Important Update for Landlords and Tenants
In light of the Coronavirus (COVID-19) pandemic cities, and counties are taking steps to minimize the impact on tenants, including placing moratoriums on evictions, holds on shutting off utilities due to nonpayment, and prohibiting late rent fees. The federal government has suspended evictions and foreclosures in public housing until the end of April. The government-backed mortgage buyers Freddie Mac and Fannie Mae, have agreed to do the same for at least 60 days.
On 3/18/20 the Department of Housing and Urban Development authorized a 60-day eviction moratorium, freezing all evictions of tenants living in FHA-insured single-family properties. (Mortgagee Letter 2020-04). As a result, while there is no statewide eviction moratorium, many cities and counties are rushing to enact them.
Because approximately half of landlords are institutional investors or related businesses, and many individual investors own multi-unit or non-FHA rental homes, most rentals won’t qualify.
Please view this brief video from our Partner Simon Khinda and feel free to contact our offices if you have any questions related to your property, as it is important to know that each respective State, City and County has variations on this issue.
Force Majeure – the importance of this in contracts
In every business transaction, extreme events, commonly referred to as force majeure events beyond the control of the obligor, may arise and prevent the impacted party from performing the contract. For example, a natural disaster can negatively affect a seller’s ability to deliver goods under a sale of goods agreement. If the contract is silent on force majeure, a court renders its decision whether to excuse an impacted party’s performance during the force majeure event based on the foreseeability of the event.
In light of COVID-19, this is a very hot topic that people are looking at very carefully and we expect to see a lot of litigation coming out of this as parties seek to terminate contracts or further enforce contracts.
Components of Force Majeure Clause. Force majeure clauses typically contain the following parts:
- Obligor excused from performance. A clause may start with language excusing one or both parties from performing the contract if specified force majeure events occur or simply allowing performance to be suspended for a period of time whilst the force majeure event is continuing.
- List of force majeure events. The clause may and should list the force majeure events – this is extremely important to understand.
- Impacted party’s obligations. The clause should identify the impacted party’s obligation to:
- notify the obligee; and
- mitigate.
- Other party’s remedies. The clause should identify remedies, for example, right to terminate the contract without liability if the force majeure event remains in effect after the specified number of days or consecutive days.
For more information including the impacted party’s obligation to send notice and the other party’s potential remedies please view this brief video from our Partner Simon Khinda and feel free to contact our offices if you have any questions related to your contract(s), as it is important to know that it is very fact specific with respect to this issue.