What is a notice to perform in a real estate transaction?
In the event that progress in a real estate transaction stalls, a “notice to perform covenant or quit” can be issued by one party to compel the other party in the transaction to perform a required action in order to move the process of the sale forward.
If the situation seems to indicate that the sale or purchase will have to be cancelled if the other party does not perform as agreed, a formal notice must be delivered before any attempt to cancel is made.
When a buyer might issue a notice to perform
A buyer may find it is necessary to issue a notice to perform if the seller has failed or refused to do any of the following:
- Deliver a pest inspection report
- Complete a seller property questionnaire
- Complete a transfer disclosure statement
- Provide homeowner association documents
- Prepare a previous insurance claims report
- Disclose any natural hazards
- Complete a preliminary title report
- Remove a seller’s contingency to buy a new home
- Complete repairs as detailed in previous document(s)
- Demand to close escrow
If the notice goes unanswered during a specified time period — usually 2 business days in California — the buyer can then seek to cancel the contract and walk away from the sale without forfeiting their earnest money deposit.
Situations when a seller might issue a notice to perform
A seller may decide to deliver a notice to perform if the buyer has not fulfilled their obligations. This can include failure or refusal to:
- Deposit earnest money as agreed
- Increase an earnest money deposit as agreed
- Submit a mortgage pre-approval or pre-qualification letter
- Provide proof of funds available to close escrow
- Sign and return disclosures or reports related to escrow
A notice to perform that is not complied with by the deadline listed on the notice puts the buyer in breach of contract and permits the seller to cancel the sale without further repercussions.
What should you do if you receive a notice to perform?
A notice to perform should be taken seriously by the recipient and acted upon immediately to avoid cancellation of the sale. If the deadline date to act on the notice falls on a weekend or holiday, the final opportunity to comply with the notice is by the close of business on the first business day after the deadline.
In most cases, a notice to perform is delivered when one party is merely slow to comply with their obligations, and serves as a reminder of the need to follow through on important tasks to move the real estate transaction forward. However, in some cases it may be a genuine effort to back out of a contract. In either instance, failing to address the items listed in the notice could lead to cancellation of the transaction.
Do you have questions about real estate closings, a notice to perform, or need expert legal advice to protect your real estate and financial interests? Contact San Pedro Real Estate Attorney Barbara Craig to schedule a free consultation. Serving clients in the South Bay area including San Pedro, Rancho Palos Verdes, Lomita, Harbor City, Torrance, Wilmington, and other nearby communities.