Three-day reflection period, written contracts welcomed

PHILIPSBURG - "It's about consumer protection," said Notaries Association President Henry Parisius, as he welcomed the proposed three-day reflection period for the purchase of immovable goods, the outlawing of pre-payments on construction and the coming into effect of law changes that would also require all contracts to be in writing.

Parisius, Notary Meredith Boekhoudt and Candidate Notary Lars de Vries were again in Parliament, Thursday, to give their opinion on law changes. The Central Committee hearing zoomed in on the pending changes to the Civil Code, on the purchase of immovable property and the contracting of work.

In the notaries' opinion, the three-day reflection period is necessary, because the purchase of a dwelling (house) is often the most important investment some people make in their lifetime. This reflection period is only extended to individuals who are not also involved in the sale and purchase of real estate as their profession. Neither are corporations and foundations entitled to this reflection period.

When adopted by Parliament along with other changes to the Civil Code, the reflection period will allow the unilateral rescinding of a sales and purchase contract, without need for just reason. However, if a buyer enters into another sales and purchase agreement for the same property within six months, the reflection period is not applicable. "You only get to have this once."

This period also covers construction contracts.

Further, the changes will bring to an end the lodging of deposits on real estate purchases and for construction cost. Only a 10-per-cent deposit in an escrow account, administered by a notary, will be allowed.

De Vries sees this as a step in the right direction, as it will limit the disputes when pre-financed projects fail and buyers want their money back. If people want to pay more funds to a developer or a contractor, this needs to be done via a loan or mortgage, "but simple sale and purchase payment will not be allowed."

Tying all changes together is the need for all contracts to be in writing. The notaries advised the public to have their contracts formulated by legal professionals, to avoid issues in the future. This would lessen unnecessary hassle and administration cost to straighten out the matter.

Member of Parliament (MP) Roy Marlin (Democratic Party) asked if the three-day reflection period was sufficient, particularly for non-residents, who purchase while on holiday. Boekhoudt said there was not a reflection period at present, so until it was instituted, it could not be judged.

She noted that a big part of getting people to understand the changes and their rights would be an information campaign that must come after the changes were made.

Marlin also queried about a similar reflection period for people buying timeshare. Parisius said the law offered protection for those buyers via a five-day reflection period.

The MP also wanted to know if it would be worthwhile to have structured, timeshare-transfer deeds, so owners would have a "real right." Parisius said this would be "worthwhile" for timeshares and fractional ownerships that cost "hundreds of thousands of dollars."

Independent Member of Parliament (MP) Frans Richardson asked what time period would be suggested for a sales and purchase agreement to be closed. Parisius said a period could not be prescribed, as each case was different, so the period should be left up to parties to judge the situation, but the contract "must state" when, at the latest, this must occur.

United People's (UP) party MP Jules James said he was happy to hear that the notaries saw the three-day reflection period as "a good thing," considering the difference of opinion between the two real estate associations. He asked if the notaries would recommend instituting a professional real estate broker's licence and an independent real estate broker's commission. Boekhoudt said these were points not yet discussed within the association, so an answer could not be given now.

James also asked about the transfer of deed restrictions, for example: someone buys a property with the deed prohibiting commercial use, later sells it and the new owner – unaware of the restriction – starts up a business, to which neighbours object. Boekhoudt said such a case illustrated the need to use a notary to review the deed, because such restrictive clauses would be pointed out.

MP George Pantophlet (National Alliance) asked if government could audit the amount in escrow, in particular those amounts that were tied up in dispute. Parisius said information on the funds was only available to the parties involved. The notary added that 99 per cent of all transactions went smoothly and for the remainder, the need to ask a notary to "properly word" a sale and purchase agreement was highlighted.

24 February 2012

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