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:

 

  1. Is the property itself quarantined or somehow actually affected by the virus?
  2. Is the buyer quarantined and physically unable to close on the deal?
  3. Is the city or state forcing businesses to close or imposing restrictions that make closing impossible?
  4. Is the buyer refusing to close because of fear, panic, or volatile financial markets?
  5. Has a lender, after contingencies were removed, refused to provide funding because of the pandemic?
  6. 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. 

 

 

(This is not to be construed as legal advice, rather for discussion purposes and all parties are advised to obtain legal advice from a licensed attorney prior to signing any legally binding document or acting on a pending legal matter)
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