BIC TIP #1108: Understanding Paragraph 8(h)
Paragraph 8(h) of the Offer to Purchase and Contract often causes confusion, but its application is actually straightforward. The provision only becomes effective if the seller has failed to disclose any known or suspected issues of governmental noncompliance prior to the Effective Date. In practical terms, this means the seller holds the key to whether 8(h) ever applies.
If the seller knows or even suspects that the property may be in violation of a governmental regulation—zoning, permits, setbacks, environmental rules, or any other compliance matter—they can avoid triggering paragraph 8(h) simply by disclosing what they know. Once disclosed, the buyer proceeds with full awareness, and the contract provision is no longer in play.
For Brokers-in-Charge and agents alike, the lesson is clear:
Encourage your sellers to disclose early, fully, and honestly. Noncompliance is not nearly as problematic when it is disclosed upfront. It is the failure to disclose that creates liability and invokes protections for the buyer under 8(h). Proper disclosure protects all parties—and keeps your transaction on solid ground.
