Mar 26, 20 • News, Real Estate

COVID-19 and Real Estate Transactions

With the recent outbreak of the novel coronavirus (COVID-19) in the United States, all Americans are forced to wonder how this pandemic will affect their lives going forward. It’s hard to imagine any aspect of life that won’t be affected by this global tragedy.

Landlords, tenants, and real estate investors in particular are already facing many difficult questions. How will this crisis affect your contracts? What are your options? Does the coronavirus excuse your performance, or will you be forced to pay damages in the event you cannot perform? What will happen to your residential and commercial leases?

All of this uncertainty is bound to leave you feeling overwhelmed. But the expert real estate attorneys at The Farah Law Firm are here to help you through these trying times and provide you with the answers you need.

Will Performances Be Excused?

How will the coronavirus affect your contracts and your performance (that is, following through with the obligations stipulated in your contract)? As with most legal questions, the answer is, “It depends.” The issue is likely to be litigated in our courts for years to come. Many contracts contain what is known as a “force majeure” clause, which will excuse your performance in certain cases, which are often described as “Acts of God.” However, these provisions must be carefully crafted to encompass all contingencies, especially with regard to coronavirus-related issues. If your contract does not carefully specify instances such as “disease” or “pandemic,” your performance may not be excused.

Furthermore, many contracts do not automatically excuse performance. Some require notice and a demonstrated attempt to work around the issue before your performance will be excused. Do not assume that your performance is excused by your contract. It’s best to contact a real estate lawyer who can help you determine your options. If you are entering into contracts during this uncertain time, the expert attorneys at The Farah Law Firm can help you ensure that they are carefully drafted to account for all contingencies.

How Will The Coronavirus Outbreak Affect Residential Leases?

Residential landlords and tenants are perhaps two of the largest groups that will be greatly affected by the coronavirus outbreak. Residential tenants who are out of work are worried about how they’ll pay their rent. And both landlords and tenants are wondering if, and how, pending and future evictions will proceed. 

The good news is that the Texas Supreme Court has already issued several Emergency Orders to guide you through the chaos. The Fourth Emergency Order Regarding the COVID-19 State of Disaster (the “Order”), issued by the Texas Supreme Court on March 19, 2020, directs that for residential property, “No trial, hearing, or other proceeding may be conducted, and all deadlines are tolled until April 10, 2020.” That date will subject to extension by further order of the Texas Supreme Court.

What does the Order mean for you? In short, it means that almost all pending residential evictions must be placed on hold. The Order further provides that cases may be filed, but tenants may not be served with notice of the lawsuit until after April 19, 2020.

What about cases where a judgment has been rendered by the court? The Order provides that “a writ of possession may issue, but the posting of the written warning required by § 24.0061(d)(1) of the Property Code and the execution of the writ of possession may not occur until after April 26, 2020. . .” This means the case has concluded, but the landlord will be unable to complete the eviction process until after April 26, 2020, at the earliest.

The Order also provides an exception to this moratorium for residential eviction cases where the tenant or the tenant’s household members or guests “pose an imminent threat of (i) physical harm to the plaintiff, the plaintiff’s employees, or other tenants, or (ii) criminal activity. . .” The Order provides very specific and burdensome requirements for proceeding with a case under this provision. If you are a landlord and find yourself in this situation, contact the experts at our firm to help navigate this difficult process. 

What About Commercial Leases?

Commercial landlords and tenants are being similarly affected. Tenants with businesses that have been forced to close their doors may not be able to meet their lease obligations, which in turn will have a potentially devastating impact on landlords. As of the writing of this article, the Texas Supreme Court has not placed a moratorium on commercial evictions. However, these cases will be greatly affected by these Emergency Orders. For example, the First Emergency Order permits all courts in Texas to extend all deadlines and procedures for a period “ending no later than 30 days after the Governor’s state of disaster has been lifted.”

The First Emergency Order also states that anyone involved in a case must be allowed to participate remotely. Additionally, the Third Emergency Order dictates that all non-essential” proceedings must not be conducted in person, “contrary to local, state, or national directives, whichever is most restrictive, regarding maximum group size.” Clearly, these emergency provisions will hinder all commercial evictions.

If you find yourself in a difficult position with your residential or commercial lease – whether as a landlord or a tenant – due to the coronavirus outbreak, don’t expect the situation to resolve itself. You must be proactive and handle the situation in the most efficient and effective manner possible. At The Farah Law Firm, P.C., the majority of our clients are landlords, tenants, and real estate investors, who are all facing a multitude of issues in these uncertain times. Contact us today regarding your situation and we’ll be happy to lend our expertise.

Michael Farah

About Michael Farah

Michael Farah is the founder and managing attorney of the Farah Law Firm. Mike graduated from the University of New Hampshire School of Law and is licensed to practice law in Texas and New York.

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