New Wildfire Clause for Real Estate Transactions

Real Estate transactions that are set to complete in an active wildfire zone may be delayed due to issues with obtaining property insurance. The impacts of wildfires serves as a reminder of the increasing financial risks to consumers due to natural catastrophes and climate-related risks (“NCCR”) events. Before purchasing a home, you should be aware of the potential impact of a wildfire on a transaction, and ways that these impacts could potentially be mitigated through the CPS.

The clause will allow for one extension of the completion, adjustment and possession dates in the Contract of Purchase and Sale (CPS). The length of the extension is 30 days after the original CPS date. However, where a buyer is able to get insurance before the end of the 30-day extension, the clause requires the buyer to immediately notify the seller and provide the seller with the option to accelerate the completion date.  The clause may be modified to provide for an extension of more or less than 30 days if the parties mutually agree.

****If the clause is being modified to provide for an extension of more than 30 days, legal advice should be obtained on the timeframe to avoid creating a clause that is void for uncertainty. The clause covers wildfire threats that prevent a buyer from obtaining fire insurance. It does not include floods or other NCCR events.

The clause does not automatically release the buyer from their obligations under the CPS. A buyer must be able to show they made best efforts to obtain fire insurance and did not wait until the last minute to try to get fire insurance.