Our phone has been active this week with an important question regarding real estate contracts. Buyers are asking if they can cancel their contract based on COVID 19 being an event of "Force Majeure".
Force Majeure excuses a Buyer or Seller in a real estate contract from performing any obligation in the contract or to be liable one to the other for damages so long as performance or non-performance of the obligation, of the availability of services, insurance or required approvals essential to the closing, is disrupted, delayed, caused or prevented by Force Majeure.
Force Majeure is defined in the Standards for Real Estate Transactions of the Florida Bar / Florida Realtors contract form 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.
I looked at several more Force Majeure clauses in other Florida forms and they all are pretty much similar. None I found include "epidemic" or "pandemic".
What one must do to examine the applicability of the Force Majeure clause is to see if any of the material events necessary to perform a party's obligations is prevented as a result of the "Act of God".
In Florida, attendance at the closing in person is no longer required. Online notary services became available in Florida on January 1 2020. We have closed transactions with buyers or sellers all around the world, as well as just a few hours away. So transportation disruption is probably no longer a supportable Force Majeure event. Mandatory quarantines and isolation may meet the definition, but mere quarantine would not be enough as it must be such that the ability to perform is disrupted or delayed. There must be a reasonable ability to perform which ability is removed or thwarted on the part of the party being required to perform. We just closed a purchase and sale with one party unable to travel from Turkey.
Certainly, the virus alone is not a Force Majeure obstacle. However are curfews, or disruption to financial markets a bona fide reason? Since in person closings are not required (I have never seen a residential contract that required in person attendance at closing), that too should not be a reason. What about the inability to gather to do a "walk-thru" inspection because of government restrictions on travel or meetings?
Someone will try to call the restrictions on our population a Force Majeure. The question is whether the closing does not occur because of impossibility or because of impracticality.
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Copyright 2020 Richard P. Zaretsky
Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This article is for information purposes and is not specific advice to any one reader.
Richard Zaretsky, Esq., ZARETSKY LAW GROUP. ATTORNEYS AT LAW, 1615 FORUM PLACE, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660. RPZ@ZARETSKYLAW.COM - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide www.ZARETSKYLAW.com.