Addendum Agreement Meaning: Everything You Need to Know
Meaning there is additional information in the addendum which was not part of the original contract.3 min read
A real estate contract may have attached to it an addendum agreement, meaning there is additional information in the addendum which was not part of the original contract. The addendum is made part of the original contract once it is prepared and given to the principals. Addenda are often used to provide additional clarifying information or elaborate on requirements that were unclear in the original contract.
A buyer can use an addendum to request, in writing, that the seller pays a portion or all of the closing costs. It can also be used if the buyer has offered to purchase appliances in the home from the seller. A financing addendum can be used as a way to set the terms related to the financial aspects of the contract.
Types of Addendum Agreements
An addendum is used for a variety of reasons. When dealing with water rights, the buyer may use an addendum to the purchase contract to specify that their offer requires that legal water rights exist for their intended purpose. Other examples include:
- An inspection addendum, which lists any inspection contingencies such as deadlines for property inspection, the inspection report, and any negotiated resolutions that come from the results of the inspection.
- A septic addendum, which is common in rural areas where septic systems are frequently used. The addendum is used to confirm the terms and deadlines for the inspection of the septic system. It will also state who will pay for any corrections or related negotiations.
- A water well addendum, which is included when a water well is on a property and supplies water. This will often list inspection contingencies, due dates, and clauses related to any corrective actions that need to be taken.
- A sale of property addendum, which is put in place If the sale is contingent on the sale of another property. The sale of property addendum will list sale deadlines and what will happen if the sale is not completed on time.
- A real estate contract addendum, which will list the terms for the buyer that are needed for the seller's mortgage note.
- An electronic signature addendum, which will list which contracts and documents allow digital or electronic signatures.
Disclosures can also be included as addenda. These can include:
- A property condition disclosure, which is when the seller discloses any defects or major repairs related to the property.
- Disclosures in relation to any instances of mold, asbestos, radon, lead-based paint, and other similar hazards. These are not required but are recommended to limit liability.
- A Homeowner Association (HOA) addendum, which will list rules, financial information, and other details that explain how the HOA is run and what financial obligations are expected.
- A property tax disclosure addendum, which lists the current tax level for the property as determined by the county.
- A hazards addendum, which discloses any known materials or substances that are on the property. This can also include any hazardous situations that may exist.
Finally, a blank addendum, while not recommended, may be used to list a contingency from a buyer. They are not recommended because real estate professionals are not trained to write legal content, and in some states, it is illegal to practice law without a license. A blank addendum should be handled by a licensed, legal professional.
A lease addendum is used to provide documentation to both parties of any changes that have been made to the conditions and rules originally stated. This will eliminate any misunderstandings or misinterpretations based on agreements that were made verbally about the lease. A lease addendum can include rules pertaining to the property only allowing smoking outside the premises, for example. The tenant agrees to the addendum by initialing the document.
A lease addendum is easy to create as it only needs to list the information that is being added and was not present in the original agreement. The addendum must include:
- The names of all relevant parties.
- The date the addendum was prepared.
- The original date of the lease.
- A detailed explanation of what is being added to the original agreement.
Landlords benefit from lease addenda by clearly stating the important rules and regulations of the property. Tenants should have a copy of their own that has been signed by both parties. A lease addendum is legal as long as both parties have signed, indicating an agreement to the content listed.
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