While constraints in California continue to be eased and society returns to normal, the preceding year has modified the way investment management will proceed. Though real estate investing is on the rise, leases and purchase and sale contracts now include new prerequisites as a result of the pandemic’s lessons learned, which are unlikely to go away.
The way force majeure clauses are framed is one adjustment to leases and purchase and sale agreements that will continue as a response to the pandemic.
“There was no one definition of force majeure that encompassed ‘pandemics’ before 2020. It is now included in essentially every force majeure clause,” says the financial advisors in Los Angeles. They also add, “There is a developing propensity to expand the meaning of force majeure as much as feasible, owing to an increased sense of the unexpected. Attorneys who represent tenants and debtors, in particular.”
Retail tenants have become more assertive in proposing rental abatement clauses in contracts if government orders restrict them from running at full capacity.
Samuel Rad, Financial Advisor, Los Angeles, adds, “This trend began with major, multi-location eateries and fast service tenants, and has since spread to small retail tenants like independent fitness studios and gymnasiums. To protect against future shut-downs, tenant abatement rights, which were initially designed with COVID-19 in mind, will now extend to use and occupancy limitations imposed by any governmental order.”
Circumstances that may postpone a transaction’s closing are another new provision that has evolved from the outbreak and will be customary in most purchase and sales agreements.
According to the proposed law, the closure date or other important performance date is prolonged until two business days after the blocking event is remedied.
These and other contractual conditions will be part of how real estate agreements are structured and negotiated as long as “social distancing” is used.