Avi Tryson.Coral Gables Managing Partner.Goede, Adamczyk, DeBoest & Cross.Coral Gables
The pandemic may cause unprecedented impacts to real estate transactions that will likely delay performance by one or both parties. The parties may be forced to work out extensions of deadlines in order to address such delays. Some delays may include travel restrictions, self-imposed and governmental-required isolations, potential closures of offices and institutions required to fund, close, and record real estate transactions, and action or inactions of a homeowners' or condominium associations.
The Florida Association of Realtors has released a coronavirus (COVID-19) extension addendum to contract (the addendum) created to specifically deal with coronavirus-related delays. The addendum can be used with all existing form Florida Association of Realtors contracts, including the FAR/BAR "AS-IS" residential contract, contract for residential sale and purchase (CRSP), vacant land contract and commercial contract. The addendum provides for extensions of time periods for the closing date, financing period, inspection period, title cure period, feasibility study period, due diligence period and homeowners'/condominium association approval.
Buyers and sellers can agree to extend any or all of the above-mentioned time periods for as much time as they think is necessary to complete each item given the current circumstances surrounding the pandemic. The parties can either enter a fixed date deadline or a number of days by which to extend the deadline. Please note that if the parties choose to extend a deadline by a certain number of days, this could mean business days or calendar days depending on the contract language, so the parties must look to the underlying contract as those terms would control the interpretation of the addendum.
The last paragraph of the addendum also provides the buyer protections in the event the buyer's lender doesn't fund an already-approved loan; specifically, it allows the buyer to terminate the contract and receive a refund of the deposit if the lender does not fund the loan due to concerns regarding the pandemic, or if the buyer's loan approval/commitment expires prior to closing due to such delays. The theory behind this provision is that buyers should not be penalized if they have already been approved and are proceeding in good faith, but something changes beyond their control due to the pandemic. Some examples of this are that the lender decides not to fund for business purposes related to the pandemic, or the buyer loses their job so they no longer have the regular monthly income under which they were previously approved. From the buyer's side, it would not be fair for the buyer to lose their deposit as a result of such scenarios. On the other side of the coin, a seller may feel that this paragraph leans too much in favor of the buyer, and may want to protect their interest by agreeing to an extension of any of these deadlines only in exchange for the buyer waiving the financing contingency, agreeing to release some or all of the deposit to seller, or some other agreement. Depending on the specific circumstances, the parties may still use the standard form extension addendum if the delay is not related to complications caused by the pandemic. It is important that the buyer and seller work together to determine which addendum and terms work best for their particular situation.
At the end of the day, as long as the parties want to close the transaction, they should be able to find a way to complete the transaction despite the complications caused by the pandemic, and the addendum allows them a simple way to do just that. For new contracts, the parties can and should include any additional time they believe will be required to deal with delays caused by the pandemic by making any deadlines longer than they would under normal circumstances.
Avi S. Tryson is the Coral Gables managing partner of Goede, Adamczyk, DeBoest & Cross. He focuses his practice on community association and real estate law.
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