Condominium connoisseurs have been eagerly awaiting the arrival of the newly revised WB-14 Residential Condominium Offer to Purchase. Practitioners want to know: What are the most important changes in the new condo offer?

Basic changes

The first order of business was to change the basic offer to purchase provisions to match the basic provisions of the newest WB-11 Residential Offer to Purchase. Real estate professionals and consumers want to know that when it comes to the provisions for earnest money, document delivery, property condition disclosures, financing, closing prorations, title evidence and inspections, the same basic standards and procedures are found in all Department of Regulation and Licensing-approved offers.

The need for Addendum C was eliminated. Addendum C to the WB-14 Residential Condominium Offer to Purchase was originally created to supplement the 2000 version of the condominium offer to reflect the changes made to the condominium law in 2004. The addendum updated the condo offer by incorporating the then-new requirements for the condominium disclosure materials executive summary and the Condominium Addendum to the Real Estate Condition Report. It also outlined the procedures and deadlines for the delivery of missing disclosure materials and the buyer’s resulting rescission rights. These changes in the law have been integrated into the 2011 edition of the WB-14. Condominium sellers will still need to use the Condominium Addendum when they provide a Real Estate Condition Report to prospective buyers, but Addendum C is no longer necessary.

Substantive enhancements

The primary substantive changes made to the new WB-14 Residential Condominium Offer to Purchase relate to (1) disclosure documents, (2) condominium fees and (3) elimination of the Association Sale Approval Contingency.

(1) Condominium Disclosure Materials

• Disclosure Document Delivery Deadline
  “CONDOMINIUM DISCLOSURE MATERIALS: Seller agrees to provide Buyer, within 10 days of acceptance of Offer, but no later than 15 days prior to closing, current and accurate copies of the Condominium disclosure materials required by Wis. Stat. § 703.33” (lines 204-206 of the 2011 WB-14).

The big news when it comes to the revised condominium offer has to be the new deadline for the seller’s delivery of the condominium disclosure materials. The days when the seller and the listing agent could postpone delivery of disclosure materials to the buyer are over. The condominium disclosure materials must be delivered to the buyer within 10 days of the seller’s acceptance of the offer. While the deadline in Wis. Stat. §703.33(1) remains “not later than 15 days prior to the closing,” a seller who does not deliver the materials shortly after acceptance will be in breach of the WB-14.

• Executive Summary Unnecessary for Some Small Condominiums
  “The Condominium disclosure materials include a copy of the following and any amendments to any of these [except as may be limited for small Condominiums with no more than 12 units per Wis. Stat. § 703.365(1)(b) and (8)]” (Lines 206-207 of the 2011 WB-14).

The list of disclosure materials on lines 208-218 of the form includes the executive summary.

A “small condominium” includes any residential or nonresidential condominium with no more than 12 units. Small condominium declarants or associations may elect to use a condensed version of the disclosure materials that would not include an executive summary. If the choice was made to use the shorter list of disclosure documents, that fact must be stated in the declaration. The disclosure materials could then be limited to the declaration, bylaws, rules, association articles of incorporation, association management agreement and other association contracts, budget, any association leases and a copy of the plat. No expansion plans, floor plans or executive summary would be required.

Agents working with a small condominium with 12 or fewer units may find it prudent to contact the association for a copy of the current condominium disclosure materials. If there is any question over what materials are necessary, a copy of the declaration (and any amendments thereto) may be reviewed by an attorney to see if the shorter list of disclosure materials has been authorized.

• Missing Disclosure Materials Delivery and Buyer Rescissions
  “If the disclosure materials are delivered to Buyer and Buyer does not receive all of the disclosure documents, Buyer may, within 5 business days of Buyer’s receipt of the disclosure materials, either rescind the Offer or request any missing documents. Seller has 5 business days following receipt of Buyer’s request for missing documents to deliver the requested documents. Buyer may rescind the sale within 5 business days of the earlier of Buyer’s receipt of requested missing documents or the deadline for Seller’s delivery of the documents [Wis. Stat. § 703.33(4)(b)]” (lines 226-230 of the 2011 WB-14).

Under Wis. Stat. § 703.33(4)(a), a condominium buyer may, at any time within five business days following receipt of all of the required disclosure documents, rescind the offer in writing without stating any reason and without any liability on the buyer’s part. In the past, if the buyer did not receive all of the required disclosure materials, the buyer’s five-business-day time period for rescission never started, leaving the buyer with a way to back out of the transaction right up until closing. The law was revised in 2004 to stop buyers from waiting until the last minute to cancel the transaction due to a missing document or page.

The new WB-14 states that if the buyer receives condominium disclosure documents that are missing one or more of the documents required by § 703.33(1), the buyer will have five business days to either rescind the offer in writing without stating any reason, or to request that the seller deliver the missing documents. If the buyer neither rescinds nor requests missing documents within the five business days, then the delivered materials will be deemed satisfactory and the buyer will have no further right to rescind based upon those materials.

The seller has five business days following receipt of the buyer’s request to deliver the missing documents to do so. The buyer may rescind the sale within five business days following the buyer’s receipt of the requested missing documents or the seller’s deadline for delivering the documents, whichever is earlier.

• Buyers Must “Actually Receive” Condo Disclosures
  “The Parties agree that the 5 business days begin upon the earlier of: (1) Buyer’s Actual Receipt of the disclosure materials or missing documents or (2) upon the deadline for Seller’s delivery of the documents” (lines 231-232 of the 2011 WB-14).

By now most real estate practitioners should be familiar with the story of the condominium disclosure materials that were delivered to the agent named as the buyers’ recipient for delivery. This agent was in Wisconsin while the buyers were at their winter home in Florida. Wis. Stat. §703.33(4) requires that condominium buyers be given five business days from receipt of the required condominium disclosure materials to rescind the contract. On January 12, the disclosure documents were personally delivered to the agent, as the buyers’ recipient for delivery, but the buyers did not actually receive the documents in Florida until January 23. On January 24, the buyers gave notice to rescind their offer.

The sellers objected and sued for the earnest money. The court found for the sellers, concluding that because the agent, as the buyers’ recipient for delivery, received the documents on January 12 and the buyers did not rescind until January 24, the rescission was late and ineffective. The agent’s receipt of the disclosures, not the buyers’ receipt in Florida, started the clock on the time frame for rescission according to the courts.

This problematic result is addressed on lines 231-232 of the new WB-14 by making it clear that the five business days begin upon the buyer’s actual receipt of the disclosure documents. As it says on lines 66-67 of the WB-14, “‘Actual receipt’ means that a Party, not the Party’s recipient for delivery, if any, has the document or written notice physically in the Party’s possession, regardless of the method of delivery.”

For further discussion of this problem, see “Document Delivery Dilemma, Condominium Style” in the February 2008 issue of the Wisconsin Real Estate Magazine, at www.wra.org/WREM/Feb08/DocDeliveryDilemma.

(2) Condominium Fees and Assessments

• Seller Must Be Current with Assessments
  “UNPAID CONDOMINIUM ASSESSMENTS: All unpaid assessments shall be paid by Seller no later than closing” (line 443 of the 2011 WB-14).

This is a new contractual obligation that is not required in the statutes.

• Buyer Should Investigate Other Possible Closing Fees
  “OTHER FEES: The Association may charge other fees at, or subsequent to, closing which may include storage, Additional Association, reserves, start-up, administrative, etc. fees” (lines 28-29 of the 2011 WB-14).

This provision generally alerts buyers that there may be other fees charged by the Condominium Association or an Additional an Association either at or after closing. It is best for buyers to closely review the disclosure documents and perhaps ask the association for information about other fees that may be charged to a new unit owner. “Additional association” is defined on lines 73-74 as “any community, neighborhood, subdivision, master or umbrella association with the power to levy fees or assessments on the Property owner.”

(3) Right of First Refusal Provision Removed

The 2000 version of the WB-14 contained a contingency at lines 306-307 that required the seller to obtain and deliver to the buyer a waiver of the condominium association’s right of first refusal. That provision was not included in the 2011 condominium offer. Condominium associations holding first rights of refusal have fallen out of favor because many of them were intended or implemented as a means to discriminate in violation of the fair housing laws. First rights of refusal have also become problematic under various financing programs. The provision has not been widely used, and so it was removed.

The new WB-14 has an optional-use date of March 1, 2011, and a mandatory-use date of July 1, 2011.

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

Editor’s note: The DRL became the DSPS in 2011. Information above may not be current.