COVID-19 Real Estate Update
The world of real estate is changing rapidly. From emergency rules restricting evictions to new CAR forms and virtual showings the changes are affecting the way the real estate business operates. Today, we look at some of the recent changes impacting real estate.
As always, if you have any questions about your real estate, business, estate planning, or any other legal issue, please let us know by e-mailing managing shareholder Keith Dunnagan at kbdunnagan@bpelaw.com.
Also, remember that we do legal presentations for business and community organizations. If your group would like to schedule a presentation, please contact me to setup a date and time.
COVID-19 Real Estate Update
By: D. Keith Dunnagan, Esq.
The world of real estate is continuing to change and adapt daily as a result of the COVID-19 outbreak. We previously wrote an update discussing tenancy and foreclosure. Since the time of posting, there have been additional and significant changes related to real estate.
First and foremost, in the most recent shelter in place order from Sacramento County, real estate services have now been deemed an essential service. This is a good step and is necessary to allow real estate professionals to continue to assist the public in finding suitable housing. But what does the shelter order require? The Sacramento County Shelter Order states as follows:
Service providers that enable residential transactions (including rentals, leases and home sales) including, but not limited to, real estate agents, escrow agents, notaries and title companies, provided that appointments and other residential viewings must only occur virtually or, if a virtual viewing is not feasible, by appointment with no more than two visitors at a time residing within the same household or living unit and one individual showing the unit (except that in person visits are not allowed when the occupant is still residing in the residence). These services must be carried out in compliance with Social Distancing Requirements as defined in this Order, to the extent possible.
With these orders, it will be important to leverage technology and virtual showings effectively while being mindful of disclosure requirements and any inspections that may be necessary. In using virtual showing technology, be mindful of the disclosure obligation. Both the seller and agents have a duty to disclose to a buyer those material defects that are likely to affect price or desirability. The Sacramento Association of Realtors put out useful guidance on these issues that can be found here.
More restrictions have been placed on instituting and maintaining eviction proceedings in California. On April 6, 2020 the Judicial Council and Chief Justice Cantil-Sakuye of the California Supreme Court issued new rules allowed under an executive order previously issued by Gov. Gavin Newsom. Under the emergency rules California Courts may not issue summons for an eviction proceeding unless the proceeding is necessary to protect public health and safety. This will limit landlord rights for the immediate future as the rule will not expire until 90 days after the state of emergency has been lifted. This puts landlords in a precarious position as they may find it difficult to protect their properties from unscrupulous tenants in the interim. The California Apartment Association has already reached out to the Judicial Council asking them to reconsider this rule and the impacts it places upon landlords.
Further, in an effort to stay in front of the changing real estate landscape, the California Association of Realtors recently added four (4) new Coronavirus forms for use in the current real estate landscape.
- CORONAVIRUS PROPERTY ENTRY ADVISORY AND DECLARATION. This form seeks to act as a waiver of liability for buyer and seller participation in a real estate transaction. While addressing the contagion rate of COVID-19, it advises participants of their risk of exposure and makes the advisory remarks on practices to limit exposure. It includes language where the parties contractually assume the risk of their participation in a real estate transaction. While the document requires parties to comply with federal and state guidelines and social distancing, how will compliance be policed? Generally, the sellers are not on the property during a viewing. What happens if a buyer or an inspector do not comply? Who will be responsible for ensuring compliance? What if the seller is sick or experiencing symptoms, how will that be disclosed or is it even required to be disclosed? There are a lot of questions that remain unanswered and will require people to self-regulate compliance, which most will do.
- CORONAVIRUS ADDENDUM OR AMENDMENT (“CAA”). This document is meant to address potential unknown implications of COVID-19. Lawyers will often refer to these as “Force Majeure” events. Those events that are outside of the control of the parties and unforeseeable by the parties to effectively contract for the occurrence. Most contracts deal with issues within the parties’ control through contingencies, covenants and disclosures, but the so-called “Acts of God” are by nature unpredictable. This agreement seeks to deal with these issues by creating extension of time and/or cancellation terms when certain events occur as a result of COVID-19.
- NOTICE OF UNFORESEEN CORONAVIRUS CIRCUMSTANCES. This document is related to the above CAA form and is used to trigger a clause within the CAA. Whether an extension or cancellation term under the CAA is triggered will be done using this new notice. This document puts a party on notice of a potential COVID-19 triggering event and the notifying party’s election to trigger a right in the CAA.
- LISTING AGREEMENT CORONAVIRUS ADDENDUM OR AMENDMENT. This document addresses the listing obligations of both the seller and broker related to a property being marketed for sale during this COVID-19 period. This includes allowing sellers who do not want their property marketed during the COVID-19 period to remove the property from active listing. It also forms a basis between the seller and broker for how the property will be marketed during the COVID-19 period and what activities will be permitted during this time. One of the critical terms is related to post-acceptance activity of a buyer. Some sellers may limit buyers’ access to the property post-acceptance and pre-sale. This document reminds the seller and broker to review the RPA to make appropriate revisions and selections related to access post-acceptance. The seller may not want to be forced to allow certain activities post-acceptance as a result of the standard allowances in the RPA. It will be important to make sure these issues are addressed and appropriately documented.
Real estate professionals will want to make sure they are incorporating these documents into their standard form checklists. It is important to make sure they have appropriate directions from their clients and to ensure that parties to a contract have the COVID-19 issues addressed ahead of time. We are already seeing a rise in claims related to a breakdown of the transactions as a result of the COVID-19 implications on the business world.
Additionally, buyers need to be structuring their agreements with the thought in mind about what to do if a seller does not timely vacate the property. We have already seen multiple situations, where sellers completed the transaction, but held over to the detriment of the buyer. Agents representing buyers may want to have discussions about contractual hold backs from the seller’s proceeds that are only released once the seller vacates the property or other options that protect the buyer from a holdover. This is not an issue for a seller who vacates prior to close of escrow but will be important for sellers who remain in possession after the close of sale.
Late on Friday, April 10, 2020, Placer County issued an updated Shelter in Place Order. Much like Sacramento, the order is good for real estate professionals as it specifically defines real estate services as an essential service, as it should be. The text of the order related to real estate professionals is as follows:
Service providers that enable residential transactions such as rentals, leases, and home sales, including, but not limited to, real estate agents, escrow agents, notaries, and title companies, provided that appointments and residential viewings occur only virtually. If a virtual viewing is not feasible, viewings may occur by appointment with no more than two visitors who reside in the same household and one individual showing the unit at a time, and only if the unit is vacant.
Again as above, it will be important to leverage technology and complete as many activities electronically, including virtual showings as possible. This order creates some significant ambiguity as it states that in person showings should only be conducted if the unit is vacant. The question we are already receiving is what does “vacant” mean. I actually went to the legal dictionary to determine what this really means. According to Black’s Law Dictionary, the Abridged Sixth Edition, “Vacant” is defined as “it implies entire abandonment, nonoccupancy for any purpose.” Under this edition, if there is an inhabitant whether present or not, an in person showing should not be done and only virtual showings would be allowed. The Black’s Law Dictionary is the gold standard for the legal profession and often when definitions of a phrases or words are an issue the Court’s look to Black’s for guidance.
Ultimately, each individual will have to make professional judgments as to how these orders are applied and carried out. Regardless of how professionals use these orders, compliance with social distancing guidelines, the CDC guidelines and best practices should be guiding the decision making.
The information contained in this post is informational in nature and not to be construed as legal advice. Each person’s scenario is different. If you are facing a legal issue of any kind, get competent legal advice in your state immediately to determine your best options.
——————————————————————————————————————
The attorneys of BPE Law Group, PC. have been advising our clients on real estate, business and estate planning issues for over 20 years and have assisted numerous clients in probate, business and real estate matters and have represented and advised brokers on their professional obligations as well as consumers on their rights. If you have questions concerning legal matters, give us a call at (916) 966-2260 or e-mail Keith at kbdunnagan@bpelaw.com. Our flat fee consult for new clients may get you the answers you need for the questions you have.
The information presented in this Article is not to be taken as legal advice. Every person’s situation is different. If you are facing a legal issue of any kind, get competent legal advice in your State immediately so that you can determine your best options.
The world of real estate is changing rapidly. From emergency rules restricting evictions to new CAR forms and virtual showings the changes are affecting the way the real estate business operates. Today, we look at some of the recent changes impacting real estate.
As always, if you have any questions about your real estate, business, estate planning, or any other legal issue, please let us know by e-mailing managing shareholder Keith Dunnagan at kbdunnagan@bpelaw.com.
Also, remember that we do legal presentations for business and community organizations. If your group would like to schedule a presentation, please contact me to setup a date and time.
COVID-19 Real Estate Update
By: D. Keith Dunnagan, Esq.
The world of real estate is continuing to change and adapt daily as a result of the COVID-19 outbreak. We previously wrote an update discussing tenancy and foreclosure. Since the time of posting, there have been additional and significant changes related to real estate.
First and foremost, in the most recent shelter in place order from Sacramento County, real estate services have now been deemed an essential service. This is a good step and is necessary to allow real estate professionals to continue to assist the public in finding suitable housing. But what does the shelter order require? The Sacramento County Shelter Order states as follows:
Service providers that enable residential transactions (including rentals, leases and home sales) including, but not limited to, real estate agents, escrow agents, notaries and title companies, provided that appointments and other residential viewings must only occur virtually or, if a virtual viewing is not feasible, by appointment with no more than two visitors at a time residing within the same household or living unit and one individual showing the unit (except that in person visits are not allowed when the occupant is still residing in the residence). These services must be carried out in compliance with Social Distancing Requirements as defined in this Order, to the extent possible.
With these orders, it will be important to leverage technology and virtual showings effectively while being mindful of disclosure requirements and any inspections that may be necessary. In using virtual showing technology, be mindful of the disclosure obligation. Both the seller and agents have a duty to disclose to a buyer those material defects that are likely to affect price or desirability. The Sacramento Association of Realtors put out useful guidance on these issues that can be found here.
More restrictions have been placed on instituting and maintaining eviction proceedings in California. On April 6, 2020 the Judicial Council and Chief Justice Cantil-Sakuye of the California Supreme Court issued new rules allowed under an executive order previously issued by Gov. Gavin Newsom. Under the emergency rules California Courts may not issue summons for an eviction proceeding unless the proceeding is necessary to protect public health and safety. This will limit landlord rights for the immediate future as the rule will not expire until 90 days after the state of emergency has been lifted. This puts landlords in a precarious position as they may find it difficult to protect their properties from unscrupulous tenants in the interim. The California Apartment Association has already reached out to the Judicial Council asking them to reconsider this rule and the impacts it places upon landlords.
Further, in an effort to stay in front of the changing real estate landscape, the California Association of Realtors recently added four (4) new Coronavirus forms for use in the current real estate landscape.
- CORONAVIRUS PROPERTY ENTRY ADVISORY AND DECLARATION. This form seeks to act as a waiver of liability for buyer and seller participation in a real estate transaction. While addressing the contagion rate of COVID-19, it advises participants of their risk of exposure and makes the advisory remarks on practices to limit exposure. It includes language where the parties contractually assume the risk of their participation in a real estate transaction. While the document requires parties to comply with federal and state guidelines and social distancing, how will compliance be policed? Generally, the sellers are not on the property during a viewing. What happens if a buyer or an inspector do not comply? Who will be responsible for ensuring compliance? What if the seller is sick or experiencing symptoms, how will that be disclosed or is it even required to be disclosed? There are a lot of questions that remain unanswered and will require people to self-regulate compliance, which most will do.
- CORONAVIRUS ADDENDUM OR AMENDMENT (“CAA”). This document is meant to address potential unknown implications of COVID-19. Lawyers will often refer to these as “Force Majeure” events. Those events that are outside of the control of the parties and unforeseeable by the parties to effectively contract for the occurrence. Most contracts deal with issues within the parties’ control through contingencies, covenants and disclosures, but the so-called “Acts of God” are by nature unpredictable. This agreement seeks to deal with these issues by creating extension of time and/or cancellation terms when certain events occur as a result of COVID-19.
- NOTICE OF UNFORESEEN CORONAVIRUS CIRCUMSTANCES. This document is related to the above CAA form and is used to trigger a clause within the CAA. Whether an extension or cancellation term under the CAA is triggered will be done using this new notice. This document puts a party on notice of a potential COVID-19 triggering event and the notifying party’s election to trigger a right in the CAA.
- LISTING AGREEMENT CORONAVIRUS ADDENDUM OR AMENDMENT. This document addresses the listing obligations of both the seller and broker related to a property being marketed for sale during this COVID-19 period. This includes allowing sellers who do not want their property marketed during the COVID-19 period to remove the property from active listing. It also forms a basis between the seller and broker for how the property will be marketed during the COVID-19 period and what activities will be permitted during this time. One of the critical terms is related to post-acceptance activity of a buyer. Some sellers may limit buyers’ access to the property post-acceptance and pre-sale. This document reminds the seller and broker to review the RPA to make appropriate revisions and selections related to access post-acceptance. The seller may not want to be forced to allow certain activities post-acceptance as a result of the standard allowances in the RPA. It will be important to make sure these issues are addressed and appropriately documented.
Real estate professionals will want to make sure they are incorporating these documents into their standard form checklists. It is important to make sure they have appropriate directions from their clients and to ensure that parties to a contract have the COVID-19 issues addressed ahead of time. We are already seeing a rise in claims related to a breakdown of the transactions as a result of the COVID-19 implications on the business world.
Additionally, buyers need to be structuring their agreements with the thought in mind about what to do if a seller does not timely vacate the property. We have already seen multiple situations, where sellers completed the transaction, but held over to the detriment of the buyer. Agents representing buyers may want to have discussions about contractual hold backs from the seller’s proceeds that are only released once the seller vacates the property or other options that protect the buyer from a holdover. This is not an issue for a seller who vacates prior to close of escrow but will be important for sellers who remain in possession after the close of sale.
Late on Friday, April 10, 2020, Placer County issued an updated Shelter in Place Order. Much like Sacramento, the order is good for real estate professionals as it specifically defines real estate services as an essential service, as it should be. The text of the order related to real estate professionals is as follows:
Service providers that enable residential transactions such as rentals, leases, and home sales, including, but not limited to, real estate agents, escrow agents, notaries, and title companies, provided that appointments and residential viewings occur only virtually. If a virtual viewing is not feasible, viewings may occur by appointment with no more than two visitors who reside in the same household and one individual showing the unit at a time, and only if the unit is vacant.
Again as above, it will be important to leverage technology and complete as many activities electronically, including virtual showings as possible. This order creates some significant ambiguity as it states that in person showings should only be conducted if the unit is vacant. The question we are already receiving is what does “vacant” mean. I actually went to the legal dictionary to determine what this really means. According to Black’s Law Dictionary, the Abridged Sixth Edition, “Vacant” is defined as “it implies entire abandonment, nonoccupancy for any purpose.” Under this edition, if there is an inhabitant whether present or not, an in person showing should not be done and only virtual showings would be allowed. The Black’s Law Dictionary is the gold standard for the legal profession and often when definitions of a phrases or words are an issue the Court’s look to Black’s for guidance.
Ultimately, each individual will have to make professional judgments as to how these orders are applied and carried out. Regardless of how professionals use these orders, compliance with social distancing guidelines, the CDC guidelines and best practices should be guiding the decision making.
The information contained in this post is informational in nature and not to be construed as legal advice. Each person’s scenario is different. If you are facing a legal issue of any kind, get competent legal advice in your state immediately to determine your best options.
——————————————————————————————————————
The attorneys of BPE Law Group, PC. have been advising our clients on real estate, business and estate planning issues for over 20 years and have assisted numerous clients in probate, business and real estate matters and have represented and advised brokers on their professional obligations as well as consumers on their rights. If you have questions concerning legal matters, give us a call at (916) 966-2260 or e-mail Keith at kbdunnagan@bpelaw.com. Our flat fee consult for new clients may get you the answers you need for the questions you have.
The information presented in this Article is not to be taken as legal advice. Every person’s situation is different. If you are facing a legal issue of any kind, get competent legal advice in your State immediately so that you can determine your best options.