IS COVID-19 AN “ACT OF GOD”?
The issue is exceptionally complex with the answers varying on a case-by-case basis. The “Acts of God” exception is intended to provide protection when a catastrophic, unforeseen event occurs. Common examples would be that the property has been destroyed by hurricane, tornado, or earthquake. A pandemic might qualify as an “Act of God,” but that will depend on the answer to several questions, including, but not limited to:
- Is the property itself quarantined or somehow actually affected by the virus?
- Is the buyer quarantined and physically unable to close on the deal?
- Is the city or state forcing businesses to close or imposing restrictions that make closing impossible?
- Is the buyer refusing to close because of fear, panic, or volatile financial markets?
- Has a lender, after contingencies were removed, refused to provide funding because of the pandemic?
- Did the buyer go under contract after the pandemic started or know these issues might arise?
In certain circumstances where there is a direct nexus between COVID-19 and the reason the deal cannot close – e.g. the federal government has seized the property for public use (turning a hotel into a temporary hospital) or the buyer’s lender has refused to fund closing because of COVID-19 related restraints on capital – the issue might be more clear. However, in far more circumstances, the answer will be unclear and require detailed legal analysis.