What Are Riders to Real Estate Purchase and Sale Agreements?

Question

We are in the middle of buying our first investment property and my attorney just sent back the revised Purchase and Sale (P&S) Agreement with an additional 12 pages, called a "Rider." Do we really need all this detail or is the attorney just adding extra work so as to charge me more for handling the purchase?

Answer

Riders are extremely common for purchase and sale agreements. The reason why attorneys add in a rider (or "addendum") to the P&S agreement is because they are accustomed to certain language, which has covered their clients' interests in the past better than a stock P&S form would normally account for.

When you look through the P&S rider, it might appear that some sections are redundant; in other words, that the topics covered match sections in the main P&S form. This is okay. These provisions might include buyer's obligations, seller's warranties, or instructions on when notice has officially been given to the buyer or seller. Upon a closer look, however, you'll likely realize that these provisions are not restatements but rather expansions on what's in the original P&S agreement, ensuring that you are covered in the manner your attorney sees fit.

Your attorney should account for this dual topic coverage, however, by adding a section in the rider noting that where there appears to be a conflict or a divergence in language between the rider and the original purchase and sale agreement, the rider wins out.

Example: "In the event of a conflict between the terms and provisions of the attached Purchase and Sale Agreement and Rider, the terms and conditions in the Rider shall prevail."

If you are purchasing a commercial property you should fully expect to see a rider to the P&S, as it will cover nuances in the transaction that are likely not covered in the standard P&S forms. These might include, for instance:

• Hazardous waste provisions. These ensure that the property is compliant with hazardous waste concerns, as outlined by state laws. There is language in several standard P&S forms regarding hazardous waste, but it typically doesn't go into enough detail to fully cover the buyer's interests.
• Tenant status. Some references to the property's current tenants will be made, whether as exhibits or warranties pertaining to the tenant roster and current rent roll, and providing assurances that they have been represented properly by the seller.
• Additional agreements. These could be, for example, credits back to the buyer to address needed repairs, or representations from the seller that the cost of certain repairs will not exceed a certain amount once the buyer is the owner.

While at first glance it might look like an attorney is padding the bill by adding more pages to the P&S, they are likely saving themselves time, and thus you money, by including the rider. Rather than having to revise every section of the standard form, attorneys can utilize rider provisions that have been appropriate in other transactions they've handled and reference them when creating the rider for your P&S.

In fact, a well-written rider is an indication that your attorney has experience. You may have more to worry about if a rider were absent rather than present, particularly when buying an investment property.