After you sell a property, do you want to ensure that the buyer does not make a claim against you?  Part 3 of this series discusses the most effective modifications Sellers make to the AIR purchase agreement to avoid (or limit) post-Closing claims by Buyers.

1. “Cap” on Liability: Many custom purchase agreements will include a “cap” on the maximum amount of liability in the event that Buyer sues Seller after the Closing. This “cap” can limit Seller’s liability for claims Buyer may make against Seller (for breach of a Seller representation, etc). Some Sellers that use the AIR purchase agreement add a similar “cap” on liability in an addendum. Such a “cap” can serve as a deterrent to Buyer filing a claim.  At the minimum, it can reduce the settlement value of a claim.

2. Bar on Small (or Harassing) Claims by Buyer: The provision “capping” liability (see above) often includes a provision that Buyer cannot sue Seller after the Closing unless the claim reaches a minimum threshold (e.g., $5k, $10k, $20k, etc. depending on the purchase price). Such a provision may prevent Seller from having to deal with a lawsuit of limited size, the type of lawsuit for which the attorneys’ fees involved may exceed the value of Buyer’s claim.

3. Broad Release of Buyer Claims Against Seller. Most custom purchase agreements will include a broad release by Buyer of claims against Seller. It frequently includes a release of known and unknown claims under California Civil Code section 1542. The release is effective as of Closing. The explicit exception to the release is typically for an untrue Seller representation or warranty. If Sellers wish to include this in the AIR purchase agreement, it can be easily included in an addendum.

What do you think of these modifications?  Post your comments or questions below.