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COVID-19 Q&A

On Friday, March 27, 2020, Governor Cooper issued a Stay at Home Order Executive Order 121, which becomes effective on Monday, March 30, 2020, at 5:00pm. In that order, Governor Cooper designated real estate (including brokerage, title and appraisal services) as an essential business. That means that unless a local (i.e. County or City) order imposes restrictions or prohibitions to a greater degree than the Governor’s order, many aspects of the real estate business can continue. NC REALTORS® is keeping an updated list of local orders and you can find those here under Current Closures and Shelter Orders.

With that said, please understand the seriousness of the COVID-19 pandemic and recognize that health and safety restrictions may impact how you conduct your business activities. Regardless of what allowances you have in your local community or through the state order, this is not the time for business as usual. It is possible to LOSE OUR DESIGNATION AS AN ESSENTIAL BUSINESS if members violate these orders, particularly as to the health and safety guidelines. In his order, Governor Cooper directed all COVID-19 Essential Businesses and Operations to the maximum extent possible to direct employees work from home or telework and meet social distancing requirements.

Below, you will find examples of some of the questions we have received, and the guidance we are giving in response to those questions. Some of this guidance has been suggested by the National Association of REALTORS®. A link to NAR’s Q&A on coronavirus issues can be found here. A link to NAR’s guidance on open houses can be found here.

If you have additional questions, please reach out to NC REALTORS® Legal Hotline by emailing legalhotline@ncrealtors.org during our regular business hours of Monday through Friday, 8:30 am to 5:00 pm.

UNEMPLOYMENT ASSISTANCE FOR INDEPENDENT CONTRACTORS

Is Pandemic Unemployment Assistance (PUA) available in North Carolina?

QUESTION: Is Pandemic Unemployment Assistance (PUA) available in North Carolina?

ANSWER: Yes, North Carolina independent contractors and self-employed workers out of work because of COVID-19 can apply for federal PUA beginning April 24, 2020, at des.nc.gov. NC REALTORS® published a Pandemic Unemployment Assistance Q&A and we encourage you to review this information before submitting your application. (Published 4.24.2020)

GUIDANCE FOR REALTORS®

Has NC REALTORS® released videos with answers to frequently asked questions from members?

QUESTION:Has NC REALTORS® released videos with answers to frequently asked questions from members?

ANSWER: Yes, lawyers from the NCREALTORS® Legal Team are answering frequently asked questions from members. You can watch the video responses here

If you have a question about a specific transaction, contact the Legal Hotline at  legalhotline@ncrealtors.org.

What unique issues does coronavirus present to the real estate industry?

QUESTION: What unique issues does coronavirus present to the real estate industry?

ANSWER: When an infectious disease, such as coronavirus, is associated with a specific population or nationality, fear and anxiety may lead to social stigma and potential discrimination. REALTORS® must be mindful of their obligations under the Fair Housing Act, and be sure not to discriminate against any particular segment of the population. While the coronavirus outbreak began in Wuhan, China, that does not provide a basis for treating Chinese persons or persons of Asian descent differently.

Has NAR provided any guidance for transactions?

QUESTION: Has NAR provided any guidance for transactions?

ANSWER: Yes, on March 25, NAR published tips related to listed properties, properties in escrow, and leased properties.

May I ask clients or others I interact with in my real estate business if they have traveled recently, or have any signs of respiratory illness?

QUESTION: May I ask clients or others I interact with in my real estate business if they have traveled recently, or have any signs of respiratory illness?

ANSWER: Yes, you may ask clients or others about their recent travel, particularly to areas identified as having an increased risk of coronavirus. To avoid potential fair housing issues, be sure to ask all clients the same screening questions based on current, factual information from public health authorities.

I typically drive my clients to showings. With Governor Cooper’s new Stay at Home Order, can I still drive potential clients to see homes?

QUESTION: I typically drive my clients to showings. With Governor Cooper’s new Stay at Home Order, can I still drive potential clients to see homes?

ANSWER: No, in order to comply with social distancing requirements including maintaining at least six (6) feet distancing from other individuals, you would need to drive separate cars and meet your clients at the properties.

On Friday, March 27, 2020, Governor Cooper issued Executive Order 121, which becomes effective on Monday, March 30, 2020, at 5:00pm. In that order, Governor Cooper designated real estate (including brokerage, title and appraisal services) as an essential business. That means that unless a local (i.e. County or City) order imposes restrictions or prohibitions to a greater degree than the Governor’s order, many aspects of the real estate business can continue. However, those activities still need to be conducted while maintaining social distancing requirements. Social Distancing Requirements include:

a.    maintaining at least six (6) feet distancing from other individuals;
b.    washing hands using soap and water for at least twenty (20) seconds as frequently as possible or the use of hand sanitizer;
c.     regularly cleaning high-touch surfaces;
d.    facilitating online or remote access by customers if possible.

The Stay at Home Order issued by the Governor DOES NOT preempt or supersede any local order which includes more restrictive guidelines. This means that if you are operating in an area with a more restrictive order on real estate activity, YOU MUST COMPLY WITH IT. NC REALTORS® is keeping a list of current local shelter in place/stay at home orders here. (Updated 3/29/2020)

With the Governor’s new Stay at Home Order, should NC REALTORS® continue to conduct open houses on their listed properties?

QUESTION: With the Governor’s new Stay at Home Order, should NC REALTORS® continue to conduct open houses on their listed properties?

ANSWER: It is recommended that you avoid conducting open houses at this time. Before scheduling an open house, NC REALTORS® should first consult with their BIC, and consider how federal, state and local authorities’ recommendations, actions, and mandates, along with local MLS Rules and Regulations, impact the advisability, and even permissibility of open houses. Some local stay at home/shelter in place orders and some local MLS Rules and Regulations prohibit open houses during this time.

In Governor Cooper Stay at Home Order, effective at 5:00pm on Monday, March 30, 2020, travel for “Essential Activities” is permitted. One of those “Essential Activities” is performing work at certain businesses that are considered “Essential Businesses and Operations.” Real estate services, including brokerage and appraisal, are included in the definition of “Essential Businesses.” While that means that many aspects of the real estate business can continue, all essential businesses must, to the extent practicable, maintain social distancing requirements.

Under the Governor’s Order, an open house could be held, but no more than 10 people, including the REALTOR®, could be in the house at the same time to comply with the Governor’s restrictions on mass gatherings. Those who are there must adhere to the social distancing requirements of maintaining at least six (6) feet distance from other individuals. You should consider having only one buyer group to tour the home at a time. You should require potential buyers to wash their hands or to use an alcohol-based hand sanitizer immediately upon entry and to remove shoes/cover footwear with booties. Also, be sure to check with your client before using any cleaning products, and recommend that your client disinfect their home after the open house, especially commonly touched areas like doorknobs and faucet handles.

A majority of REALTORS® around the country have ceased holding open houses during this time due to concerns about health and safety. It is an activity that is particularly vulnerable to result in virus spread is particularly.

With the seriousness of the COVID-19 pandemic, now is not the time for business as usual. Talk to your clients about the alternative marketing opportunities available that would reduce the risk of exposure to the virus. With your clients’ permission, one option may be to conduct a virtual open house, using software such as Skype or Zoom. You may be able to schedule such a conference at a specified time, advertise it, and invite interested parties to participate. Another possibility would be to schedule more private video showings for parties expressing an interest in the home. For example, you could walk through the property using FaceTime or a similar product, and have a conversation with the potential buyer and/or their agent about the various features of the home.

The COVID-19 pandemic is changing rapidly. Please keep an eye on changes issued by your local, state, and national officials that might affect the permissibility of open houses as well as adhering to any MLS rules and regulations. (Updated 4/2/2020)

https://www.nar.realtor/open-house-guidance-during-covid-19

If open houses are permitted in my area and we agree to hold an open house, what types of precautions should be taken?

QUESTION: If open houses are permitted in my area and we agree to hold an open house, what types of precautions should be taken? ​

ANSWER: You should consider the following guidelines and best practices.

Prior to the open house, make sure the house is thoroughly cleaned. Also, open all doors so that people can freely walk around the house without touching door knobs. Place paper towels near sinks in case a visitor wants to turn a sink on and off.

Question all visitors upon their arrival, outside the home. Visitors with symptoms of a respiratory illness, or who have traveled to affected countries, or who have had recent contact with anyone with a positive coronavirus test should not be permitted entry.

All visitors who are permitted entry should be required to sign in. You should either sanitize the pens that are used or provide extra pens and ask visitors to take the pen they use with them.

Hand sanitizers should be provided at the entry to the home. All visitors must use those products to disinfect their hands before entering the home.

Under Governor Cooper’s Stay at Home Order only ten (10) individuals including the REALTOR® will be allowed in the home at one time.

All visitors should be instructed to follow social distancing guidelines including maintaining a distance of six (6) feet from all other visitors

After the open house, you should recommend that your client clean and disinfect their home, particularly commonly touched areas like doorknobs and faucet handles.  Advise your clients that individuals can be contagious several days before becoming symptomatic. (Updated 3/30/2020)

What if my seller-client wants me to hold an open house, but I am concerned about the risks? Can I refuse to do so?

QUESTION: What if my seller-client wants me to hold an open house, but I am concerned about the risks? Can I refuse to do so?

ANSWER:  Yes. When NC REALTORS® adopted its Exclusive Right to Sell Listing Agreement (Standard Form 101) it considered whether the agreement should obligate REALTORS® to hold open houses. The decision was made that open houses should not be mandatory.

Paragraph 9 is the section of Form 101 that describes the listing firm’s duties to the seller. It includes the following statement: “Firm agrees to use its best efforts in good faith to find a buyer who is ready, willing and able to purchase the property.” Paragraph 9 does not mandate that the Firm conduct an open house, or employ any other specific form of marketing effort.

Paragraph 10(b) of Form 101 is entitled “Marketing Authorization.” In that paragraph, there is a check box relating to open houses. If checked, that section authorizes the listing firm: “To conduct open houses of the Property at such times as Seller and Firm may subsequently agree.” This wording makes it clear that before an open house is conducted, the agreement of the listing firm is required.

The REALTOR® Code of Ethics contains language that may seem contrary to the above guidance. Specifically, Standard of Practice 3-10 states as follows: “The duty to cooperate established in Article 3 relates to the obligation to share information on listed property, and to make property available to other brokers for showing to prospective purchasers/tenants when it is in the best interests of sellers/landlords.” In our view, the obligation described in Standard of Practice 3-10 can be modified by the parties’ contract. Form 101 does exactly that. We do not believe that a REALTOR® who uses that form and later refuses to conduct an open house because of legitimate health concerns is guilty of any sort of ethical violation.

The tenant is refusing to allow any showings based on health concerns. What do we do?

QUESTION: The tenant is refusing to allow any showings based on health concerns. What do we do?

ANSWER: The landlord-tenant relationship is governed by two things: the contract between the parties (i.e. the lease) and North Carolina’s landlord-tenant statute.

If your seller-client used NC REALTORS® standard residential lease form (Standard Form 410-T), he or she has the right, expressly set forth in paragraph 10, to enter the leased premises at reasonable hours for several listed purposes. One of those purposes is showing the property to prospective purchasers or tenants. Other leases generally include similar language.

North Carolina’s landlord-tenant statute does not give tenants the right to refuse access to a prospective purchaser. Therefore, assuming your landlord has reserved the right of entry in their lease, you can proceed with showing the property.

Keep in mind that landlords have both a contractual and a statutory obligation to provide a safe and habitable property to their tenants. Therefore, before allowing anyone to enter the property, be sure to take all appropriate health and safety measures to protect the tenant. These should include the measures and best practices set forth above.

What precautions should brokers consider taking in their offices?

QUESTION: What precautions should brokers consider taking in their offices?

ANSWER: Brokers should use their best judgment when formulating a plan. First, brokers should implement a mandatory “stay-home” policy for any staff member or agent exhibiting any sign of illness, and depending on where the broker is geographically located, a broker may want to consider imposing a mandatory remote work policy for employees and instructing agents to stay out of the office.  In addition, taking measures such as holding virtual meetings or potentially postponing or cancelling in-person meetings or events may be good measures to take to limit close contact between individuals.  Be sure to monitor updates from the CDC, as well as your state and local health authorities for additional information and guidance on holding meetings or events. For travel considerations, review NAR’s “Coronavirus:  A Guide for REALTOR® Associations”.

Can I show an occupied listing?

QUESTION: Can I show an occupied listing?

ANSWER: As with many questions that have arisen following the issuance of state and local stay-at-home orders, the answer will depend on where you are doing business. There are several counties and municipalities that have placed substantial restrictions on real estate brokerage activities. In the rest of the state, the ability to conduct real estate brokerage, including the ability to show property, is governed by Governor Cooper’s Executive Order no. 121. According to that order, real estate brokerage is considered an essential business and is permitted to remain open. However, all brokerage activities must, to the extent practicable, maintain the social distancing requirements set forth in the order. Those include maintaining at least six feet distance from other individuals, and facilitating online or remote access by customers if possible.

While showing of property is permissible in most parts of the state, REALTORS® should take precautions to protect the health of the homeowner as well as any persons who wish to see the home. Agents may also ask if an interested buyer is pre-qualified to purchase and may limit showings to qualified buyers. All such individuals should be asked the same questions to avoid accusations of a fair housing violation. Before and after every showing, the home should be thoroughly cleaned to reduce the risk of community spread of the coronavirus. (Published 4/1/2020)

Can I accompany a home inspector? Can I send a photographer to film a new listing?

QUESTION: Can I accompany a home inspector? Can I send a photographer to film a new listing?

ANSWER: Under Governor Cooper’s Executive Order no. 121, real estate brokerage is listed as an “Essential Business” that is permitted to continue operating, unless there is a local order that is more restrictive. Paragraph 21 of the Governor’s order states that businesses that supply an Essential Business with the service necessary to operate are also included within the definition of “Essential Business.” Home inspectors and photographers are two examples of that type of business. That means that home inspectors and photographers can enter a home in order to complete their work. If possible, inspections and appraisals should be conducted alone. However, assuming that you follow the social distancing requirements set forth in Executive Order no. 121, you may accompany those service providers.

In order to minimize the risk of spreading the coronavirus, REALTORS® who attend home inspections and REALTORS® who hire photographers should stay at least six feet away from anyone they accompany to the home. They should regularly clean all high-touch surfaces and take all other precautions to protect the health of the homeowner, the home inspector, the photographer, and all subsequent visitors to the home. For suggestions on those precautions, REALTORS® should be sure to review the health and safety guidance published by the Centers for Disease Control and Prevention and the North Carolina Department of Health and Human Services. (Updated 4/2/2020)

 

Can I attend a closing?

QUESTION: Can I attend a closing?

ANSWER: The execution of documents necessary to complete the closing process typically occurs at a settlement meeting at the office of a licensed attorney. The North Carolina Real Estate Commission’s Real Estate Manual includes the following statements: “The listing broker and selling broker should attend the settlement meeting. A broker who neglects to attend the settlement meeting for a sale he or she brokered may be found derelict in the performance of his or her duties.”

Since attending the settlement meeting is considered mandatory, that attendance falls within the definition of real estate brokerage. As such, in those portions of the state where real estate brokerage has been designated an Essential Business, brokers are legally permitted to attend the settlement meeting.

All Essential Businesses must, to the extent practicable, maintain the social distancing requirements set forth in Governor Cooper’s Executive Order no. 121. Those requirements include facilitating online or remote access by customers if possible. Under the circumstances, brokers should certainly consider “attending” any settlement meetings remotely. With the increased usage of online videoconferencing, participating in a “closing” remotely would be one way for REALTORS® to maintain social distancing while still complying with their duties as a licensee.

Be mindful of the fact that real estate attorneys are also working hard to make sure they comply with the order and social distancing requirements. Keep lines of communication open with your closing attorney and be sure to check with them in advance of the closing about what their office protocols are and any changes they might have made to their operations in light COVID-19. That will help you and your clients prepare for the closing. (Updated 4/1/2020)

Can I measure a home?

QUESTION: Can I measure a home?

ANSWER: Measuring a home, whether by a listing agent or a buyer’s agent, is an integral part of a broker’s responsibility to their clients. In those portions of the state where real estate brokerage is considered an Essential Business, the permission to engage in that business necessarily includes permission to complete those activities that are necessary to perform the agent’s duties to their client.

Unlike some aspects of an agent’s duties, measurement of a home is not something that can be completed remotely. Listing agents who are preparing to submit a listing to their MLS should discuss with their clients the need to include an accurate measurement of the property, and the COVID-19-related risks associated with completing the measurement.

In order to minimize the risk of spreading the coronavirus, REALTORS® who measure homes, or hire someone to do so, should stay at least six feet away from anyone they accompany to the home. They should regularly clean all high-touch surfaces and take all other precautions to protect the health of the homeowner and all subsequent visitors to the home. For suggestions on those precautions, REALTORS® should be sure to review the health and safety guidance published by the Centers for Disease Control and Prevention and the North Carolina Department of Health and Human Services.  (Published 3/30/2020)

How will this order be enforced?

QUESTION: How will this order be enforced?

ANSWER: Governor Cooper is seeking voluntary cooperation from all state residents and businesses to ensure the health and safety of our communities. If voluntary cooperation is not achieved, Section 6 of the order explains that state and local law enforcement officers have the authority to enforce the Order. A violation of the order may be subject to prosecution and Is punishable as a Class 2 misdemeanor. If a licensee received a criminal conviction, they’d be required to report that to the North Carolina Real Estate Commission. (Published 4/1/2020)

Does my real estate business need any documentation to continue operating?

QUESTION: Does my real estate business need any documentation to continue operating?

ANSWER: According to Governor Cooper’s FAQ about the Stay at Home order, businesses and not-for-profit organizations that are deemed essential as defined by the Order do not need any documentation from the State to continue operations. Employees are not required to have specific documentation to report to work under this Order.

At the time this Q&A, NC REALTORS® is not aware of a local order (i.e. city or county) requiring specific documentation to travel for essential business. Please remember, the Stay at Home order issued by the Governor does not preempt or supersede any local order which includes more restrictive guidelines. This means that if you are operating in a local area (county or municipality) with a more restrictive order on real estate activity, you must comply with it. (Published 4/1/2020)

Should I use a COVID-19 hold harmless agreement for sellers that show their homes but buyers may later contract the virus, or vice versa?

QUESTION: Should I use a COVID-19 hold harmless agreement for sellers that show their homes but buyers may later contract the virus, or vice versa?

ANSWER: Before using COVID-19 hold harmless agreements, REALTORS® should consult their brokers and legal counsel in order to assess the risk and effectiveness of such agreements. In general, a hold harmless agreement protects a party from liability if another party is injured on their property or is injured during an inherently dangerous activity. In the case of a pandemic where the risks associated are not only widely known, but is also widespread, easily transmittable, and may not show symptoms for days after exposure, proving causation would be nearly impossible from a legal standpoint. As a result, NC REALTORS® does not plan to create COVID-19 hold harmless form or include language to an existing form. (Published 4/3/2020)

How does the Code of Ethics apply in this COVID-19 pandemic and specifically with regards to adherence to the various Stay at Home orders throughout the country?

QUESTION: How does the Code of Ethics apply in this COVID-19 pandemic and specifically with regards to adherence to the various Stay at Home orders throughout the country?

ANSWER: Bruce Aydt does an excellent job setting the stage in this article on Realtor Magazine Online: https://magazine.realtor/law-and-ethics/feature/article/2020/04/covid-19-and-the-code.

HEALTH & SAFETY

What are Coronaviruses?

QUESTION: What are Coronaviruses?

ANSWER:According to the North Carolina Department of Health and Human Services, coronaviruses are a large group of viruses that can cause illness in animals and humans. Some coronaviruses commonly circulate in the United States and usually cause upper respiratory symptoms such as cough or runny nose, although some can cause more serious illness. The 2019 novel (new) coronavirus causes the illness coronavirus disease 2019 (COVID-19). (Updated 3/30/2020)

What is COVID-19?

QUESTION: What is COVID-19?

ANSWER: Coronavirus disease 2019 is a disease that was identified in late 2019 and was declared a pandemic on March 11. COVID-19 is an international, national and North Carolina public health emergency. The federal government is working closely with state, local, tribal, and territorial partners, as well as public health partners, to respond to this situation. COVID-19 can cause mild to severe illness. It appears that the most severe illness occurs in older adults. (Updated 3/26/2020)

What is the risk of exposure to coronavirus?

QUESTION: What is the risk of exposure to coronavirus?

ANSWER: Different parts of the country are seeing different levels of COVID-19 activity. The United States nationally is in the acceleration phase of the pandemic. The duration and severity of each pandemic phase can vary depending on the characteristics of the virus and the public health response.

  • CDC and state and local public health laboratories are testing for the virus that causes COVID-19. View CDC’s Public Health Laboratory Testing map.
  • All 50 states have reported cases of COVID-19 to CDC.
  • U.S. COVID-19 cases include:
    • Imported cases in travelers
    • Cases among close contacts of a known case
    • Community-acquired cases where the source of the infection is unknown.
  • Most U.S. states are reporting some community spread of COVID-19.
  • View latest case counts, deaths, and a map of states with reported cases. (Updated 3/26/2020)
What preventative measures may be taken to reduce the risk of contracting and spreading coronavirus?

QUESTION: What preventative measures may be taken to reduce the risk of contracting and spreading coronavirus?

ANSWER: The same preventative measures recommended to prevent influenza are also effective in reducing the risk of contracting or spreading coronavirus.  These measures include:

  • Staying home if you have a fever, cough, shortness of breath or any other cold or flu-like symptom.
  • Washing your hands frequently with soap and water for at least 20 seconds. If soap and water aren’t available, use an alcohol-based hand sanitizer.
  • Avoiding touching your eyes, nose, and mouth with unwashed hands.
  • Avoiding close contact with anyone who is sick.
  • Cleaning and disinfecting frequently touched objects and surfaces.
  • Covering your mouth and nose with a tissue when you cough or sneeze, or cough or sneeze into your sleeve.
How should brokerage staff or agent/licensee reports of COVID-19 be handled?

QUESTION: How should brokerage staff or agent/licensee reports of COVID-19 be handled?

ANSWER: NAR has prepared a Sample Preparedness Plan for Circumstances Relating to COVID-19 that any real estate brokerage may adapt and implement in your workplace.

TRANSACTION DISRUPTIONS

Do buyers and sellers have any rights to terminate contracts or delay closings due to COVID-19 issues that have arisen or may arise?

QUESTION: Do buyers and sellers have any rights to terminate contracts or delay closings due to COVID-19 issues that have arisen or may arise?

ANSWER: The short answer to your question is yes, under certain circumstances. Whether or not a party has the right to terminate or delay a particular transaction due to the pandemic will depend on the specific facts. Following are examples that illustrate legal principles that would be applied in determining a party’s rights and obligations in three different situations. They should serve to underscore the fact that the legal issues involved may be complex, and that it is very important to advise a buyer or seller to seek legal counsel if they want to know what their legal rights and responsibilities are in this extraordinary environment.

Example 1:

A buyer under contract refuses to attend Settlement out of fear that he will be infected with the coronavirus. There is no evidence that the closing attorney or anybody in her office has been infected, and in fact, the closing attorney has implemented detailed protocols for her closings to help ensure that the virus is not transmitted. In addition, the closing attorney is offering a creative alternative to a traditional in-office Settlement, such as a “mail-away” or “drive-by” closing, or the execution of a limited power of attorney giving the closing attorney the authority to execute all closing-related documents on the buyer’s behalf. In that situation, the buyer’s refusal to close is likely a breach of contract that would entitle the seller to terminate the contract and keep the Earnest Money Deposit.

Example 2:

The Register of Deeds office in the county where the property is located has closed and does not accept electronic filings. Since the final step in the process of “Closing” is the recordation of the deed and any deed of trust, the transaction simply cannot be completed. In our view, it would be difficult to point to either the buyer or seller as a delaying party in this situation, in which case an argument can be made that the Delay in Settlement/Closing paragraph in the Contract isn’t even applicable. If that paragraph isn’t applicable, how long would a party have to close? Common law provides that if the parties haven’t made time of the essence, then the closing date is considered a target date and the parties have a reasonable period of time based on the particular circumstances to perform their obligations. Applying the law to this situation, since time is not of the essence in the Contract, we think an argument can be made by either party that under the particular circumstances, the contract remains enforceable through the time that the Register of Deeds office reopens.

Example 3:

A buyer under contract is informed by their lender that their loan has been delayed indefinitely due to the lender’s concern about the potential liability of placing an appraiser in the property. What are the buyer’s rights in this situation? If the Due Diligence Period hasn’t expired, the buyer has a contractual right to terminate and should seriously consider doing so. On the other hand, if the Due Diligence Period has expired and the buyer won’t be able to close without getting a loan, the buyer could be characterized as a delaying party and the Delay in Settlement/Closing paragraph could apply. Assuming the seller is willing and able to close, the seller likely has the right to terminate the contract. Ordinarily, the seller would also be entitled to retain the earnest money. However, these are not ordinary times. The buyer may have a legal defense that would allow them to obtain a refund of their Earnest Money Deposit (EMD). The doctrines of impossibility of performance or frustration of purpose offer relief to contracting parties in extraordinary situations where changed conditions caused by an unforeseen event occur during the term of a contract. The buyer in this third example may argue that their performance should be excused due to the unforeseen nature of a global pandemic and its effect on their lender’s decision-making. If that argument is successful, the buyer would not be in breach of the contract and would be entitled to a refund of their EMD. However, the seller may plausibly argue that although the contract doesn’t specifically address the effect of pandemics or other unforeseen events on the parties’ obligations, since the buyer’s obligation to purchase the property is not contingent on the buyer’s ability to obtain a loan, the contract clearly allocates to the buyer the risk of the loan not being made, and the buyer should forfeit the EMD, regardless of the reason that the loan falls through.

Does our Offer to Purchase and Contract (Standard Form 2-T) permit either of my clients to delay because of this pandemic?

QUESTION: Does our Offer to Purchase and Contract (Standard Form 2-T) permit either of my clients to delay because of this pandemic?

ANSWER: Form 2-T does not have a specific provision that addresses this kind of worldwide emergency. Though each transaction will need to be evaluated on a case by case basis, we believe that in many cases each party will have a good faith argument that they are not the source of delay. If neither party is the delaying party, then paragraph 12 of Form 2-T would not apply, which would mean the parties would have a reasonable amount of time under the common law to complete the transaction.

 

COVID-19 Addendum Form

Does NC REALTORS® have an Addendum to the Offer to Purchase and Contract (Standard Form 2-T) that can be used during this unprecedented situation?

QUESTION: Does NC REALTORS® have an Addendum to the Offer to Purchase and Contract (Standard Form 2-T) that can be used during this unprecedented situation?

ANSWER:  Yes, on March 20, 2020, NC REALTORS® released a COVID-19 Addendum (Standard form 790) to the Offer to Purchase and Contract (Standard Form 2-T). NC REALTORS® can download a pdf on our website here. It will be available with electronic forms vendors soon.

NC REALTORS® worked diligently with our Forms Committee and others to create this addendum in response to the COVID-19 pandemic. This addendum allows the parties to agree to an extension of the Contract (time period to be negotiated by the parties) if circumstances arise related to the world-wide Coronavirus (COVID-19) pandemic that could make it unduly burdensome or impossible for the Buyer or Seller to exercise their rights and/or perform their obligations under the Contract. This form is not required, however, it is being made available to all NC REALTORS® to use if appropriate in their transaction.

Is there more information about the new Addendum form?

QUESTION: Is there more information about the new Addendum form?

ANSWER: Yes. A new COVID-19 Addendum (Form 790) has just been released. A pdf version is available by logging into ncrealtors.org and clicking here. The form has also been provided to zipForms for inclusion in the NCR forms software program. The form may be used with a new contract or added to an existing contract. The Form is designed for use with NCR Forms 2-T and 12-T.

Here are the highlights of how the form will work:

  • If circumstances related to the COVID-19 pandemic make it unduly burdensome or impossible for either or both parties to exercise a right or perform an obligation under the contract, there will be a one-time extension of contract deadlines by a number of days agreed to by the parties
  • A party whose performance is affected by a COVID-19 issue must notify the other party in writing to trigger the extensions. Notice may take place in the same way it is typically handled under the “Delay in Settlement/Closing” paragraph in the Contract, so long as it is in writing. An email from one agent to the other describing the circumstances should suffice.
  • The extension of deadlines will apply to any contract deadline that has not already expired, including the Due Diligence Period and the Settlement Date
  • The parties agree to make a good faith effort to use alternative methods that may be reasonably available to enable them to perform their rights and obligations under the contract
  • If the parties are unable to close prior to the expiration of the extended period of time and they haven’t agreed to another extension, the contract will become null and void
  • If the contract becomes null and void, the seller will retain the Due Diligence Fee and the Earnest Money Deposit will be returned to the buyer, regardless of the reason for the delay
  • If the buyer is unable to get a loan due to loss of income related to the COVID-19 pandemic (for example, loss of employment), either party may terminate the contract, in which case the seller will retain the Due Diligence Fee and the Earnest Money Deposit will be returned to the buyer

For example, assume a transaction has been scheduled for closing, but the local Register of Deeds office closes on short notice and is not set up to accept electronic filings. The Due Diligence Period has expired. Since both parties are affected by this event, written notice from either party to the other confirming the closure would automatically extend the Settlement Date by the number of days agreed to by the parties. If the Settlement Date is March 30 and the parties have agreed to a 30-day extension, the Settlement Date would be extended until April 30. If, during the month of April the Register of Deeds office reopens, the Addendum provides that the parties will make a good faith effort to close as soon as reasonably possible. On the other hand, if at the end of April the Register of Deeds office has not reopened, the contract will be null and void if the buyer and seller don’t agree in writing to further extension, and the seller will keep the Due Diligence Fee and the Earnest Money Deposit will be returned to the buyer.

The buyer’s and seller’s rights under the Addendum are triggered by a “COVID-19-Related Restriction.” Examples of such restrictions are listed in the introductory paragraph, but the list is not all-inclusive. Thus, any event related to the pandemic that makes a party’s performance unduly burdensome or impossible can cause the provisions of the Addendum to become applicable. This open-ended definition anticipates that circumstances unforeseen at the present time could arise that will affect the ability of buyers and sellers to complete real estate transactions.

We recognize that a broad definition increases the potential for misunderstanding as to whether a particular circumstance is related to the pandemic or whether such a circumstance makes it unduly burdensome or impossible for a party to perform. We hope and believe that buyers, sellers and their agents will exercise the utmost good faith in dealing with each other during this very difficult time. However, it is important for all parties to understand the ways in which the Addendum will affect their rights and obligations in considering whether to make it a part of their contract. Careful consideration should be given to the length of the time that contract deadlines will be extended. The parties may agree to a further extension if, as the deadline approaches, they are both still willing and able to complete the sale and further time is needed.

The parties and their agents should also understand that use of this Addendum is not mandatory. Buyers and sellers may choose to use the negotiable terms of the contract (amount of Due Diligence Fee or Earnest Money Deposit, length of Due Diligence Period, etc.) to protect their respective interests without making the COVID-19 Addendum a part of their contract, and delays arising as a result of the pandemic may be addressed through the use of the Agreement to Amend Contract (Form 4-T).

Questions about the Form should be addressed to the Legal Hotline at legalhotline@ncrealtors.org.

Has NC REALTORS® provided additional information about how to use the Addendum?

QUESTION: Has NC REALTORS® provided additional information about how to use the Addendum?

ANSWER: NC REALTORS® released this video with more information on the Addendum.


Onsite Preview Addendum Form

Does NC REALTORS® have an Onsite Preview Addendum to the Offer to Purchase and Contract (Standard Form 2-T) that can be used if my real estate firm is located in an area where a local stay at home order restricts showings of listed properties?

QUESTION: Does NC REALTORS® have an Onsite Preview Addendum to the Offer to Purchase and Contract (Standard Form 2-T) that can be used if my real estate firm is located in an area where a local stay at home order restricts showings of listed properties?

ANSWER: Yes, NC REALTORS® released an “Onsite Preview Addendum” (Form 795) to the Offer to Purchase and Contract on April 13th. The form is designed for use with NCR Forms 2-T and 12-T in situations where a buyer’s ability to conduct an onsite preview of a property has been prohibited or impaired by a local, state, and/or federal Stay at Home order. It has been provided to NCR’s forms software vendor and is also available on the HERE. (login required).

Is there more information about the new Onsite Preview Addendum form?

QUESTION: Is there more information about the new Onsite Preview Addendum form?

ANSWER: Yes, the NC REALTORS® released an “Onsite Preview Addendum” (Form 795) to the Offer to Purchase and Contract on April 13th. The form is designed for use with NCR Forms 2-T and 12-T in situations where a buyer’s ability to conduct an onsite preview of a property has been prohibited or impaired by a local, state, and/or federal Stay at Home order. It has been provided to NCR’s forms software vendor and is also available on the NC REALTORS® website (login required).

Here is a summary of how the Form works:

  • The seller agrees that the buyer will have the right to conduct an onsite visual inspection or “preview” of the property through 5 p.m. on an agreed-upon date, called the “Onsite Preview Period”
  • In exchange for the right to preview the property, the buyer agrees to pay the seller an agreed-upon amount, called the “Onsite Preview Fee”
  • The Onsite Preview Fee is payable when the contract is signed and must be delivered to the seller before the buyer can conduct the preview
  • The Onsite Preview Fee is non-refundable but is applied to the purchase price of the property if the buyer chooses to proceed with the contract and the transaction closes
  • Prior to the end of the Onsite Preview Period, the buyer has the right to terminate the contract by written notice to the seller that the buyer has decided not to continue with the contract
  • If the buyer timely terminates the contract, it will be null and void and neither party will have any further rights or obligations under the contract
  • If the buyer chooses to proceed with the contract, no notice is required. The Due Diligence Fee is payable no later than the expiration of the Onsite Preview Period, and the Initial Earnest Money Deposit is payable to the escrow agent either upon the expiration of the Onsite Preview Period or within 5 days thereafter.

Other than the fact that delivery of the Due Diligence Fee and the Initial EMD are tied to the end of the Onsite Preview Period rather than the Effective Date of the contract, the contract between the parties will work in exactly the same way as it would without an Onsite Preview Addendum attached, assuming that the buyer chooses not to terminate the contract prior to the end of the Onsite Preview Period. There is a simple form of notice appearing on page 2 of the Onsite Preview Addendum that may be used by a buyer to notify the seller of the buyer’s decision not to proceed with the contract.

Page 3 of the Addendum contains acknowledgments of receipt of the Onsite Preview Fee that may be used to confirm delivery of the Fee to the listing agent and seller. It is recommended that they be used in the same way as the acknowledgments of receipt of the Due Diligence Fee in Forms 2-T and 12-T.

It is very important for agents and their clients to understand that time is of the essence as to the date and time that the Onsite Preview Period ends as well as the date and time that the buyer must notify the seller in writing if the buyer decides not to proceed with the contract. Remember well that the parties are under contract and that the contract continues in full force and effect unless the buyer timely delivers notice to the seller of the buyer’s decision not to proceed.

This Form is not mandatory. If the parties choose to make it a part of their contract, both the amount of the Onsite Preview Period and the length of the Onsite Preview Period are fully negotiable.

Questions about the Form should be addressed to the NC REALTORS® Legal Hotline at legalhotline@ncrealtors.org.



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