COVID-19: Protecting the residential property market
The current situation is incredibly fluid, making assessing the true impact on the residential market a complex task. However, a range of issues have been highlighted, including:
- Possible disruption to parts of the banking system (e.g. CHAPS)
- The complications of having to complete on original signed documents due to closed offices
- The inability to access properties to carry out mortgage valuations and surveys
- The inability to access searches as Local Authorities are struggling to work remotely
- Mortgage products being withdrawn from the market
These problems have led to estate agents closing and prohibiting viewings, as well as the suggestion from the Government that transactions shouldn’t go ahead, even when contracts have been exchanged.
Not only has COVID-19 put a stop to the sale of houses, it has also put a spanner in the works when it comes to building properties. Most of the UK’s biggest house builders are now in lockdown, putting a temporary stop to many new build developments. However, the good news is that many house builders are starting to announce that they are returning to sites and have brought in measures for social distancing to enable construction to begin again.
For purchasers who have already exchanged contracts with house builders, developers have been asking to delay completion, resulting in people being stuck in rental accommodation for an unknown amount of time. Although long-stop dates are common in new build contracts, not having a fixed end date for the lockdown means the impact COVID-19 will have on completions is unclear.
Breach of contract
If an exchange has already taken place and either party is unable to complete, then this is a breach of contract. Under normal circumstances, a 10-working day notice period would be served on the party causing the delay, during which interest accrues on the purchase price. The defaulting party are also then liable for any expenses incurred by the other party at this point. However, The Law Society and others have suggested that lawyers take a common-sense approach, varying contracts to allow for delay.
Offering a solution
Completion failures during COVID-19 will be unavoidable, as such, the non-defaulting party can opt to take a ‘good faith’ view. This means the party will not take advantage or make an issue of minor errors, ensuring the objectives of the contract can still be met. This being said, if the transaction forms part of a longer chain, this might not be viable and a delay a better option.
For those who have yet to exchange contracts, it could be wise to include a clause which allows for delay due to COVID-19 making completion impossible at this time.
The current situation is something nobody has experienced before, so being as fair as possible during this time is vital. Cases should be reviewed individually, with long-term considerations kept in mind, enabling people to make it through this uncertain period and complete transactions once normality returns.
Shakespeare Martineau has launched a free legal helpline, with a team of experts on hand for any queries on family and private matters. We are also offering bespoke guidance on a range of other subjects, from employment and general business matters, through to director’s responsibilities, insolvency, restructuring, funding and disputes. Available from 10am-12pm Monday to Friday, call 0800 689 4064.
General advice in relation to COVID-19 can be found on our dedicated coronavirus resource hub.