Covid 19 Purchase And Sale Agreement
With respect to sales and sales contracts that have been executed but are still part of due diligence, or new contracts that have just been entered into, buyers are increasingly concerned about their ability to properly assess and manage real estate. Travel bans may prevent the potential buyer or his advisors from physically visiting the destination. Residence or social orders may prevent surveyors and environmental, environmental and zoning advisors from visiting housing or accessing public records to complete their assessment and reporting. At least the care may take longer, but in some cases it cannot be done legally as long as there are restrictions. As a result, purchasers may seek longer due diligence periods or pre-negotiated and unilateral options to extend due diligence periods as a result of COVID-19 disruptions before investing significant due diligence dollars in a transaction. Sellers will be encouraged to make certain concessions over time to close deals in this difficult environment; However, given the rapidly changing market, sellers will continue to focus on rapid implementation and minimize the “free look” period where possible, in order to avoid a long period of due diligence that only ends with termination. In return for timing risk, sellers can ask for a serious money increase. To succeed in transactions, buyers and sellers must compensate for these competing concerns, which likely eases the very tight due diligence deadlines that have become customary in recent years, provided the extensions are reasonable and sellers and buyers want the right to terminate the sales contract if due diligence barriers are not removed by an agreed-upon date. Commercial real estate transactions declined sharply during the COVID 19 pandemic. According to real estate data provider Real Capital Analytics (as cited by The Real Deal, the volume of commercial real estate contracts was $11 billion in April 2020, down 71 percent from April 2019. The number of commercial real estate transactions also decreased by 61% between March and April 2020.  Given that the recovery is not expected by 2021, even in the most optimistic forecasts and with different recovery times planned for the different asset classes, commercial real estate transactions must take place in an environment of economic uncertainty. It will therefore be essential to ensure security in the negotiation of purchase and sale contracts (“EPI”).
This article aims to provide sellers and buyers with guidance for the development of PPE in order to achieve a higher level of security in these uncertain times. While there are ways to address the complications caused by the COVID 19 pandemic to ensure the continuation of real estate transactions, the clauses proposed by some real estate agents do not achieve this objective and, as the above analysis shows, may effectively result in the desired outcome or give rise to disputes between parties that should not exist.