The social and business impacts of Covid-19 were largely unexpected.  When community associations entered into agreements that are still ongoing, they didn’t have delay or termination provisions for things like Covid-19.  So, what’s a board to do regarding these contracts where the board or the vendor or contract can’t perform because of the impacts of Covid-19?  For future contracts, provisions can be added to address concerns with Covid-19.  Your counsel should make sure that new contracts protect your association in this new world in which we are living.

The more difficult issue is what to do about those existing contracts.  Will the contractor be able to delay the completion of the contract, or even cancel the contract altogether? Is the association able to do the same? In most agreements we try to negotiate in a termination provision which allows a board to terminate for no reason at all.  These are commonly referred to as termination for convenience provisions.  The contractor may be entitled to charge for out of pocket or other expenses or may even be able to recover a portion of profit for the job, in return for a termination by the board.  It really depends on what the contract says.  So, the first thing you should do is review the contract and see what it says.  If there are notice provisions, make sure you comply with them.  If it says notice has to be by certified mail return receipt requested, then make sure you mail notice that way.

Another provision in many contracts is called a “force majeure” or “acts of God” clause. Such clauses generally protect the parties in the event that the contract or a part of the contract cannot be performed due to causes which are outside the control of the parties and could not be avoided by the exercise of due care. The relief that is requested is typically a suspension of the parties’ obligations under the contract during the “force majeure” event and, if the event continues for an extended period, the right to terminate the contract.

In order to obtain this relief, a party to the contract will need to prove that the event that has materially impacted or rendered impossible the performance of the contract, falls within the definition of “force majeure.” Secondly, the party will need to satisfy any notice provisions and other preconditions that specified in the agreement. These preconditions may require that the parties to the contract take reasonable steps to mitigate the losses caused by the event.

Although it may seem that a “force majeure” clause must be applicable with COVID-19, that is not the case.  It is a fact intensive analysis and the party on the other side of the contract who doesn’t want to get out of the contract will argue that the clause does not apply.  A party looking to implicate the clause should consider both the direct impact that COVID-19 may have had on the contract as a pandemic, as well as the effect that government actions, including travel restrictions, shelter-in-place or stay-at-home orders may have had.  In other words, the applicability of the “force majeure” clause in a contract just because of COVID-19 is not a slam dunk argument.

An issue that has come up several times since the pandemic has involved license or access agreements with neighbors.  A coop, condo or HOA performing exterior work may have had to access neighboring properties in order to protect them.  Neighbors often enter license or access agreements which include time frames for access and penalties for exceeding the time frames.  Sometimes, neighbors aren’t that neighborly and try to impose sanctions for exceeding time frames for access.  With COVID-19 stop work orders by the government, construction and required access to a neighbor’s property may take much longer than originally anticipated.  This can be an issue for the coop, condo or HOA performing the work.

In many cases, neighbors are all in the same boat and if they are good neighbors they will be accommodating and not try to stick it to their neighbors who cannot possibly complete the work within the anticipated time in the agreement.  The end result will depend on what was negotiated in the contract before COVID-19 became a household word.  What difficult neighbors should be reminded of is that one day they will be looking for their neighbor to be neighborly and perhaps they ought to reconsider being difficult in these trying times.  My sense is that Court that may have to address these types of issues down the road will not be very favorable to difficult neighbors in light of the COVID-19 crisis.

Any association that is in the midst of a contract may want to review their options during this crisis. Associations may also be approached by a contractor seeking to delay or even end an ongoing agreement. Pulling out the contract and reviewing your board’s legal options sooner than later is the best approach.