In addition to causing turmoil, Hurricane Dorian has placed many aspects of personal and business dealings on hold in Florida. It may also halt commercial real estate transactions because of changing insurance practices.
Insurance companies play a substantial role with a real estate closing involving mortgages. Without any insurance coverage in place, there may be no closing. Insurers, however, no longer rely on the “box method,” in which they would not bind new policies in an area that fell within a geographic box until the storm passed and there were re-inspections of those properties. Insurers now rely on warnings and storm watches issued by the National Weather Service. Once these are issued, insurance policy binding may be stopped.
Accordingly, at least one title service recommended the binding of insurance polices by the closing date before the warnings or watches issued by the NWS. If these polices are bound by the effective date, the insurance company will honor the policy. Most contracts also contain a “force majeure” clause. These allow the purchaser or seller to delay a real estate closing within a certain time period after the storm is gone. Either party may cancel after 30 days. Some brokerage firms have post-storm documents that can be added to contracts if contracts are delayed by a hurricane.
Re-inspection of the property is also recommended. Contracts usually require the seller to turn over the property in the same condition that existed before the hurricane. Any property damage could have an impact on the ability to insure the property. Hurricanes pose may issues for Florida real estate transactions. In addition to their impact on closing these deals, these can also pose regulatory compliance issues.