QUESTIONS: Our office has been inundated with questions and concerns about the current state of emergency caused by the world-wide Coronavirus (COVID-19) pandemic. Most of those questions are variations on the following: Is the new CAR Interim Coronavirus Addendum/Amendment (Form CVA) mandatory? When should we use it? Can we still close escrows? Must I cease showing property? Can we conduct inspections and/or prepare a house for marketing? Can I go to my office to scan documents?
ANSWERS: Sadly, everything in the world has been in a state of flux and what may have been true yesterday may not be true today or tomorrow. As such, providing definitive answers is difficult, at best, and each Broker and Agent must make their own business decisions as to how they are to handle their own business.
This Special Weekly Practice Tip is designed to serve as a temporary guide for conducting real estate business based upon the best available information as of the date of this Tip.
Interim Coronavirus Addendum/Amendment (Form CVA)
Yesterday, in response to the obvious transactional concerns created by the COVID-19 pandemic, CAR released this form to create some degree of contractual certainty. It is not a mandatory form; it is merely a mechanism to resolve questions regarding the potential unenforceability of real estate purchase contracts during the current circumstances. As CAR noted when it made the form available:
“This form allows parties to agree on a way forward for existing contracts and address potential issues in contracts that have yet to be formed.”
This optional Addendum/Amendment can thus be used in connection with existing real estate Agreements as well as for Agreements that will be prepared. It is currently the best available temporary form. It has just gone “live” on the Zip platform.
It is our recommendation that the form be presented to all Buyers and Sellers as a standard means to deal with some of the uncertainties caused by the current health crisis. The sooner this document is presented to your Clients the better. It will then be up to the Clients to decide whether or not they want to include the Addendum in their Purchase Agreement. Basic contract law has not changed: If the Parties do not agree on all of the terms and conditions in the CVA, then that document is not part of the transaction.
If Buyers and Sellers do not reach an agreement on the terms and conditions of the CVA and they question what they should do about proceeding with the transaction (whether they want to cancel or delay the contract), then they will need to consult with their own qualified California real estate attorney to review their particular legal risks and obligations. Agents cannot answer those questions.
Be certain to read the entire Addendum/Amendment. It is not an Advisory with general information that clients are asked to sign. When signed, the CVA is a contractually-binding document which provides Buyers and Sellers with certain alternative options depending upon what boxes are or are not checked. This was a hastily created form and it is far from perfect.
Paragraph 1: The default or automatic choice (if no other boxes are checked in the form) is that the Buyer and Seller agree to postpone Close of Escrow if the transaction cannot close on the specified time due to Unforeseen Circumstances. The pre-selected time for the delay is “up to 30 Days to accommodate Unforeseen Circumstances” related to COVID-19. This time frame can be made shorter or longer. Note that at the end of the selected time frame either Buyer or Seller may cancel without any need to issue a Notice to Perform or a Demand to Close Escrow.
Be aware that there are currently no legal guidelines for precisely what is now or what will be included in the future within the definition of “Unforeseen Circumstances” that are related to COVID-19. Some obvious situations: One of the Parties contracts the disease and is quarantined without the ability to get documents notarized. The County Recorder’s Office cannot close the escrow. One of the Parties loses their job because of COVID-19.
Paragraph 2: This is an Optional paragraph that is only included if the box is checked. The Buyer and Seller may also agree — whether or not there is a loan contingency (including whether or not that contingency was waived or removed) — that if the Buyer’s loss of income from COVID-19 causes the lender to not fund the escrow, that the Agreement may be cancelled by either Buyer or Seller, without the need for any Notice to Perform or Demand to Close Escrow.
Note: At the present time, we do not know precisely what circumstances will constitute a legitimate basis to cancel under this provision. Clients who have questions about this paragraph should be advised to consult with their own qualified California real estate attorney.
Paragraph 3: This is an Optional paragraph that is only included if the box is checked. This can only be used in connection with an existing Accepted Agreement when the Buyer and Seller decide they both want to cancel the Agreement. The intent of this paragraph is that if it is checked, there is no need to prepare a separate Cancellation form. Whether or not Escrow Officers will accept this fully-signed form as a complete substitute for separate escrow cancellation documentation is unknown at this time but, it is possible since it does not expressly state that the escrow is cancelled.
Paragraph 4: If the clients want to consider other options or want to create special terms to include in the blank lines in this section, stop. Do not create your own provisions; discuss the situation with your Broker or Manager first.
Can We Still Close Escrows?
If all of the terms and conditions of the Agreement have been met by the Parties, escrow has been funded and escrow instructions have been signed, it may be possible to still close. Following this Tip is the most current information we have regarding which County Recorders’ Offices are open for business and whether or not they are permitting e-filing.
Check with the company handling the escrow as to what they can or cannot do regarding closing any specific escrow.
Must I cease showing property? Can we conduct inspections and/or prepare a house for marketing? Can I go to my office to scan documents?
Many of the questions we receive concern whether or not Agents can continue to conduct the day-to-day business of real estate sales in view of the current government orders to shelter in place. There is no “one size fits all” answer. The answer depends upon the specific governmental orders that are in place in your County, what rules your Broker has implemented, and the degree of risk that you are willing to assume.
Some Counties are very specific that unless you are providing “an essential service” you must shelter in place. None of the activities performed by Agents are specifically mentioned as an essential service in these Counties nor are Agent activities specifically listed as nonessential in those Counties that are following that rule.
Other Counties are far more lenient and their “Shelter in Place” directives allow people to perform “critical business services” which would include activities that help keep people housed.
Local government officials will need to make their own determinations as they work through the current situation as to what they will allow people to do within their jurisdiction. In most instances, government officials are deferring to county health officers as to precisely what activities will be deemed “essential” or “critical business services” — and those definitions are constantly changing. Bottom Line: It is not known what action, if any, will be taken by government officials today, let alone tomorrow.
At some point, the state or local government may well define all Agent activities such as showing property, conducting inspections, preparing a house for marketing or even going to your office for any purpose as being nonessential services during this crisis.
While sheriff’s departments are not currently patrolling for violators, neighbors could report activity to the authorities. As such, it is a business risk that Brokers, Agents and their clients will need to assess so as to make their own business decision in response to the temporary governmental restrictions in their County that have been necessitated by this health crisis.
PRACTICE TIPS:
- BROKER POLICY: Check with your Broker or Manager to see if your company has a policy regarding what activities you may or may not perform within each of the Counties where you do business. Some brokerages have chosen to cease conducting business at all; others are limiting what services they will provide while some are conducting business as usual. There are business, health and legal risks involved in creating brokerage policies on this topic. Each person must ultimately make their own business decision as to the level of risk that they are personally willing to take.
- READ: There are several forms in circulation that have been created by brokerages, escrow officers and other well-meaning people, most of which are not beneficial to Buyers and Sellers. Make certain that you and your clients carefully read any proposed last-minute forms, even the CAR CVA form, before anyone signs anything. Clients who have questions regarding the legal effect or enforceability of any terms should be advised to consult with a qualified California real estate attorney.
- USE COMMON SENSE: Yes, the business of real estate is important but so is your health. We recommend that you strictly follow CDC guidelines to protect yourself, your friends and loved ones, your clients and the rest of the real estate industry.
This Weekly Practice Tip is for the exclusive use of clients of Broker Risk Management and their agents. It may not be reproduced or distributed without the express written consent of Broker Risk Management. The advice and recommendations contained herein are not necessarily indicative of standards of care in the industry, but rather are intended to suggest good risk management practices.
© Copyright Broker Risk Management 2020 03/18/20
County Recorders Chart
| County | eRec | Status |
| Butte | E | Open paper and eRecording |
| Contra Costa | E | Open paper and eRecording |
| El Dorado | E | Open for now |
| Fresno | E | Open for now, working remote, expect delays |
| Kern | E | eRecording only – no paper |
| Los Angeles | E | eRecording only – no paper |
| Madera | E | Open for now |
| Merced | E | Open for now |
| Modoc | E | Open for now |
| Mono | E | Open for now |
| Monterey | E | Open for now- meetings taking place to decide |
| Napa | E | Open for now |
| Nevada | E | Open for now |
| Orange | E | Open for now |
| Placer | E | Open for now |
| Riverside | E | Open for now |
| Sacramento | E | Open for now |
| San Bernardino | E | Open for now |
| San Diego | E | Open for now |
| San Francisco | E | eRecording only – no paper |
| San Joaquin | E | Open for now, BoS meeting 3/17 to decide |
| San Luis Obispo | E | Open for now |
| San Mateo | E | eRecording as much as possible, paper by appt only |
| Santa Barbara | E | Open for now, offsite capabilities, expect delays |
| Santa Clara | E | eRecording only – no paper |
| Santa Cruz | E | eRecording only – no paper |
| Shasta | E | Open for now |
| Solano | E | Open for now |
| Sonoma | E | eRecording only – no paper |
| Tehama | E | ? |
| Tulare | E | Open for now |
| Ventura | E | Open for now |
| Yuba | E | Open for now |