Undoubtedly the coronavirus pandemic has brought about severe anxiety. The real estate industry has not escaped this uncertainty as primarily Purchasers and to some extent Venders consider their options in any Agreement for Sale or Purchase. A Purchaser who may want to cancel their Agreement must be guided by the terms of the contract. They must determine if the Agreement for Sale has provided for cancelation. Is there a forfeiture of deposit clause in which case there is no recourse for the Purchaser who may not wish to proceed to Completion. The Agreement may be subject to financing and provides for the return of any deposit less Attorney fees and interest. Generally, these are the provisions that traditionally will determine the Purchaser’s options for cancellation. Similarly, the need to extend the Completion date as a result of unexpected delays can result in cancellation or penalties by the imposition of interest to be paid on the unpaid balance needed to Complete. The current crisis however has introduced the unexpected, events not previously considered that our current drafting language may not have taken into account.
In light of the foregoing a long tested legal principle is beginning to find relevance in real estate contracts during this period. In law, there is a doctrine called “force majeure” that excuses or permits a party to delay its performance under an otherwise legally enforceable contract when certain events occur. Force majeure means “greater force.” A force majeure event is derived from the French Napoleonic Code. Force majeure events are often defined in contracts to include political events such as wars, insurrections, riots, strikes, lockouts, terrorist threats or actions, or explosions. A force majeure event is often referred to as an act of God or act of nature, such as hurricanes, floods, earthquakes, landslides, tornadoes, tsunamis, volcanic eruptions, sinkholes and storms.
Generally, losing one’s job, financial or general uncertainty about the future are not force majeure events. Courts will review the specific Agreement to determine whether there is force majeure language and the events covered. If included, the Courts will enforce them and if not the Courts will generally enforce the Agreement as written.
Given the current crisis, Attorneys in other jurisdictions are now including force majeure language and in some instances a “Coronavirus Addendum” to the Agreement for Sale. The addendum allows a buyer and seller to agree in advance to extend deadlines if certain events occur. Those coronavirus-related events are called permitted delays. Permitted delays include the buyer or seller being exposed to or infected with the coronavirus or diagnosed with covid-19, the buyer or seller being quarantined or not permitted to travel, the buyer’s attorney or lender being unable to complete the transaction, and other similar causes related to the coronavirus outbreak that are beyond a buyer’s or seller’s reasonable control.
Matters that may be beyond a buyer’s or seller’s reasonable control may take into account instances where property valuations or survey identification reports cannot be completed in a timely manner. Open houses may be at a greater risk in the current pandemic but virtual open houses may still be held via the Internet and may become the wave of the future.
Notwithstanding some of the restrictions imposed by the corona virus, real estate transactions continue to be finalized and all stakeholders remain engaged to facilitate timely completion of sales. The Tax Administration of Jamaica office that is responsible for issuing certificates for the payment of transfer tax and stamp duty remains open as well as the National Land Agency which has responsibility for the issuance of Certificate of Land Titles. Save perhaps legal firms working in quarantined communities Lawyers are able to work remotely and with government agencies remaining open there is limited reason that real estate transactions cannot move to Completion.
For those persons contemplating entering into an Agreement for sale in the current environment, the merits to the inclusion of a force majeure clause or the addition of a Coronavirus Addendum should be given great attention and must be brought to the attention of the Lawyer representing them so that the appropriate wording can be included.