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COVID -19 and New Jersey Real Estate Transactions

The real estate industry relies on person to person activity. Real estate sales people meet their clients in person. They show them real estate in person. They hold open houses in person. And then they usually conduct closings in person.

Of course this industry has been greatly impacted by COVID-19 and business cannot be conducted as usual. Nonetheless, there are buyers and renters who need to move forward with their transactions and though it is hardly business as usual, business is still happening: from showings to closings.

Governor Murphy issued Executive Order 107 which defined what businesses were considered to be essential and therefore could continue through this pandemic. His office clarified that in New Jersey realtors are allowed to show a house to a prospective purchaser on a 1-1 basis which includes immediate family members.

On March 30, 2020 Governor Murphy ordered that  “[i]ndividual appointments to view real estate with realtors by individuals or families shall be considered essential retail business for the purposes of paragraph 6 of Executive Order No. 7. However, open houses will be considered impermissible gatherings in accordance with paragraph 5 of Executive Order No. 107.”

Social distancing is still required. And clearly masks are required since they were required by Governor Murphy’s April 8 Order for retail store operations. By analogy they clearly need to be worn during house showings. Realtors are making much use of tools such as Facetime and Facebook streaming so as to reduce the opportunity for spreading illness and the industry has urged that to the extent possible homes and apartments should be virtually shown to prospective customers. If that will not work, than 1 on 1 with distancing and gloves is alternatively available. There will not be a Sunday open house, which is expressly prohibited.

Closings are allowed to take place as well. Lawyers and title companies are used to conducting closings by mail. In person closings are still allowed at this time but social distancing must occur and presumably masks must be worn as well. Logic suggests that remote closings are much safer than in person closings, but some customers presumably resist this practice and sometimes it is not prudent.

Closings require that documents be notarized and in person notarizing is difficult because of social distancing requirements. On April 14 New Jersey joined the ranks of most U.S. States by permitting remote on line notarizations.

This process allows the notary and person seeking his/her service to be in different locations. They could for example each be in their own home and rely on Zoom or Facetime-like technology. The new legislation establishes specific verification procedures that enable the notary to confirm that the other person is who he or she says he or she is and is signing a specified document.

The new law became effective immediately and will expire when Executive Order 103 is rescinded. The Secretary of State has the discretion to adopt temporary rules providing additional guidance for this process.

Other closing related activities have been seriously impacted by this national emergency. For example the State Division of Fire Safety has stopped many inspections and has urged local inspectors to follow suit while the emergency persists. When possible, the state is urging local officials to use virtual technology instead of in-person inspections.

COVID-19 has also resulted in the drafting and circulation of certain legal documents that protect brokers, buyers, sellers and lenders For example some realtors now ask clients to fill out surveys to determine if they pose a COVID-19 risk. Of course if this is done it must be uniformly done.

Some condominium associations and homeowners associations have adopted practices restricting who can enter their buildings, making real estate sales of impacted units all the more difficult. There is also a question of whether a seller must disclose that a family member has COVID-19 to a prospective buyer. And we have seen lender documents requiring sellers to certify that their finances have been unaffected by the virus.

Some real estate contracts now have COVID-19 language seeking to provide some measure of legal protection from COVID-19 exposure claims. Other language attempts to address the inability to close on time or meet other interim contract requirements such as inspections due to the pandemic and related government orders. No to mention that realtors are dealing with with sellers and existing tenants who resist site inspections and showings to prospective tenants due to the understandable fear of virus exposure.

Conclusion

Yes, New Jersey real estate can be shown, sold and leased during the pandemic. But many new issues have arisen and will keep on emerging. And since social distancing will still be required even after stay at home orders are rescinded, at lease for a while these measures will become the new normal in New Jersey. We even imagine that long after the virus threat completely disappears some of these changes will remain because their utility will have been proven.

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