With the panic right now over the Coronavirus, we have found that
developers, investors, and agents alike are wondering how they
should respond to this crisis. Tips for real estate professionals.
TIP #1 - CAREFULLY REVIEW YOUR PAPERWORK FOR FORCE MAJEURE CLAUSES
A force majeure or an act of god clause is a specific contract
provision found in many contracts.
The clause contains language that removes or limits liability for
natural and unavoidable catastrophes that interferes with or restricts
the parties that entered into the contract from fulfilling their
Force majeure events often include acts of God (weather), war,
acts of terrorism, epidemics, acts of government, strikes and labor
disputes, and certain accidents.
Determining whether a force majeure clause can be invoked is often
the subject of intensive inquiry. In general, force majeure clauses are
defined narrowly and are subject to substantial litigation.
To trigger a force majeure clause, three criteria typically need to be
CORONAVIRUS REAL ESTATE TIPS
So, what are some concrete steps the average developer, investor, or
agent could take during this time of uncertainty?
Please utilize the following tips to prevent unpleasant surprises and
keep your project moving forward.
1) The event must be beyond the reasonable control of the
2) The affected party’s ability to carry out its obligation must have
been prevented, impeded, or hindered by the event
3) The concerned party must seek to avoid or lessen the damage
from the unexpected event.
If these three factors are present, the affected party can find
relief. This relief could range from negotiating a new deal until
the unexpected event is over to terminating the contract without
In regards to the Coronavirus outbreak, most legal experts believe
that, unless a contract was entered into after the Coronavirus
outbreak began, most parties would have a strong argument to
utilize the force majeure clause.
However, each case is different, and discussing your particular
situation with an experienced attorney is an excellent place to start.
TIP #2 - YOUR CONTRACT MAY BE SUBJECT TO THE DOCTRINE OF FRUSTRATION
If your contract does not contain a force majeure or an act of god
clause, another option is the doctrine of frustration. This implied
contract term works to limit your damages when something
unexpected occurs, which nearly destroys the value of your contract.
A contract obligation can be removed under this doctrine if three
conditions are met:
1) The unexpected event is not the fault of either party
2) The incident occurred after the contract was formed and
was not expected to occur by either party
3) If the party had to complete the deal anyway, even with
the event, it would transform the contract into something
radically different than what either party intended.
If these three factors are met, the parties could be excused from
performing the contract.
The doctrine of frustration can be applied to many contracts,
including leases and other business contracts.
TIP #3 - DOUBLE-CHECK YOUR TRANSACTION TIMELINES
It’s always important to keep track of a real estate transaction
timeline, but it may be even more so today due to the Coronavirus.
Things like school closings, “social distancing,” working from home,
and closed businesses have made delays more likely.
These unavoidable circumstances must be factored into your
timeline. Missed deadlines can lead to extra expenses and even put
a deal in jeopardy.
TIP #4 - TALK TO AN INFORMED REAL ESTATE LAWYER
In times of turmoil, it is more important than ever to have a good
lawyer on your side.
Complicated legal jargon and concepts combined with societal stress
can cause little details to be missed or essential aspects of a deal to
A good real estate lawyer can help streamline closings, renegotiate
contracts, and spot any potential problems.
The stress and uncertainty caused by the Coronavirus have raised
many questions for those individuals engaged in the real estate
These questions are complicated and involve everything from
investment strategy to future legal obligations. That is why having
an experienced lawyer on your side, who has advised clients through
previous crises, is so important.
The key to weathering any storm is first to get informed so that you
can take the best action moving forward – and that is why we are
We can also provide you with more information on the Economic
Injury Disaster Loans that are now available to impacted small
businesses in all 159 Georgia Counties.
Remember, now is not the time to wait and see. Please do not
hesitate and end up paying the price.
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