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Real Estate Disputes- Delay or Impossibility of Closing under FR/BAR sales contracts

Real Estate Disputes are bound to arise after any major storm. A little knowledge can help avoid expensive litigation. This blog attempts to provide broad brush guidance (and my opinions) as to Post Irma closing delays under FR/BAR agreements, specifically the FR/Bar Contract for Residential Sale and Purchase last revised June 2017. It's not possible to address every argument that might be made on both sides and this blog should not be construed as specific legal advice. If you find yourself in this predicament, contact our office. http://www.naplesattorney.net/

These FR/Bar contracts generally have a Paragraph 4 (Closing Date; Occupancy) that elevates the closing deadline above all other deadlines:

"Unless the Closing Date is specifically extended by Seller and Buyer or by any other provision in this contract, the Closing Date will prevail over all other time periods including, but not limited to, financing and inspection periods....

If on Closing Date insurance underwriting is suspended, Buyer may postpone closing for up to 5 days after the insurance suspension is lifted."

This paragraph goes on to say, roughly, that if the contract provides for mortgage financing and the lenders funds are not available due to CFPB delivery requirements, then closing will be extended, but not more than 10 days. CFPB is the Consumer Financial Protection Bureau, the delivery requirements cannot be easily summarized here, so there is a lot to parse in this provision.

Paragraph 9 (RISK OF LOSS) of the residential FR/Bar contract states:

"RISK OF LOSS: If any portion of the property is damaged by fire or other casualty before closing and can be restored by Closing or WITHIN 45 DAYS to substantially the same condition as it as on Effective Date, Seller will, at Seller's expense, restore the Property and deliver written notice to Buyer that Seller has completed the restoration; and the parties will close the transaction on the later of Closing Date OR 10 DAYS after Buyer receives Seller's notice. Seller will not be obligated to replace trees...."

This clause goes on to say that if restoration cannot be timely completed, Buyer may cancel this contract and get their money back OR accept the property AS IS, along with assignment of any insurance proceeds to which the Seller is entitled.

I find it interesting that Seller need not replace trees. What about soil? Many homes lost significant portions of their lots in the extensive flooding. The trees are gone... so is the lawn.

Paragraph 11 of the FR/BAR agreement under discussion is significant and is titled: "11. Effective date; Time; Force Majeure:"

The effective date is the date the last of the parties initials or signs the final or counter offer. Then it says in bold: "Time is of the essence for all provisions of this Contract."

Paragraph 11, Subparagraph c, is titled Force Majeure* events (*see my blog at http://www.naplesrealestatelitigationattorney.com/2017/09/real-estate-closing-delays-caused-by-hurricane-irma.shtml )

and is much more extensive than similar provisions in the NABOR contract. However, for the purpose of Hurricane Irma, it really comes down to the same thing.

"...All time periods, including Closing dates, will be extended for the period that the act of God or force majeure is in place. However, if such Act of God or force Majeure event continues beyond 30 days, either party may cancel this contract by delivering written notice to the other; and Buyer's deposit(s) will be refunded." (emphasis added)

Note the requirement of written notice! Paragraph 12 says this must be delivered by mail, personal delivery of electronic media. (Hmm, does electronic media include faxes?) FAILURE TO TIMELY DELIVER WRITTEN NOTICE RENDERS ANY CONTINGENCY NULL AND VOID. This could mean Buyer forfeits his deposit where he didn't need to. It can mean Seller unnecessarily loses a good sale. Remember, unlike the NABOR contract, The FR/BAR puts at risk not only deposits the Buyers have made, but ALL deposits they agreed to make.

If the notice wasn't in writing and delivered, IT DIDN'T HAPPEN. Send notice by multiple methods. How many times have you done an email, but forgotten to hit "send?" or your internet connection crashed and you did not realize it?

This blog focuses on the issue of time to close, not the very real problem of significantly changed or damaged property conditions after Hurricane Irma. Those issues will be addressed in a future blog.

See my blog concerning the same issues under a NABOR contract, as well as my blog discussing the general topic of force majeure extensions or contract terminations.

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