What is a MAE Provision in Real Estate and Could it Help During the Coronavirus Pandemic?

For many who were in the middle of a real estate transaction when the coronavirus pandemic changed everything, it can seem unclear whether or not closing should or can continue under these new circumstances. Perhaps they no longer want to proceed with the sale because the agreed-upon price does not make sense given our new economic position, because moving during the pandemic seems inconvenient, or for a variety of other reasons.

The Auricchio Law Offices team believes that it still makes sense for those in the Chicagoland area to continue to buy and sell real estate at this time. However, we do understand that the changes taking place in the world right now might make it necessary for some to rethink their real estate decisions. If you are one of the many people scrambling to determine whether your contract justifies your decision not to proceed with your transaction, we are here to help. 

One aspect of a contract that may help you is a Material Adverse Event (MAE) provision. These can also be called “MAC” or Material Adverse Change clauses. MAE provisions can often be found in purchase and sale agreements as well as leases, construction contracts, development agreements, property management agreements, and loan commitments. 

Under a MAE provision, certain adverse events can make the transaction unactionable. Which events qualify, and whether or not coronavirus makes the cut, can be different from contract to contract, depending on the wording in the definition, and it is important to get a lawyer’s opinion if you’re taking action on one of these clauses. Essentially, if a qualifying event changes the anticipated value of the property that is being sold, a buyer can use the MAE provision as a reason to withdraw from a deal.

Without a MAE provision, you still may have the ability to change your mind — force majeure provisions, intervening government conduct, or impracticability may be the reason you need to do so.

If you need help determining whether or not you can legally justify changing your mind or renegotiating your contractual obligations relating to real estate, the Auricchio Law Offices team is here to help. We represent clients in all aspects of real estate closings. If you are interested in partnering with our team, we encourage you to give us a call at (312) 263-0010 to schedule your free consultation.

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Auricchio Law Offices

Auricchio Law Offices in Chicago provides a complete range of real estate services. We facilitate residential and commercial real estate transactions, advise and represent condominium associations, and represent property owners in real estate litigation. Whatever your real estate issue, we will work diligently to achieve your goals in a timely and efficient manner.

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