Lowndes

Closing Interrupted? Check Your Force Majeure Provision


  • March 23, 2020
  • /   Jennifer Dixon
  • /   Articles,Coronavirus COVID-19 Task Force,Real Estate
coronavirus force majeure real estate

By: Jennifer Dixon

As the country grinds to a halt during the public health emergency, many are wondering about the effect it may have on their pending real estate closings and other sales transactions. A good place to start is by looking for the force majeure clause in the governing contract.

The force majeure clause defines what happens when an interrupting event occurs that is outside the control of the parties (acts of God, hurricanes, war, famine, etc.). Such a clause will often afford the parties relief from liability if one of these unforeseen events results in non-performance. Typically, a force majeure clause will excuse the parties’ non-performance (i.e., closing the transaction) for a certain number of days after the unforeseen event causing the delay has resolved. A public health emergency, such as the current coronavirus (COVID-19) pandemic response, especially one that results in an inability to record documents or to obtain financing or insurance through a reputable lender or carrier, could trigger the force majeure provision.

If the force majeure provision in your contract is not clear as to whether the COVID-19 response is a qualifying event, the parties may be able to amend their contract to include it specifically. If you have a pending closing or transaction that you are not sure is protected by a force majeure clause, an attorney can guide you.

If you would like to read more about force majeure clauses, in general, click here.

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