How do I get my commercial real estate transaction closed in the COVID-19 environment? Many transactions are at a standstill, particularly if lenders are overwhelmed or are having difficulty underwriting loans with economic conditions in a state of flux. However, for those deals past the due diligence period and near closing, it may be possible to still complete the transaction through creatively implemented closing logistics.
In Virginia, most courts remain open to handle essential services, and courts are accepting electronic filings. However, not all courts are set up for electronic filings, so it remains important to confirm with your attorney as to which jurisdictions have implemented such systems.
Title updates and examinations are often possible due to the ability to access online land records when there is limited physical access to land records. However, online land records are not available in every jurisdiction, so confirming such availability with your attorney or title company remains important.
It is possible to use electronic or remote notarization, when necessary, for certain instruments. There are two (2) general approaches: (1) electronic notarization or “e-notarization” (where the actual process of notarizing the document is done on the computer), and (2) notarization of a document after “remotely” witnessing a signature video. E-notarization is available in Virginia, but it requires certain technological capabilities and a notary who has obtained an additional certification, and a notary may remotely witness a signature in Virginia, provided certain requirements are met.
Not all notaries may perform e-notarization. A notary must first register with the Secretary of the Commonwealth and demonstrate certain technological capabilities related to e-signatures to perform electronic notaries. The e-notarization process otherwise must meet the requirements of a traditional notary, except that the notary’s signature and seal information is affixed electronically and is not physically “stamped” on the piece of paper. Once electronically stamped, the document carries that notary stamp and it can’t be removed.
In performing remote notarizations, the notary must abide by the normal notary rules, except that the signer is allowed to appear via video and sign on video, as opposed to physically signing in the presence of the notary. To appear remotely via video, there are certain requirements, including (i) notary and document signer must simultaneously see and speak to each other, (ii) must be live and in real time, and (iii) the transmission must be “secure from interception through lawful means by anyone other than the persons communicating.”
With respect to transactions that are still in the due diligence phase or are otherwise unable to close due to COVID-19 uncertainty, force majeure clauses may not adequately address the excusal or delay of contractual deadlines. Some parties are documenting extensions to expire 30 days following the (i) declassification of a formal state of emergency or (ii) lifting of stay-at-home orders by applicable government authorities, with the understanding that the total extension period would not exceed 120 days.
If lenders are reluctant to fund in the immediate future, it may be necessary to obtain extensions with respect to certain loans. The loan extension could be (i) to extend the business terms for an acquisition loan or (ii) to extend the period necessary to sell or refinance the property, without experiencing a loan default due to a missed payment or maturity date.
The COVID-19 crisis presents no shortage of logistical hurdles to successfully completing commercial real estate transactions, so it is critical to contact your attorney to help you navigate this unchartered landscape and keep you apprised as to how to best utilize your existing resources.