COVID-19 and Real Estate Closings

Throughout the world, we are experiencing the effects of COVID-19, which is continuing to have a growing social and economic impact. Many parties to contracts are concerned about the performance of the other party, which begs the question as to whether the principle of Force Majeure could be invoked or potentially be detrimental to their situation.

The Far/Bar “AS IS” is essentially a contract, developed jointly by the Florida Bar and the Florida Realtors, used in Florida, which standardizes the key elements of the real estate property transaction. 

One such element that might apply to the current situation is the Force Majeure clause.  The standard Far/Bar “AS IS” provides:

Buyer or Seller shall not be required to perform any obligation under this Contract or be liable to each other for damages so long as performance or non-performance of the obligation, or the availability of services, insurance or required approvals essential to Closing, is disrupted, delayed, caused or prevented by Force Majeure. "Force Majeure" means: 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. 


In case of Force Majeure, all time periods, including the date for a closing to a real estate transaction may be extended up to seven days after Force Majeure no longer prevents the parties from performing under the contract. However, if Force Majeure continues to hinder the process of closing more than 30 days beyond the date of closing, the law allows either party to terminate the contract by delivering written notice to the other. The deposit for the real estate transaction should be refunded to the buyer, thereby releasing the buyer and seller from all further obligations under the contract.  

On March 1, 2020, the Governor of Florida, Ron DeSantis, issued Executive Order number 20-51, directing the Florida Department of Health to declare a public health emergency.  Under Fla. Stat. 381.00315(a)(c) 4b. If an individual poses a danger to the health of the public, the State Health Officer may subject that individual to quarantine or isolation.  

On April 1, 2020, Gov. Ron DeSantis issued another executive order calling for all Floridians to stay home except to obtain essential services. Per the same order, however, residential and commercial real estate activities, including settlement services, were determined to be essential. As such, law offices performing settlement services can remain open and parties have the ability to continue to move forward with their real estate purchases. In addition, parties’ performance can be ensured via several advanced techniques now available, allowing a party to a contract to be able to complete a transaction from any part of the world. Some modern tools available in transactions to help in facilitating closings are RON (Remote Online Notary), remote closings, mobile notaries, drive through closings and courier document delivery.

Accordingly, the current shelter-at-home order does not necessarily rise to a level where a party to a real estate contract can trigger the Force Majeure clause. 

However, the COVID FAR Addendum recently released by the Florida Realtors allows the buyer to cancel due to a lender's failure to fund or the expiration of the loan commitment:  

All other non-conflicting terms of the contract remain in full force and effect except if Buyer has obtained approval for the loan and either the terms/conditions of the loan approval expire or lender refuses to fund the loan due to COVID Restrictions, then Buyer may cancel this Contract by providing written notice to Seller the earlier of Closing Date or within two (2) days of expiration/notice of refusal.  Buyer shall be refunded the deposit, thereby releasing Buyer and Seller from the Contract.

The use of the COVID Addendum also might give a buyer a stronger argument to use the Force Majeure clause and cancel the agreement even if the lender is willing to fund or the loan approval hasn't yet expired due to the following statement: 

The Coronavirus (COVID-19) pandemic may cause unprecedented impacts to real estate transactions, including but not limited to travel restrictions, self-imposed and/or governmental required isolations, potential closures of offices and institutions required to fund, close and record real estate transactions, and actions or inactions of a homeowners' or condominium association ("COVID Restrictions").

If you are seeking to cancel a contract under the current circumstances, you can be found to be in breach and could possibly face consequences such as losing your escrow deposit or having to pay a reasonable amount of damages ordered by the courts equal to the seller’s expected profits. 

If you are considering cancelling your contract or are presented with a COVID addendum, feel free to consult with our experienced real estate attorney who can ensure that your interests are adequately protected.