My last article demonstrated how the NABOR contract would function after a hurricane. At a minimum, you and your customers should closely monitor the various time periods, as ignoring the post-hurricane passage of time can cost customers money.
This article – Part 2 –highlights how FR/BAR functions after a hurricane or other force majeure event.
Personally, I prefer the FR/BAR contract when addressing hurricane damage as it is simpler and more comprehensive. Preference for one contract or the other may simply be a matter of taste, and the specific facts at hand.
1. Paragraph 11. Property Maintenance:
This section details that the Seller shall maintain the property “except for ordinary wear and tear and Casualty ”. Therefore, look to Paragraph 18 after a storm and quickly move past this section (see below).
Further Consideration: NABOR does not mention Casualty Loss in its maintenance paragraph. We’ve been asked by several parties and have even tried conferring with other attorneys here locally. Must a Seller restore a home to its original condition after substantial Hurricane Ian damage under NABOR?? One lawyer said, “it’s complicated” and the second lawyer hasn’t responded. I prefer to point out the clear difference with FR/BAR. A judicial interpretation may be necessary and forthcoming.
2. Paragraph 18 G. Force Majeure:
“Force Majeure” includes but is not limited to; hurricanes, extreme weather, floods, governmental actions, unusual transportation delays, wars, civil unrest, and pandemics.
I really like that this paragraph defines the start of the event as the first day the effect of the Force Majeure prevents “performance, non-performance, or the unavailability of services, insurance or required approvals essential to closing”.
Like NABOR, if the Force Majeure event prevents performance more than 30 days beyond the Closing Date, either party may cancel the contract. Luckily, there is not a 5-day window after which the customer loses his right to cancel (i.e. NABOR).
Personally, the FR/BAR approach better protects the Realtor by improving definitions that help track timelines. The FR/BAR contract also indicates that there is no end date after which customer rights disappear. Imagine being blamed for missing a 5-day cancellation window!
3. Paragraph 18 M. Risk of Loss:
Risk of Loss is a legal term that defines who is responsible for damage to the Property. Both NABOR and FR/BAR place the risk on the Seller prior to Closing, but FR/BAR limits the Sellers maximum liability after a major force majeure event by capping their liability to 1.5% of the Purchase Price.
Further Consideration: The contract specifies that 125% shall be escrowed if the repairs are not completed by Closing, but this may not be practical after a large storm. Why? Insurance and Mortgage lenders likely would not allow it.
Of course, the Buyer can terminate if the damage exceeds 1.5% and the Seller refuses to do more. The key is that the Seller will not be obligated to go beyond 1.5%.
As I wrap up these last two articles, it’s important to note that Hurricane Ian has forced all of us to reexamine both contracts. Neither is perfect.
REMEMBER. Appreciate the importance of time in both contracts and urge all customers to consult with an attorney regarding their rights.
Do not assume the risks inherent in telling a customer when any time begins, or ends, when dealing with any of these issues, and instead put the risk on an attorney such as Christian or myself. Call us for help and in representing your client!
