Adapting Contracts and Showing Expectations


 Debbi Conrad  |    May 11, 2020
Adapting

Adaptation has become key in this world afflicted with the coronavirus (COVID-19). Every facet of society is bravely venturing into unchartered waters. The rules of the sea are being made up on the fly, are new to everyone and are in a constant state of flux. To this world of chaos, real estate professionals work to bring a reassuring sense of normalcy to their clients, customers and transactions. 

This is no easy mission; ingenuity, creativity and flexibility are required. At any given moment, there may not be enough fingers to plug all the holes in the dyke, but collectively a solution is found, and everyone bravely sails on until the next stream of water pops through; and the process is repeated again. 

Two areas that are central to real estate practice are showings of listed property and the offer to purchase. Three WRA optional forms have been created to help in these areas.

Coronavirus (COVID-19): Showings and inspections safety commitment

The Coronavirus (COVID-19): Showings and Inspections Safety Commitment (Safety Commitment) takes account of the changed atmosphere surrounding showings, inspections and the entry of any person into a property for sale. The Safety Commitment assists in the implementation of the governor‚Äôs ‚ÄúSafer at Home‚ÄĚ order by helping make everyone aware and responsible to take the ordered safety precautions. Those who sign the Safety Commitment are agreeing to notify others with whom they have been in contact during a showing or inspection if they become afflicted with COVID-19. The commitment also makes clear that real estate licensees are not liable for damages relating to showings or inspections conducted during the COVID-19 pandemic.¬†

The Safety Commitment can be used in counterparts ‚ÄĒ one copy might be signed by just one person while another copy may be signed by multiple people. It might just be signed by a seller and listing agent. The idea is to be flexible, use the Safety Commitment to set expectations, and secure commitments to observe safety guidelines and notify others to provide notification if a person is afflicted with COVID-19.

Rather than dive into lengthy details in the Safety Commitment form, it is hoped people are generally familiar with the safety precautions for protecting themselves and others. Since real estate is an ‚Äúessential business‚ÄĚ under Gov. Evers‚Äô Emergency Order #12 ‚ÄĒ Safer at Home, those in the real estate profession are obligated, as a condition of the order, to follow the guidelines of the Wisconsin Department of Health Services (DHS) and the Center of Disease Control (CDC) to the greatest extent possible. For those not familiar with the guidelines, the Safety Commitment references the prevention measures found on the CDC website at www.cdc.gov/coronavirus/2019-ncov/prevent-getting-sick/prevention.html. It is reassuring and wise to establish an understanding that everyone who resides at a property, and everyone who visits and enters the property, is committed to follow those COVID-19 prevention protocols and shares those expectations with others who will visit or enter the property.

The Safety Commitment can be used as the parties and their agents deem best. The seller and the listing agent would likely be the first to use the commitment to establish the ground rules for COVID-19 issues. They may then ask buyers and their agents to sign the commitment if there is going to be a showing. If there is an accepted offer, then inspectors, appraisers and other service providers may be asked to sign a commitment. Once a person has signed a commitment, copies may be potentially shared in other transactions. Those who decline to sign will have at least become familiar with the expectations of the seller, listing agent and other signatories. Real estate professionals may be flexible with the commitment and adapt it to their company procedures.

The Safety Commitment uses the term ‚ÄúCoronavirus Precaution‚ÄĚ to refer to a person diagnosed with COVID-19, directed to self-quarantine or self-isolate by a medical professional or a health department, or a person who is observing self-quarantine or self-isolation under the parameters of the Wisconsin DHS information for self-quarantine, self-isolation and self-monitoring guidance at www.dhs.wisconsin.gov/covid-19/prepare.htm as well as¬† www.dhs.wisconsin.gov/covid-19/prepare.htm.¬†

The commitment confirms the seller is responsible for the condition of the property that may include the extra cleaning and disinfecting described in the safety guidelines, as the conditions indicate, but also confirms that buyers, agents and service providers, called ‚ÄúVisiting Parties‚ÄĚ in the commitment, enter a property at their own risk.¬†

Sellers, listing agents and all Visiting Parties share two ongoing responsibilities. Responsibility number one is to take reasonable safety precautions required under the governor’s order and as stated in the CDC guidance. Responsibility number two is to provide written notice to the others who were present when a person who has been found to have COVID-19 or has been placed per physician instructions to self-quarantine or self-isolate visited the property. The written notice also obviously is given to the property owner and listing agent. This avoids issues concerning disclosure of private medical information by others and relies on the premise that those afflicted will warn others of possible exposure.

The commitment also states the agreement of all signatories to the commonsense statements that the licensees involved with the showings and inspections are not responsible for the effects of COVID-19 on transactions or upon the individuals entering properties. 

Addendum CV ‚Äď Coronavirus (COVID-19) provisions

The Addendum CV ‚ÄĒ Coronavirus (COVID-19) Provisions takes a different, more familiar approach and is structured as an addendum to an offer to purchase or another contract.¬†

Addendum CV addresses potential delays that might arise due to an office of a government agency or service provider closing or if a person involved in a transaction is quarantined or isolated due to COVID-19. Check-box provisions allow the parties to select those deadline extension provisions that are desired. The business of agreeing about extensions to provisions before any triggering event has transpired is tricky and imprecise and may not always end up having the impact anticipated or desired by the parties. But making the attempt is often better than doing nothing at all. 

The deadline extension and the offer termination based on an office closure would seem to be less of a risk as time goes on and companies adapt and find ways to continue business. This provision applies only if an office closure makes it impossible for a party to perform, which is admittedly a very high standard. It does not indicate that one contractor’s inability to provide services due to the closure of the contractor’s office triggers the extension because the party may look for other contractors for the assistance needed for the party’s performance. As the situation with the coronavirus evolves and as solutions often based in remote technology are developed to work around obstacles to customary practice, it may be unlikely this provision comes into play, but it is nonetheless a prudent precaution.

The extension mechanism used throughout the addendum adds days to deadlines stated in the offer. This may have differing impacts depending upon where on the transaction timeline the extension is triggered.

For example, if a buyer is in day 3 of a 14-day Inspection Contingency period, and notice is given that inspectors can no longer inspect, the buyer’s Inspection Contingency deadline would have to pass to trigger the 30-day extension. If a buyer is on day 3 of a 14-day Inspection Contingency, it is not yet known that it is impossible for the buyer to perform by the deadline. If the offer was accepted on March 1, then the 14-day Inspection Contingency will run through March 15. If written notice of an office closure is given, then the deadline is extended potentially through April 14, which is 44 days, or 14 + 30, after acceptance. 

With regard to extensions caused by a person with COVID-19 or a COVID-19 exposure, the Addendum CV uses the same term as the Safety Commitment. ‚ÄúCoronavirus Precaution‚ÄĚ refers to a person with COVID-19 or who is suspected to have the virus and treated as if they do. If one party is subject to a Coronavirus Precaution, that party is to provide written notice to the other party, with result that all deadlines are extended 14 days. In the delayed access provision, if the seller has a COVID situation, the seller notifies all Visiting Parties that access is delayed for 14 days. These provisions would provide a basis to halt a transaction for up to 14 days and give the parties time to assess the situation and perhaps enter into amendments with specific accommodations and solutions, including escrow agreements as referenced in the caution.¬†

The Addendum CV includes a hold harmless provision that provides the commonsense disclaimer that agents are not responsible for the virus and its consequences. It may not necessarily hold up in court but provides reassurance for licensees.

Coronavirus (COVID-19): Commercial Addendum (WRA-CVCA)

The Coronavirus (COVID-19): Commercial Addendum is an alternate offer addendum designed with commercial practitioners in mind. This addendum offers three check-box provisions that take a different, more open-ended approach to deadline extensions, delays and offer terminations resulting from the coronavirus. 

The Commercial Addendum may be used to extend dates and deadlines if a party gives notice explaining their performance has been delayed due to the coronavirus in a manner beyond the control of that party. The written notice for the equitable extension is to specify the coronavirus concern and set a new reasonable date or deadline for performance. In the second check-box provision, a limit may be placed on the length of any extension, with a default of 60 days. The transaction may be terminated if a party becomes unable to perform due to the coronavirus. The party must provide written notice before the expiration of the applicable dates or deadlines and explain the manner in which the coronavirus made the party unable to perform. If the offer is terminated in this manner, the earnest money is to be returned to the buyer.

Using this trio of forms

The WRA Addendum CV ‚ÄĒ Coronavirus Provisions, Coronavirus (COVID-19): Showings and Inspections Safety Commitment and Coronavirus (COVID-19): Commercial Addendum are available in zipForm, in the WRA forms library online and online at www.wra.org/Coronavirus/Legal. The provisions from all three forms are also available separately in an electronic format in the WRA zipForm Clause Library.

For those concerned that the use of an addendum referring to deadline extensions and terminations will discourage sellers from accepting offers, the addenda can also be used as an amendment if attached to and incorporated by reference into the WB-40 Amendment to Offer to Purchase at line 28. The Safety Commitment may be used in this fashion as well.

Debbi Conrad is Senior Attorney and Director of Legal Affairs for the WRA.

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