There are a number of provisions within our standard real estate contracts which most buyers, sellers and real estate professionals typically give little to no thought to. In fact, most attorneys will gloss over certain provisions when making modifications to the contract. In the wake of Hurricane Irma these provisions become critical and will govern when (and in some cases if) closings will actually take place. In a typical transaction our focus tends to be on price, deposit amount as well as inspection and financing periods. If however you have a transaction which was scheduled to close in the week prior to Irma’s impact on Florida or in the week or weeks thereafter, these obscure contract provisions such as “Force Majeure” and “Risk of Loss” will likely impact your transaction.

The focus of this post is to cover some basic questions I have received from various real estate professionals as well as clients whose transactions were disrupted by Hurricane Irma.

•  What does the term “Force Majeure” mean? Literally translated, the term means “superior force”. The most recent version of the FAR/BAR Contract defines the term as “hurricanes, floods, extreme weather, earthquakes, fire, or other acts of God, unusual transportation delays, or wars, insurrections, or acts of terrorism, which by exercise of reasonable diligent effort, the non-performing party is unable in whole or in part to prevent or overcome.”

 My closing was scheduled two days prior to Irma, am I required to close? The answer depends on whether your performance or the availability of a service (including insurance or required approvals essential to close) is disrupted, delayed, caused or prevented by Hurricane Irma (the Force Majeure). If you are unable to obtain insurance, wire money, obtain your association approval, receive loan documents, due to the Force Majeure, then you are not obligated to close. However, if all services are available and nothing is preventing you from closing except your unwillingness to close, that is a different story requiring a deeper analysis.

•  I was supposed to close on September 11, 2017 and was unable to due to the impact of Irma. Do I need a contract extension? The FAR/BAR contract provides that “all time periods, including the Closing Date, will be extended a reasonable time up to 7 days after the Force Majeure no longer prevents performance under [the] Contract.” So, by way of example, if your closing date was September 11 and the bank lending you the funds is unable to deliver the documents because their offices do not have power, your closing is automatically extended up to 7 days after power is returned to those offices such that the employees can perform as they were prior to the storm. So that all parties are on the same page, it is wise that you notify the other party in writing of the reason for the delay and provide supporting documentation and further iterate that the deadline will extend automatically until such time as the performance can occur.

•  How long does this automatic extension last? The FAR/BAR contract states that if the Force Majeure prevents performance under the contract by more than 30 days, then either party may terminate the contract, so the automatic extension would last 30 days. If the delay is going to be greater than 30 days, the parties should execute an addendum agreeing to an extension timeframe, otherwise the risk of cancellation by either party exists.

•  I already performed my inspection of the property, then the hurricane hit. Do I get another inspection? The FAR/BAR contract places the burden on the Seller to maintain the Property Realtor(including lawn, shrubbery and pool) in the condition existing as of the Effective Date. A Buyer would be entitled to inspect the Property to ensure the condition has not changed since the original inspection. Ordinary wear and tear is acceptable. Therefore, if a portion of the roof was damaged due to the hurricane, the obligation to repair that damage falls on the Seller (as limited by the risk of loss provisions in the contract). The post Force Majeure inspection is not an opportunity for a Buyer to find items which were present during the original inspection and negotiate a reduction to the price of the home.

•  I am selling my home and the storm caused a window to shatter. My contract is “as-is”. Isn’t this the Buyer’s responsibility? No. As stated in the answer to the previous question, the FAR/BAR contract places the burden on the Seller to maintain the Property in the condition existing as of the Effective Date. A window damaged after the contract is effective would be the responsibility of the Seller to repair. Seller is responsible to repair damages to the Property up to 1.5% of the Purchase Price. If the cost to repair the damage exceeds 1.5% of the Purchase Price, the Buyer may elect to take the Property in “as-is” condition together with a 1.5% credit or terminate the transaction and receive a refund of the Deposit.

These are just a few of the questions we received over the past week. The facts will dictate the response.
The attorneys at ATS are offering free support to real estate agents to assist with contract questions due to post-Irma difficulties.