Acts of God Between the Signing of A Purchase and Sale Agreement and the Closing–The Buyer Really Doesn’t have a Lot of Remedies

It happened last evening in a bedroom community north of Boston. The tenant who had rented the home my clients are purchasing had vacated the dwelling on January 31, 2010 and informed all affected utilities,including the electric company. For reason still unknown, the electric company immediately shut off the electricity. The pipes froze, and there is rather severe damage to the interior of the dwelling including a flooded basement.

The closing was scheduled for this afternoon.  It has been postponed until Thursday afternoon. The Lender’s rate commitment runs out on Friday. The more the parties look at the damage, the more certain we all are that the repairs and replacements will not be done for at least a week. My clients, the Buyers, have requested an extension of their mortgage interest rate. They are likely to receive same, but at a cost.

I protected my client from this eventuality in the purchase and sale agreement by saying that if for any reason, the Seller was not able to deliver the premises in substantially the same condition as they were in at the time of signing the purchase and sale agreement on the agreed upon closing date, and my client could not extend their interest rate at no charge, we could terminate the deal and receive our deposit back. This is not what my client wants to do. They want the house, and they are willing to pay for a thirty day extension. I had asked, in the course of the negotiations, for the Seller to agree to pay for this extension, but that request was not agreed to.

In any event, we are now at that miserable state of affairs where in the middle of winter, the house which my clients have dreamed of owning has “clay feet” What is worse, with the exception of withdrawing from the purchase, there are no real remedies under Massachusetts law which protect my Buyer.

The event was not the fault of the Seller, at least it would be hard to attribute NStar’s negligence to the Seller in a court of law. Realistically, the Seller is suffering here as well, as the Seller struggles to assess the damage and fix what went wrong, all , at least initially, out of their pockets.

When the dmage is substantially rectified, and we close, I am anticipating requesting the following from the  Seller in connection with the home purchase:

     1. An assignment of insurance claims which the Seller may have with respect to the damage to the extent that same have not been paid to the Seller by the time of the closing date, as well as an affirmative covenant to assist my client with any subsequent claims.

     2. An assignment of any claims against NStar, if any, for shutting down the electricity without consent of the Owner and without contemplating the effect of such an action.

I would be very interested in hearing from any of you, either lawyers or other real estate professionals about any other ways I can protect my clients in this unfortunate situation. Perhaps, there is something obvious which I am missing.

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