COVID-19 Extension Addendum to Contract

Parties in Florida currently under contract using a FAR BAR form (from the Florida Association of Realtors) have been provided the opportunity to use a Coronavirus (COVID-19) specific Extension Addendum provided by the FAR. In this blog post, I summarize and explain the COVID-19 Extension Addendum to Contract (the “Addendum”) and provide guidance on best practices for all real estate professionals (attorneys, agents, parties, etc.) to use. A copy of the Addendum is provided at the bottom of this blog post.

                 On its face, the Addendum is helpful to parties currently under contract trying to deal with the realities of COVID-19 causing delays in inspections, third party reports, loan processing, etc. It describes this reality by defining “COVID Restrictions” as:

                “The Coronavirus (COVID-19) pandemic may cause unprecedented impacts to real estate transactions, including but not limited to travel restrictions, self-imposed and/or governmental required isolations, potential closures of offices and institutions required to fund, close and record real estate transactions, and actions or inactions of a homeowners’ or condominium association.”

                The Addendum allows the parties to extend certain dates under the contract by checking off the corresponding box and inserting a specific amount of days or the actual date of the extension. The choices are:

• Closing Date
• Financing Period
• Inspection Period
• Title Cure Period
• Feasibility Study Period
• Due Diligence Period
• Homeowners’/Condominium Association Approval

Additionally, the Addendum’s final paragraph provides a possible additional protection for the Buyer to get out of the contract and receive a return of its deposit. Although the Addendum clearly states that “other non-conflicting terms of the contract remain in full force and effect”, it specifically excludes the situation when the Buyer has already obtained loan approval. In such a situation, if “either the terms/conditions of the loan approval expire or lender refuses to fund the loan due to COVID Restrictions”, the Buyer is given the option to terminate the contract and receive a return of its deposit by “providing written notice to Seller the earlier of Closing Date or within two (2) days of expiration/notice of refusal.”

                However, all real estate professionals should be aware of the limitations of the Addendum and the best way to deal with such limitations:

1. AS-IS Residential Contract for Sale and Purchase
   • The Addendum does not apply to the often used AS-IS Residential Contract for Sale and Purchase.
   • It only applies to:
     • Contract for Residential Sale and Purchase;
     • Residential Contract for Sale and Purchase;
     • Vacant Land Contract; and
     • Commercial Contract.
   • PRACTICE TIP:
     • If you wish to use the Addendum for the AS-IS form, be sure to either (i) replicate the terms of the Addendum into a standard addendum/amendment to your contract or (ii) if short on time, write in “AS-IS” at the top of the Addendum before Residential Contract for Sale and Purchase and make sure both parties initial such change.
2. Florida Bar
   • The Addendum was released by the FAR, but it has not been approved by The Florida Bar.
   • This does not preclude the use or enforceability of the Addendum, but it should be noted the Addendum was not created by the Florida Realtor – Attorney Joint Committee.
   • PRACTICE TIP:
     1. As with all real estate contract issues, be sure to consult with a real estate attorney to assure you are adequately protected.
3. Not Automatic
   • The Addendum does not provide an automatic extension for the parties.
   • The Addendum must be approved and executed by both parties to be effective.
   • PRACTICE TIP:
     1. Do not assume the other side will agree to an extension. Be sure to plan ahead and try to perform within the previously agreed to time frames in the contract. If an extension is needed, request one as early as possible.

Real estate purchase agreements are seeing increased attention to COVID-19 related provisions (see link to blog post discussing such provisions), and the Addendum is just another example of how real estate professional are handling issues in their deals. This blog post is a basic introduction to the COVID-19 Extension Addendum to Contract.  Every situation is different and demands the proper attention and handling to navigate these uncertain times. If you are a buyer or seller and want to discuss any of the above or have a similar situation and would like to discuss with an attorney, please do not hesitate to contact me.