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By Keith Barrett, Esq.

Betty Buyer and her agent receive an HOA disclosure packet from Sam Seller. Upon review of the packet, Betty Buyer and her agent determine that there is information missing and decide to order an update from the HOA. Four days later, Betty Buyer and her agent receive the update, review the documentation and decide to cancel the contract under the HOA statute. Sam Seller refuses to accept the notice of cancellation. Who’s right?

Questions surrounding this scenario or some variation of it have swirled around of late and the answer is an important one to both the parties to a contract as well as the agents involved.

In March of 2002, the Circuit Court of Fairfax County decided a case, Davis, et. al. v. D.R. Horton, Inc., 63 Va. Cir. 621 (March 12, 2002), in which the homebuyers argued that the disclosure packet they received was incomplete and failed to comply with VA. Code section 55-512 (now 55.509.5) which delineates what a disclosure package must contain. Consequently, it was as if they had not received a disclosure package and the three day cancellation period did not begin to run, which in turn, allowed them to cancel the contract months after receiving the packet. The Court concluded that even if the disclosure packet was deficient, the buyers’ only remedy was to cancel the Sales Contract within three days of their receipt of the incomplete packet.

Some sixteen years later, in a letter opinion from the Fairfax County Circuit Court, the Court again confronted the issue of whether a buyer may unilaterally rescind a purchase contract more than three days after receiving an incomplete or outdated disclosure packet (Liam Daly and Brandee Daly v. Gulick Group, Inc., CL-2018-214, May 11, 2018).  In referencing Davis v. Horton, the Court again held that a buyer’s only remedy for an incomplete packet is to cancel the contract within three days of receipt of the packet.

These results are counter-intuitive given the fact that the HOA statute prescribes the contents of the disclosure packet and allows for an update request. Buyers and their agents (assuming the agent somehow communicated to the buyer that the right to cancel tolls until they get a complete packet) can get themselves into trouble without knowledge of these court opinions.

In order to accommodate the parties to the contract without the Buyer having to cancel, the parties to a contract may mutually agree to a general “study period” within which time the buyer may cancel the contract. It is this author’s opinion that any extended study period in which Buyer has the right to cancel not reference the HOA statute because of the following statutory language – “[e]xcept as expressly provided in this chapter, the provisions of this section and § 55-509.5 may not be varied by agreement, and the rights conferred by this section and § 55-509.5 may not be waived.”

So in our example above, Betty Buyer is out of luck.

*The information and opinions expressed in this article are not legal advice and you should seek independent legal counsel for any specific matters relating to this subject.*