Post Hurricane Irma, Are We Still Closing?
One of my Realtor clients posted the following question on social media: “When you have a buyer under contract before a tropical storm / hurricane affects an area, and the contract is AS-IS, who is liable for repairs from storm damage, if there is any?”
Luckily the Tampa Bay area escaped Hurricane Irma with minimal damage, mostly trees down, power outages, and some flooding. but I am certain there are nervous buyers and sellers out there thinking “are we still closing?” and “whose responsibility is it to fix the property prior to closing?”
The answer can be found in four places within the FAR/BAR “As Is” Residential Contract for Sale and Purchase: (i) Paragraph 5.(b), (ii) Paragraph 12, (iii) Standard G, and (iv) Standard M.
Paragraph 5(b): Reads as follows, “If an event constituting “Force Majeure” causes services essential for Closing to be unavailable, including the unavailability of utilities or issuance of hazard, wind, flood or homeowners’ insurance, Closing Date shall be extended as provided in STANDARD G.” This means exactly what it says – if the Closing cannot proceed forward because there is no power to the home or insurance is unavailable, the Closing Date is automatically extended.
Paragraph 12: Provides the time within which the Buyer must perform all inspections. If the Buyer is still within the inspection period and the house suffers storm damage, the buyer can choose to make the repairs after closing, or cancel the contract without penalty.
Standard G: This is the “Force Majeure” paragraph which says, “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.” The paragraph further defines Force Majeure as “hurricanes.” Standard G then extends the Closing Date up to 7 days unless the hurricane prevents the Closing for longer than 30 days, at which point either party may terminate the Contract. Under a cancellation on these terms, the buyer would get their deposit back.
Standard M: Under this Standard, if the cost to repair the property is less than 1.5% of the Purchase Price, and we are between the Effective Date and Closing, then the Seller must pay the money to repair the Property. If repairs are incomplete on the day of Closing, the Seller must escrow 125% of the estimated cost to repair (but not more than 1.5% of the Purchase Price). The remaining costs to repair after closing are taken from the 125% escrow. If the cost to repair the property exceeds 1.5% of the Purchase Price, then the Buyer can take the Property “as is” and have the Seller pay the 1.5%, or cancel the contract.
From a review of the “As Is” Contract, there are reasonable provisions for the Seller to repair, or for the Buyer to cancel a closing on Property damaged by a hurricane or other act of “Force Majeure.” We hope you and your family escaped damage from the storm. However, if your home was damaged by the Hurricane (whether you are selling or not), please reach out to us for help and advice.
Shawn M. Yesner, Esq., is the host of the Crushing Debt Podcast and founder of Yesner Law, P.L., a Tampa-based boutique real estate and consumer law firm that helps clients eliminate the financial bullies in their lives. We assist clients with the sale and purchase of real property, asset protection, Chapter 7 liquidation, Chapter 13 reorganization, bankruptcy, foreclosure defense, debt settlement, landlord/tenant issues, short sales, and loan modifications in Tampa, Westchase, Odessa, Oldsmar, Palm Harbor, Clearwater, Pinellas Park, Largo, St. Petersburg, and throughout the greater Tampa Bay area.