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Force Majeure Ruling in Miami Retail Suit Could Change How Contracts Are Written

In what attorneys say is the first ruling of its kind in Miami-Dade County, a popular retail store on Lincoln Road in Miami Beach is required to pay rent despite hardships caused by the COVID-19 pandemic.

A force majeure clause is common in leases and can sometimes allow a party to not fulfill their contract when there is a circumstance beyond their control or an “act of God.”

Guess? Retail Inc., the clothing store, alleged that the COVID-19 pandemic left it unable to pay its rent. The retailer refused to pay after it had to close its operations around March of last year — something Guess said was done to protect the health and safety of customers and employees, and comply with government safety guidelines.

“This seems to be a case of the first impression in South Florida that will likely be relied upon by other jurists as litigation regarding force majeure provisions move through the court system,” said Bruce Weil of Boies Schiller Flexner, one of the attorneys who represented the landlord, The Denison Corp. 

Weil argued there wasn’t anything unique about the clause, and that its provisions are pretty standard.

The lease states that the term force majeure encompasses, “acts of God, labor disputes (whether lawful or not), material or labor shortages, restrictions by any governmental authority, civil riots, floods, or other cause beyond the control of the party asserting the existence of force majeure.”

It also said, “Notwithstanding anything to the contrary in this lease, tenant shall not be excused from payment of base rent, operating costs, or any other sum due under this lease by reason of force majeure.” 

Miami-Dade Circuit Judge Peter R. Lopez found that The Denison Corp.’s lease had an unambiguous force majeure clause and ruled Guess must pay no matter what — even during a pandemic.

The ruling is a win for landlords who still need that income to pay their expenses and continue operation. Weil said he hopes that landlords and tenants will be able to sit down and work together to avoid lawsuits since the pandemic has caused hardships for everyone.

Weil and his associate Laselve Harrison worked together in the case and believe the lawsuit will change the way all contracts are written in the future to make sure that pandemics are specifically named as an example of a force majeure incident.

“Force majeure clauses are certainly going to be scrutinized going forward because of the pandemic, with both landlords and tenants seeking clarity about what circumstances excuse performance under a lease,” said Weil. 

Mark Steiner of Liebler, Gonzalez & Portuondo represented Guess and did not immediately respond to a request for comment.


Source:  GlobeSt.

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The Coronavirus Is Changing Real Estate Sales Contracts. The Shift Looks Permanent

The contracts drawn between a seller and buyer in South Florida may never be the same again.

As coronavirus continues to spread, real estate agents are adding a “COVID rider” to existing contracts and including it in new sales. The standard force majeure clauses that protect sellers and buyer in the case of an act of God typically cover only natural disasters like earthquakes, hurricanes and tornado.

Pandemics have not been on the list. That is, until now, said Miltiadis Kastanis, director of luxury sales for Douglas Elliman.

“Yesterday’s contract is not today’s contract. Legal intervention is the smartest thing we can do,” Kastanis said.

Several Realtors say they contacted their attorneys in March, as the crisis was growing, to update pending sales contracts and write new ones that specifically include pandemic or coronavirus as covered reasons for canceling contracts. Kastanis now sends his contracts for approval first to his attorney before sending it to the buyer for review.

The COVID clause protects both the buyer and seller, he said. For the buyer, it gives them more time to complete tasks, including finalizing lending — should a bank have halted lending altogether — or complete an inspection.

It also protects the seller, Kastanis said. “A buyer may say, ‘Well, my bank isn’t lending.’ It may be an excuse for the buyer to walk out.”

It also faciliates contract extensions, said Anthony Askowitz, broker and owner of RE/MAX Advance Realty.

For sellers, such clauses act as a hedge against fluctuations in the market, Askowitz said. “Their home may not have the same value in the future. We know the value from yesterday. We don’t know what the value is going to be after the pandemic.”

The clause may also offer a sense of security to lenders, he said. “This is a protection for banks. Banks need this because it puts things in context of what people can expect. We saw that early on when people wanted to get out of their contracts, this ensured that they couldn’t.”

The addendum or clause is legally binding, said attorney Florentino Gonzalez, co-chair of the downtown Miami-based Shutts & Bowen’s Real Estate Practice Group. If the buyer tried to pull out after all mortgage, appraisal and inspection services are back to normal, “they can risk being sued for specific performance of contracts or lose their deposit,” said Gonzalez.

But because a pandemic can be infinite in nature, Gonzalez said, there will also likely be a deadline for any contract extension.

The addition of the word ‘pandemic’ as a force majeure is here to stay, Kastanis said. “It has shown to impact our market strong enough.”


Source:  Miami Herald

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