again liable for the cost to repair the damage.

3. Recommendations.

Determine if the Seller can keep the utilities on at the time you take the listing. If your Seller cannot afford to keep the utilities on, then negotiate that term out of the contract by counter offer.

Under no circumstances should the agent/broker turn on the utilities. The agent/broker will be liable for all damage caused if they turn on the utilities (i.e. flooding, fire, gas leaks, personal injury, etc.).

If the Buyer elects to turn the utilities on, then the agent/broker must require the Buyer to sign a disclosure holding the agent/broker harmless from any personal injury or property damage caused by turning on the utilities.

©