Arguably a slowdown was happening in the housing market anyway with movement restrictions and self-isolation affecting viewings by potential buyers.
(This insight was updated on 17 April 2020).
Conveyancing on a property sale or purchase is something Shoosmiths attempts to make as painless as possible for clients, but getting the process going and seeing it through at the moment is nigh impossible. With no visitors allowed into properties while the ‘stay-at-home’ measures are in force, estate agents could give general advice about the local property market and handle certain matters over the phone, but they will not be able to start actively marketing a property in the usual manner. Similarly, surveyors will be unable to conduct valuation surveys (an important milestone in the conveyancing process and obtaining mortgage finance) or conduct homebuyers reports. Support from businesses such as removal companies is, for the time being, also unavailable.
Delay to completion dates and mortgage offers
Full details of the government advice can be seen here. The government’s advice to delay the completion date (when parties typically move) beyond the current indeterminate distancing period, anticipated next due for review in early May therefore seems sensible.
Meanwhile UK mortgage lenders and building societies have also given their commitment to extend existing mortgage offers for three months from their current expiry dates where clients have committed to exchange of contracts.
Several banks and specialist lenders have focused on existing customers with Lloyds Banking Group and Barclays, two of the UK’s biggest lenders, temporarily pulling many of their mortgages. Lloyds has stopped offering mortgages or remortgages through brokers unless the customer has a deposit of at least 40% of the value of the property.
Purchasing a vacant property
However, there is good news for buyers who invested in a mortgage application, survey and legal expenses prior to the ‘lockdown’ of normal life and contracted to purchase a vacant property with a fixed completion date falling within the distancing period. There may be no need to delay such a transaction from legal completion.
Parties in this case are only advised to follow guidelines on staying away from others. It may be prudent to delay actually moving into the property to allow time for any risk of residual virus to die. If moving in more swiftly is unavoidable, then best advice is to thoroughly and carefully clean all surfaces within the property, wearing suitable protective clothing, and following advice on good hygiene, regularly washing hands and avoid touching your face.
Parties already committed to a completion date
Where parties have already committed to a completion date falling within the distancing period requiring one party to move out of their home the advice is to delay the completion date with all parties required to work together to achieve this. Anyone showing symptoms, self-isolating, or shielding is advised not to move home for the time being.
Parties on the brink of exchange of contracts
The situation becomes more complex where parties are negotiating towards an exchange of contracts (when the transaction becomes legally binding and a completion date is typically fixed). Again, the government’s advice is to delay the completion date beyond the current indeterminate distancing period.
Prior to exchange of contracts, if any party has a change of heart, they are able to withdraw from the transaction without financial penalty. However, once contracts are exchanged then the completion date is usually agreed and fixed. The exception is newly constructed homes which may exchange with a later completion date, depending upon the progress of construction of the new home, although most construction is presently suspended .
Ordinarily, once contracts are exchanged, then it is assumed that the parties progress to the completion date agreed. If completion cannot take place on the date agreed, then the usual position is that the suffering party should be able to serve a notice requiring completion within 10 further working days with a contract penalty rate of 4% over base per annum for the delay. If completion is not achieved, then after the 10 working days the contract is rescinded with the deposit being returned or forfeit - depending upon who is liable for the delay.
Common sense and good faith rather than COVID-19 riders to contracts
The Law Society of England and Wales has to date advised solicitors and conveyancers not to attempt to add “COVID-19 specific” untried or untested clauses to property contracts, due to the wide range of circumstances that could arise in the coming weeks.
The expectation is that in the event that a chain cannot complete on an agreed date due to any coronavirus related issue, wherever possible the parties should apply ‘common sense’ and work together “in good faith” to overcome the challenge. Conveyancers will be expected to support the government's advice and act with integrity to all parties to reach a compromise should be capable of agreement.
The government’s latest guidance would seem to support this position and endorse the need for good sense and pragmatism to prevail. The commitment by mortgage lenders to extend offers post contract by three months should now enable parties already committed at exchange of contracts to negotiate a delay to the previously agreed completion date.
Early communication is key
Should you yourself suffer suspected coronavirus sickness in your household, in particular where exchange of contracts is imminent or has already taken place, then please raise this with your conveyancer as is reasonably practicable. If completion has to be re-negotiated, then the sooner we can inform the other contracting parties then the greater the opportunity to reduce any consequential costs and preserve their goodwill.