Investors interested in commercial real estate prefer markets for liquidity, durable returns, demand density, gateway, and coastal areas. However, coastal regions are much exposed to vulnerable changes in climate such as a rise in sea level and hurricanes.
These events pose a threat to investment performance. The Florida Realtors or FR/Bar Contract comes with definite clauses that tend to deal with bad weather and casualty events. Read on to find out the four most important clauses as described in Florida’s ‘as-is contract.
Hurricanes, Transactions & Contract Clauses
Real estate and hurricanes go hand to hand in Florida and the said industry is aware of it from all aspects. Despite that, whenever a hurricane strikes a potential real estate transaction, most realtors scramble to counter bad weather and casualty provisions.
This section provides you with an overview of the top provisions as described in Florida’s Realtors or FR Bar Residential ‘As Is’ Contract for Sale & Purchase of property. Also, the same has been updated as on October 2021 alongside a special reference to casualty provision as found in Florida’s Residential Landlord & Tenant Act.
1. Force Majeure – Section 18G
This clause can be said as an extension that you can see in action whenever any kind of dramatic event tends to prevent the performance of a certain party or close the same from happening. However, it might take unplanned and unusual events to trigger the Force Majeure clause.
And, you can notice them from the probable examples such as acts of terrorism, acts of God, and hurricanes. After the above-mentioned clause gets triggered, specific periods (even including the closing date whenever applicable) get extended for a considerable amount of time. And, it can go for up to seven days even after full implementation of Force Majeure becomes inefficient to prevent performance of all kinds.
In addition, parties have to pay close attention to the time when it comes to relating the events to the closing dates. However, either party has the liberty to withdraw and terminate the said contract simply by an authorized written notice even if Force Majeure continues to put a stop to performance for over thirty days and beyond the specific closing date.
2. Access to Properties to Conduct Walk-Through, Inspections, and Appraisals – Section18L
Oftentimes, whenever a hurricane passes through a particular area of the property, buyers want to have a good look at the same. Moreover, buyers insist on having a look at the property even if they are in inspection periods. This contract clause favors the buyer’s requests from every aspect.
This clause says that sellers have to, upon considerable observations, provide necessary utilities and services so that buyers can access the properties for inspections and appraisals. Also, it should include a causal walk-through or even a repeat walk-through when required before proceeding to a Closing.
3. Risk of Loss – Section 18M
Whenever the seller or even the buyer discovers casualty damages resulting from intense hurricanes, this clause comes to the rescue in terms of describing the obligations and rights of both parties. If the restoration cost doesn’t exceed 1.5 percent of the overall purchase price (the cost should include removal or pruning of damaged trees), the expense lies with the seller.
However, if the cost to restore the property is not complete before Closing, the seller has to escrow an amount of 125 percent of the estimated cost needed for the restoration of the property. Furthermore, when the restoration cost surpasses 1.5 percent of the buying price, the buyer gets the liberty to choose from two options.
Either they can have the property alongside 1.5 percent of the buying price or they can take a refund of their deposited amount. And, that would release both parties from any kind of obligations stated in the contract.
4. Casualty Damage (Florida Statutes) – Section 83.63
This clause states that if the rented property gets destroyed or damaged and the purpose of the premise is impaired substantially, the tenant has the right to terminate the agreement and vacate the premise immediately. Also, the clause state that the tenant may vacant a part of a premise that’s rendered unusable due to the casualty.
These provisions are always overlooked and deals are closed when the weather is fine. Hence, you should know about them so that you can act the right way when you need them.
Published by HOLR Magazine.