Real Estate Questions Coronavirus –
Anyone with a stake in real estate has been forced to make changes to address the COVID-19 outbreak. The virus has affected all aspects of our lives, including agreements on real estate.
In general, these agreements are a reflection of the business climate and risk assessments at the time of creation, but with unforeseeable disruptions like coronavirus, it becomes necessary to evaluate the existing arrangements and review what’s covered in them. Changes might be needed regarding term, rights, medications, remedy, or relationships.
Now is the perfect time to assess the provisions in your contracts and ask the following questions:
What protection is offered or could guide during the COVID-19 outbreak via provisions in a purchase or sales contract, loan or lease document?
- Force Majeure or Acts of God, which address privileges and duties when proceedings occur ahead of anyone’s control
- Defaults, which define actions or indecisions that will trigger defaults and what the privileges and responsibilities are of both parties
- Taking, which defines what happens when some or all of the material’s right to operate is isolated or controlled
- Access, which address the rights to input and examine premises and the right to limit access
- Covenant of Quiet Enjoyment, which offers tenants with a guarantee they can peacefully use their leased property
- Maintenance, which addresses cleaning and other maintenance issues
- Payment obligations, which defines expense and closing requirements of all parties, some of which might be excluded from force majeure clauses
- Notice and Cure Periods, which address requirements and protocols during specific phases
- Remedies, which defines what should be done if there is default or non-performance
- Duty to Notify, which, in this case, addresses whether or not parties must notify others of exposure to or symptoms of COVID-19
Other things in a contract that could be relevant during this time include operating covenants, contingencies, delivery periods, abatement or support clauses, and general deadlines or termination and extension rights.
What other issues should parties consider moving forward with a real estate contract at this time?
In addition to what might already be addressed in an existing contract, new contracts should include:
- Information about what third-party workers are required to move a contract forward. In some cases, third-parties might not be considered essential workers, and therefore, not available to perform as required.
- Delays in recording at local recording offices
- Closing delays or disruptions which would arise because parties are unable to meet in-person
- Insurance coverage, which, in most cases, will not include business interruption analysis for involuntary or voluntary shuts down caused by this chaotic time. Parties should evaluate all of their insurance procedures with their risk management teams to determine whether the coverage is included in their policies.
- All evolving federal, state, and municipal ordinances that affect real estate contracts
Keep in mind, it will likely be necessary to secure signatures and notarizations electronically during this time. You should research and prepare for this final step in advance.