Florida Beach During a Storm

Both NABOR and FR/BAR include language that will help us navigate Hurricane Ian’s aftermath. This article covers the NABOR contract provisions, while our next article will address the FR/BAR differences.

NABOR has windows of time during which a party may exercise certain rights – missing this window of time could cause them to lose those same rights! As you already know, tracking accurate time periods is critical.

NABOR’s Standard D.2e. is entitled Risk of Loss; Casualty; Insurance and Services Essential for Closing; Limited Purpose Inspection Rights; Extreme Weather Condition.

Greatly revised after Hurricane Irma, the finer details of these sections are only now being tested.

  1. Risk of Loss. Damage to the Property is solely on the Seller. The Seller is also required to maintain insurance until disbursement, which is meant to help limit the chances the Seller will experience financial hardship in complying with this clause.
  2. Availability of Insurance and Services Essential for Closing. The Buyer to delay closing (5 day increments), up to a maximum of 30 days, if insurance coverage and/or essential services are not available.Practice Point: Either party may terminate the contract not later than 35 days after the Casualty date. Waiting too long to cancel could hurt the parties in this paragraph. One challenge could be determining when the 5 days begins and ends, so you may want to include that in subsequent amendments.
  3. Property Rendered Uninsurable or Unfit for Habitation. If the property is uninsurable, either party may terminate as long as supported by a letter from an insurance agent or underwriter. If the Property is unfit for habitation, you will instead need a letter from the appropriate governmental agency.Either party can terminate the contract not later than 5 days after the receipt of said letter.Important: Ross Title currently is involved in a dispute over a $150,000 deposit. The controversy is whether there is a 30-day waiting period before the Buyer may cancel under this section. A court may end up deciding this argument but in the meantime we are attempting to salvage the deal.
  4. Landscaping. This category does not have a 5-day window to monitor. This paragraph limits the Seller’s liability to 1% of the purchase price.
  5. Buyer Limited Purpose Post-Casualty Inspection Rights. The Buyer is provided an additional inspection to check for casualty damage. The Buyer has 5 days after the receipt of notice from the Seller that safe access to the property is available.Again, keep track of the 5 days. The Buyer may lose this additional limited inspection if he waits too long, causing undue stress on an already stressed transaction.
  6. Extreme Weather Condition. Buyer or Seller may delay closing for a pending or threatening hurricane, tropical storm, or other extreme weather not more than 5 days after insurance or essential services are restored, up to a maximum of 30 continuous days.

Either party may then terminate the Contract not later than 35 days after the insurance or services essential for closing becomes unavailable. Again, the major takeaway is the 5-day window. Miss the window, and your customer may blame you.

Practice Tip: Try to stipulate with the other realtor the pertinent dates. If the 5-day cancellation period falls on a weekend or holiday, stipulate that time period as well.

Using Hurricane Ian as an example, the threat or casualty start dates may vary depending on whether the property is located on Marco Island, Naples, or Lee County. Also, the lack of availability of essential services varies depending on when each law firm, title company or lender shuts down in preparation for the storm. Time periods are fluid depending on geography and essential services.

As you navigate the contracts, please do not hesitate to contact our office for legal advice. Both Christian and I are available to discuss these and other questions that may come up during this time.

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