Real Estate Purchase and Sale Contracts in 2021: New Closing and Timing Risks During the Downturn

Duty to Notify, Defenses, Reliance on Third-Party Providers, Evolving Federal, State, Municipal Laws, Ordinances, and Doctrines

A live 90-minute premium CLE webinar with interactive Q&A


Tuesday, December 15, 2020

1:00pm-2:30pm EST, 10:00am-11:30am PST

or call 1-800-926-7926

This CLE webinar will provide real estate counsel with advice on navigating a purchase and sales transaction following the economic contraction of 2020 and the public health restrictions and uncertainties related to COVID-19. Real estate stakeholders are reviewing agreements to determine whether there are conditions to closing that might justify a decision not to proceed with a transaction or considerations and risks to address before closing. Lenders, landlords, tenants, developers, contractors, sellers, and buyers are trying to evaluate how to ensure that a long-planned transaction proceeds to closing and the practical considerations that parties should bear in mind as they consider their options.

Description

The current economic climate and limited access to government offices create issues for real estate closings that counsel must address moving into 2021 and beyond.

Sales of commercial properties close in two ways: either a deed-recordation closing or a "gap closing." Deed-recordation closings require the recorder's office to confirm that the deed has been recorded before the buyer's funds are released to the seller, and the transaction is deemed closed.

The more common "gap closing" allows the parties to deposit all closing deliverables, including the buyer's funds, in escrow with the title insurance company, and it issues title insurance in favor of the buyer. In the current environment, with recorder's offices either closed or at risk of closing, both methods of closing create concerns and risks.

As parties to real estate transactions assess new risks presented by the COVID-19 crisis and the subsequent economic downturn, they should consider the potential impact of issues related to the timing of closings. Specifically, parties should consider the concept of "time of the essence" as they prepare for closings, structure their transactions, and negotiate with counterparties.

Counsel must determine whether a non-performing party is in default for failing to close either due to strict enforcement of timing or a general unwillingness to close. Upon further examination, a non-performing party may assert defenses of the impossibility of performance, the frustration of purpose, good faith and fair dealing, or force majeure.

Not all third-party providers whose services are necessary to perform obligations under a transaction will be classified as essential workers. Counsel must check applicable and evolving ordinances and contact the providers directly to determine if services are available remotely to proceed. Counsel must assess how deadlines, including, but not limited to, filing deadlines, IRS Section 1031 deadlines, due diligence deadlines for inspections, title, and survey, may be impacted.

Listen as our expert panel provides practical tips and procedures for timely and successful closings in an environment limited by both the COVID-19 crisis and the economic recession that followed.

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Outline

  1. Closing risks
  2. Timing
  3. Duty to notify
  4. Potential defenses for breaching parties
    1. Impossibility of performance
    2. Frustration of purpose
    3. Good faith and fair dealing
    4. Force majeure
  5. Reliance on third-party providers
  6. Evolving federal, state, municipal laws, ordinances, and doctrines

Benefits

The panel will review these and other key issues:

  • What closing risks should counsel consider due to the economic downturn?
  • Are there timing issues or new duties to notify opposing parties in a sales transaction if there is a delay in closing a sales transaction?
  • What possible defenses exist to a breaching party of a real estate sales transaction and what is necessary to prove such a defense?
  • How does reliance on third-party providers impact a real estate closing after 2020?
  • What are the best practices and procedures for conducting a real estate closing in 2021 and beyond?

Faculty

Akerman, Elizabeth
Elizabeth M. Akerman

Attorney
Stroock & Stroock & Lavan

Ms. Akerman provides clients with comprehensive counsel on complex commercial real estate transactions. She regularly...  |  Read More

Arkow, Loryn
Loryn D. Arkow

Partner
Stroock & Stroock & Lavan

Ms. Arkow has extensive experience handling acquisition, disposition and development transactions; joint ventures,...  |  Read More

Sohn, Joshua
Joshua Sohn

Partner
Stroock & Stroock & Lavan

Mr. Sohn’s practice spans a wide range of commercial and regulatory matters, with particular focus in complex...  |  Read More

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