florida assignment of contract form

Can a Buyer Assign or Transfer Rights in Florida Real Property to Third Person Before Closing?

by Larry Tolchinsky | Closings , Florida Law , Florida Real Estate , Real Estate Title | 1 comment

In Florida, the closing process normally begins with a written sales contract where a seller commits to sell his or her home and a buyer commits to buying the property. That document creates an equitable interest in the property for the buyer.

What some buyers and sellers may not realize is that after the parties sign the contract, the parties can change (most standard residential contracts for the sale and purchase of Florida real estate contain a provision related to the buyer’s right to assign the contract). Under Florida law, the buyer can legally transfer his or her rights in the pending sale to an independent third party.

Which means, the deal may go through with a buyer who is different from the one who signed the contract (the assignment provision in most standard contracts also contemplate whether or not the original buyer will be released from any liability under the contract).

Florida Condos Are Still a Popular Real Estate Purchase

Purchasers, Executors, Heirs and Assigns

For many years, it has been generally accepted in Florida law that a land sale contract can be assigned. Sometimes, this is easily determined because either the section for assignment is checked or the language of the contract identifies the buyer as the “ purchaser and/or assigns ” when describing the person who is buying the property. Either one of these options places a seller on notice that he or she may be seeing a different face at the closing table.

Other language that may be used in the sales contract: “ heirs, executors, or assigns .” This language is also notice to the seller that the buyer may opt to assign the deal before it closes. (See – Shirley v. Lake Butler Corp., 123 So. 2d 267  – These words, heirs, executors, or assigns, do not require the seller to approve the assignment in order to make the assignment effective.)

When Can’t a Sales Contract Be Assigned by the Buyer?

The key here is that the sales contract is not personal to the buyer under its terms or by its nature; if it is, then there can be no assignment by the purchaser.

As explained by the Florida Supreme Court, real estate buyers will be allowed to assign (sell) their contracts to someone else whenever they choose to do so — unless (1) there is language in the contract that prohibits it in that particular deal; (2) if the assignment would violate public policy in some way; or (3) if it would violate some state or federal law or statute.

One other possible limitation on assigning a real estate sales contract (assuming the contract is silent on the issue of it being assignable): it may not be assigned if the seller has agreed to sell to this particular buyer because of an explicit reliance upon that buyer’s personal credit to cover the transaction. Walton Land & Timber Co. v. Long, 135 Fla. 843, 185 So. 839 (1939).

What Are the Assignee’s Duties?

If the buyer enters into an assignment with a third party, the deal to sell the property as described in the original sales contract does not change. The buyer is subject to a legally enforceable agreement when he or she signs the sales contract to buy that home or condo.

If the buyer wants to transfer the contract to an assignee, that first contract is not changed insofar as the rights and duties of the original parties (unless the seller agrees, in writing, to allow the buyer to be released from liability).  The assignee needs to make sure that all the duties required by the buyer under the sales contract are performed in order to close the deal.

The assignee takes on the legal responsibility of tendering to the seller the purchase price at the time stated in the sales contract. He or she will need to perform as the buyer would have been required to perform under the agreement.

If the assignee doesn’t fulfill his or her duties, then the seller can argue that the sales contract has been breached (thereby allowing the seller to retain the buyers deposits and seek any other remedies set forth in the contract).

As long as the seller is ready, willing and able to provide the deed to the original buyer, the seller should win this argument.

What Are the Assignee’s Rights?

Once there is a legally binding assignment in place, the assignee has rights under the sales contract. However, the terms of the deal do not change just because there is an assignee involved now.

The assignee does not have any more rights than the buyer had at the get-go. The buyer cannot transfer something to the assignee that he or she didn’t have!

Furthermore, the assignee will be subject to the rights of the seller in the original sales contract. If the seller expects something to be done by the buyer in the contract, then the seller can legally expect that the assignee will perform that task.

If the seller has defenses against the buyer under the sales agreement, then those defenses will be able to be asserted against the assignee, too.

Bottom line, if a buyer and a third party decide to enter into their own agreement where the buyer assigns his interest in a pending sales contract to buy a home or condo in Florida to the third party, great. But that assignee will not stand in a more favorable legal position than the buyer just because he’s a third party who’s come into the deal under an assignment.

Note: that third party will also get the right to end the deal, if the buyer had a legal right to do so. As the assignee, if the buyer has a right to seek recession of that sales contract, then the third party assignee will as well. For instance, if the seller cannot provide clear legal title, then the assignee has a right to rescind the deal just as the original buyer could have done.

What Are the Seller’s Duties After the Buyer’s Assignment?

When a buyer assigns his rights to a third party, what does the seller have to do? Well, the seller is not usually a party to the assignment (unless the contract requires the seller to approve the assignment). The assignment is an agreement usually between the buyer (the ”assignor”) and a third party (the ”assignee”).

Accordingly, the seller has no responsibility to determine who the assignee is in order to close the deal. All the seller has to do is meet the terms of the sales agreement. It’s up to the buyer and his or her assignee to work out the details of getting to the closing table at the time and date set forth in the sales contract. See,  Pierce & Stevenson v. Jones, 109 Fla. 517, 147 So. 842, 88 A.L.R. 192 (1933).

Buyer Needs to Make Sure There’s an Effective Assignment

For some buyers who enter into an assignment the seller may allow the buyer to be free of the obligations set forth in the sales contract. If not, the buyer will remain responsible under the real estate contract to fulfill the obligations that he or she agreed upon at the time the contract was first signed.

Any release of the buyer’s obligations by the seller has to be specifically stated and in writing.

For example, if a buyer signs a real estate purchase agreement and inserts language that he or she will be taking title to the property in the name of his or her wholly owned corporation, that’s not creating any kind of assignment from the buyer to the corporation. That’s creating a condition in the sales contract, but it’s not an assignment by the buyer to a third party (it doesn’t relieve the buyer from liability under the contract).

The buyer needs to have something in writing stating that the seller is relieving the buyer of his or her obligations under the sales contract and the buyer’s wholly-owned corporation will be liable in order for there to be an effective release of liability of the buyer. See, Greater New York Corp. v. Cenvill Miami Beach Corp ., 620 So. 2d 1068 (Fla. 3d DCA 1993).

Having a Florida Real Estate Lawyer Can Help Your Residential Closing

Whether you are a seller, a buyer, or an assignee in a deal to sell a Florida home or condo, things can get complicated very fast and parties can end up confused and upset. Closings can be delayed. Some may never happen.

Having the advice of an experienced Florida real estate lawyer can be of great help here. Moreover, having an attorney review the situation before the deal is finalized at closing isn’t as expensive as some assume it to be.

See: 19 Reasons to Hire a Real Estate Lawyer When Buying or Selling Florida Real Estate

A good piece of advice if you are faced with an assignment issue, is to at least speak with an experienced Florida real estate lawyer to learn about your rights. Most real estate lawyers, like Larry Tolchinsky, offer a free initial consultation (over the phone or in person, whichever you prefer) to answer your questions.  

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What is impossible to locate anywhere online is how you are legally able to market a property that you are trying to assign. I understand no MLS, but FB, Craiglist, Zillow, Signage? Help.

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Nick, & Cindy Davis

Assignable Contracts

July 9, 2019 by Nick & Cindy Davis

The Florida Realtors/Florida Bar AS IS contract has a provision (Section 7) that permits a contract to be assignable. What you should know if this is filled out – and what does this mean for the transaction?

Assignable Contracts – What you want to understand about them

Here is a scenario.

Seller just received a contract offer from a buyer who used a Florida Realtors/Florida Bar “AS IS” Residential Contract for Sale and Purchase, and they observed that the buyer’s offer included a provision in Section 7, Assignability, that would enable the buyer to assign the contract.

Examples of the ramifications if you accept this assignable contract?

The main thing that changes in an assignable contract will be the person or entity that signed the contract (Buyer 1) most likely is not the same person or entity that will actually close on the property (Buyer 2). An assignment is simply a option for a party to a contract to hand legal rights and obligations off to another individual.

How exactly does an assignment happen? This is generally done by having the assignor and assignee sign a legal document called an assignment. In this situation, the assignor is going to be Buyer 1, whose name is on the contract. The assignee will probably be Buyer 2, who accepts the assignment and steps into the shoes of Buyer 1. As soon as the assignment is fully executed, Buyer 1 gives the contractual rights and obligations to Buyer 2, who receives and assumes those rights and obligations.

Florida Realtors does not provide an assignment-of-sales contract form, so one of the buyers is going to be responsible to draft, or hire a lawyer to draft, the assignment.

Why might a buyer want to negotiate an assignable contract? One reason is just that Buyer 1 intends to form a corporation, LLC or trust to take title at closing. In this scenario, Buyer 1 usually just requires a little time after the property is under contract to get the legal paperwork in order. This particular assignable contract generally on the lower risk side of the spectrum, although it’s always up to seller what terms they’re prepared to accept.

Other buyers might prefer an assignable contract since they want to assign their interest in the contract to another buyer they have not yet identified. This assignment of contractual interest is also known as a flip, and it may be a situation where Buyer 1 hopes to collect money from Buyer 2 to execute the assignment. Unlike the previous scenario, a seller has no idea what the personality and business practices of the unknown Buyer 2 are going to be, so as a seller you should be ready for a new person to enter the transaction.

When the parties opt to make the contract assignable, Section 7 of the contract provides two options:

The first option provides that Buyer 1 “may assign and thereby be released from any further liability under this Contract.” This clause is far more favorable for Buyer 1, because it contains a type of release, which is a means for Buyer 1 to remove some of their liability through the release language.

The second option provides that Buyer 1 “may assign but not be released from liability under this Contract.” This option is more favorable for the seller, and Buyer 1 should be more cautious about vetting Buyer 2 when using this clause.

Understand that this is a very general summary of this topic, therefore if buyers or sellers would like a thorough analysis of risks and benefits associated with making a contract assignable, they should consult a lawyer. The lawyer may suggest additional tools, such as carefully tailored assignment clause that has more protection for a party than is available in the very brief options in the form contract.

Have a questions or concern? Nick, Cindy & Nicholas Davis with RE/MAX Premier Group are here to assist you with all your Real Estate Needs. We are always available at 813-300-7116 to answer your questions or you can simply  click here and we will be in touch with you shortly.

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Understanding Assignability of Contract

Many real estate contracts allow buyers to “assign” their rights and obligations under the contract, and sellers can suddenly find themselves working with Joe rather than Sally. What’s a Realtor to do? Ask the right questions – and don’t give legal advice.

ORLANDO, Fla. – Florida Realtors® Legal Hotline fields many calls from members, and some topics come in waves. Currently, one of those waves is made up of Realtors® perplexed by contract paragraphs about assignability. Most callers want to know how it should be completed and whether it applies to their current transaction.

Since Realtors rather than actual buyers or sellers complete form contracts, it’s important to understand the legal concept of assignment, as well as the agent’s role when a customer has an assignable contract.

In the Florida Realtors/Florida Bar contracts (FR/Bar), assignability of contract is addressed in paragraph 7. For the purposes of this article, the examples are based on the FR/Bar residential contracts – but always refer to the contract used in your transaction since it varies.

In paragraph 7, the parties check one box to indicate if the buyer is able to assign the contract (or not), and whether the buyer would be released from liability if the buyer is allowed to assign it (or not).

First, the concept of assigning a contract: If an assignment of contract occurs, it means that one party to an existing contract (the “assignor”) has handed off the contract’s obligations and benefits to another party (the “assignee”). In the context of the FR/Bar contracts, the assignor is the buyer in the contract and the assignee is a non-party, i.e. another buyer not currently part of the contract.

The next step is addressing the release of liability. The assignor may want the assignee to step in and assume all of the contractual obligations and rights, releasing the original buyer from further liability under the contract. This means that if a buyer assigns the contract, that buyer essentially walks away from the transaction, with the assignee taking on all further obligations currently within the contract. It also means that the seller’s recourse, should the assignee fail to comply with the contract, is solely against the assignee and not the initial buyer.

In applying these concepts to language in the FR/Bar contract, a buyer’s agent should ask the buyer if they have any intention of assigning their interests in the contract to another party. If yes, does the buyer want to remain potentially liable under the contract should the assignee fail to perform?

If a seller’s agent receives an offer that is assignable, they should ask the seller if they’re willing to allow the buyer to assign the contract to a third party. If yes, is the seller okay with allowing the initial buyer to just walk away, or do they want to hold the initial buyer to the contract terms as far as liability is concerned?

Please note: These are all questions your customers should answer. A Realtor shouldn’t give legal advice, explain the concept of assignability, or describe potential outcomes or issues that could arise with an assignable contract. If your questions cause customers to ask even more questions about assignability, you should advise customers to seek legal advice from their attorney.

Lastly, understand that this article covers the contract portion of assignability. Assuming the parties agree the contract is assignable, a buyer who later wants to assign the contract still needs to sign a separate legal document assigning their rights/interests in the contract over to the assignee, aka “the new buyer.”

The initial buyer/assignor may need their attorney to assist with drafting this document, which covers their agreement. In other words, paragraph 7 only covers whether the seller and initial buyer agree to the initial buyer being able to assign the contract. A separate assignment document would cover the assignor and assignee’s agreement.

Meredith Caruso is Associate General Counsel for Florida Realtors

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