Covid and the Agreement of Purchase and Sale

By: Jacqueline Moneta JD and Jayson Schwarz LLM

COVID-19 has created a unique situation in the real estate market, not only for the buyer and seller, but for their realtors, mortgage brokers and lawyers too. The current restrictions and limitations necessary to comply with physical distancing are having a direct impact on a buyer’s experience. Showings are done virtually, meetings with brokers and lawyers are over Zoom, and everyone is working remotely.

As a solution to some of these challenges many real estate agents are now including COVID-19 clauses in Agreements of Purchase and Sale. But how do these clauses protect the parties and what should you be looking out for?

COVID-19 clauses in Agreements of Purchase and Sale are meant to protect the parties from delays and interruptions to their deal caused by issues relating to COVID-19 including illness, self-isolation or delays with third parties. However, a COVID-19 clause, which is not carefully drafted and reviewed, may cause unnecessary confusion or delay.

Consider, for example, a common clause which contemplates an extension of a real estate transaction where either party is subject to a mandatory COVID-19 quarantine and the agreement is automatically extended, at the request of either party, for a period of 14 days.

This clause doesn’t consider a situation where a party is still sick after 14 days or where a party has to stay in isolation as other members of their household remain COVID positive. In addition, most people self-isolate voluntarily, rather than it being mandatory. Would this put a party, who is self-isolating to mitigate the risk of exposure or transmission to others, in breach of the agreement? And what if the party were able to close the deal remotely, using audio-video technology, would they be able to delay the transaction due to a quarantine despite their ability to close?

So, what if your real estate agent includes a COVID-19 clause in an offer, or you receive one from a potential buyer? Discuss the clause carefully with your real estate agent and seek the advice of your real estate lawyer before signing the agreement. It’s important to disclose what you are hoping to achieve should an unexpected situation arise.

Certainly, there are ways to protect both the buyer and the seller from complications which may arise as a result of COVID-19. But it’s important that buyers and sellers are aware of the potential pitfalls with these clauses before including them in any contract or Agreement of Purchase and Sale.

The world as we know it has changed and we must change with it. Protect yourself and your family by ensuring that you speak to an experienced real estate lawyer and he or she will guide you properly and protect you to the exclusion of all others from the dangers brought forward by Covid. A good real estate lawyer should also ensure you have a will or power of attorney. The minute any real estate deal is firm ensure that at a minimum you have a Power of Attorney in place in the event that you are physically or mentally unable to complete the transaction because of mental or physical disability. You must protect your family and yourself.

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