“Force Majeure” Clauses

[Editor’s Note: This post originally ran on May 29, 2011, after tornadoes damaged scores of North Minneapolis homes. In the wake of Friday’s even more devastating storm — with hundreds of downed trees, smashed cars, and smashed homes throughout the Twin Cities — it seemed timely to re-run.]

RISK OF LOSS.  If there is any loss or damage to the property between the date hereof and the date of closing for any reason, including fire, vandalism, flood, earthquake or act of God, the risk of loss shall be on seller.  If the property is destroyed or substantially damaged before the closing date, this Purchase Agreement is canceled, at Buyer’s option.

–lines 144. to 146.; standard Minnesota Purchase Agreement

In the wake of severe weather in the Twin Cities and elsewhere this Spring, it’s a good bet that many home Buyers and Sellers — and their Realtors — are familiarizing themselves with heretofore obscure clauses like the one above.

Also known as a “force majeure” clause, it governs what happens when a tornado or other natural disaster destroys or heavily damages a home that’s under contract, but hasn’t yet closed (called a “Pending Sale” in Minnesota).

The bottom line?

It’s the Buyer’s call.

One counter-intuitive reason to stay in the deal:  once insurance has replaced the roof, windows, and any other storm-related damage, the home the Buyer is taking title to may actually be in better condition than the one they originally contracted to buy.

About the author

Ross Kaplan has 19+ years experience selling real estate all over the Twin Cities. He is also a 12-time consecutive "Super Real Estate Agent," as determined by Mpls. - St. Paul Magazine and Twin Cities Business Magazine. Prior to becoming a Realtor, Ross was an attorney (corporate law), CPA, and entrepreneur. He holds an economics degree from Stanford.

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