Any COVID-19 delay may affect your pending real estate contract. That’s because the virus is still affecting every aspect of life, with public and private closures still causing delays in scheduled contract closings.
Buyers and sellers are frequently seeing key parties and employees unable to sign documents as expected or battle through remote work complications.
What this means for you depends on the terms of the contract form itself. Let’s take a deeper look:
Reviewing Your Contract
The first thing many parties’ should do when evaluating their rights is to review the terms of the contract itself. Purchase and sale agreements regularly include provisions that excuse performance obligations under certain circumstances.
Dates are usually listed in the contract and must be met to avoid a breach. However, some circumstances may allow these requirements to be overridden.
You may also see Real Estate contracts include conditions for financing contingencies, rent roll contingencies or lease review contingencies – all that can be affected by COVID-19 delays.
A Real Estate attorney should review the conditions to see how COVID-19 affects your pending Real Estate contract.
Force Majeure and COVID-19 in Florida
Florida’s most commonly seen Real Estate contract is the standard FAR BAR ‘As Is’ Contract. This type of contract contains Force Majeure details, which may excuse a party’s nonperformance of contract obligations under some circumstances.
But importantly, the definition of Force Majeure in FAR Bar ‘As Is’ contract does not specifically cover pandemics such as COVID-19.
However, the Force Majeure clause does express circumstances where a party is limited to perform its contractual obligations due to floods, hurricanes, fire, other ‘acts of God’, wars, insurrections, acts of terrorism or unusual transportation delays.
What If a Party Is Unable to Perform or Sign?
If a party is unable to sign or perform their obligations due to a Force Majeure qualification, then they will be held in default or potentially be held liable for damages.
Also, note that under Force Majeure, all contract deadlines (such as the closing date) will be given an extension of up to seven days after the qualified Force Majeure no longer prevents the performance under the contract.
Extensions such as these occur up to 30 days after the contract closing date. But, if the delay is over 30 days, then either party is entitled to terminate the contract through a written notice. This will see the deposit return to the buyer and both parties released from any future obligations under the contract.
You may also be required to notify the other party of a Force Majeure event within a specified number of days of it occurring. COVID-19 naturally makes this very complicated as closures and knock-on effects have been stop-starting for nearly two years.
Material Adverse Event Provisions
Real estate contracts also tend to include provisions over material physical damage or destruction of assets. In some cases, people may argue that a State or Government required shutdown of a building impacts a performance obligation or the building that is being purchased or sold. In these cases, it could theoretically be possible to terminate the agreement.
However, a Real Estate attorney should review any Real Estate contract or agreement to determine the possible impact and right course of action.
Recognizing the complexities of the COVID-19 affecting real estate contracts, the Florida Association of Realtors has since circulated a COVID-19 Extension Addendum to Contract.
This can be useful when attempting to clarify any mutually agreed extensions, given it’s hard to predict when COVID may stop causing Force Majeure provisions.
What To Do If COVID-19 Is Affecting Your Pending Real Estate Contract?
If for any reason a COVID-19 related event is at risk of affecting your pending real estate contact in Florida, then contact a Real Estate attorney as soon as possible.
Whether you or key individuals are unable to perform their obligations due to illness, delays or closure, an attorney can help provide crucial guidance.
Failure to perform your performance obligations or have a particular activity completed could see you lose the sale or purchase and potentially face damages.
However, with the help of a Real Estate attorney, you can review your Real Estate contract to take the necessary steps, such as notifying Force Majeure.
Please note the information listed here is for reference purposes only and you should only take advice and make decisions following the guidance of a Real Estate attorney.
How COVID-19 Has Affected the Real Estate Market:
As previously mentioned, performance obligations may be delayed or impossible due to any COVID-19 related illnesses, isolation and closures. But the effects of COVID-19 have gone further than the buyer and seller.
We’ve seen surveys, inspectors, contractors and environmental consultants all struggle to meet their usual time frames of delivery. Site visits have been limited over safety concerns and people have been unable to perform obligations due to contact tracing.
Additionally, remote work relies on mail arriving on time. Naturally, that sometimes doesn’t happen. If you are planning or creating a Real Estate contract, it’s advised you deliver notices and documents by email to avoid such problems.
- COVID-19 has significantly affected the U.S. residential real estate market
- Urban areas have seen a noticeable drop in residential sales, with health concerns, closures and economic uncertainty the main causes.
- April-May 2020 saw the lowest level of U.S. residential sales since the financial crisis of 2007.
- The shift towards remote working has placed a greater value on the characteristics of a house and less on its location for commuting.
- 25% of homes were delisted during early 2020.
- New listings decreased by 40% from 2019.
- Home showings for residential purchases were down by 40% from 2019.
Hire a Residential Real Estate Contract Attorney in St Petersburg, FL
If COVID-19 is at risk of affecting your pending Real Estate contract in St Petersburg, Florida then contact us today. Our attorneys, Ross and Purdun at Battaglia, Ross, Dicus & McQuaid, P.A. have extensive experience that can help you through these tricky moments, reviewing your document and advising you on the next steps to secure your transaction.
Contact us today to schedule a free consultation.