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Shared & Halved - Housebuilders

To support our clients and colleagues who work in the housebuilding community, Shoosmiths hosted a webinar on 8 April 2020 looking at the most pressing issues impacting the sector in light of the unique challenges posed by COVID-19.

Introduction

Coronavirus COVID-19 is a crisis unlike any other we have faced as a country, presenting a new and varied set of challenges to UK and global businesses.

Based on what you’ve told us is most pertinent to you in the current climate, we have devised a series of webinars aimed at you, to look at implications of the outbreak. In this webinar we looked at the homebuilding community. Below are the key tips and takeaways from our webinar.

Can we still exchange and complete matters?

  • Completions – yes, we can legally complete on a plot that is vacant provided that the actual house move can take place whilst following social distancing rules.
  • Issues may arise in a chain where one or more parties are not completing on a vacant property and/or cannot follow social distancing rules when moving to their new home, in this case it would hold up the chain.
  • Exchanges – yes, we can still exchange matters. The key issues faced currently are:
  • Banks are increasingly busy making it difficult to get mortgage offers
  • Local authorities are advising of search delays
  • HM Land Registry is advising of much slower response times
  • COVID-19 riders are already being used in some contracts. The drafting of the riders is being updated frequently but ultimately acts in both parties’ interest by providing flexibility/extension of timelines.

Is COVID-19 a force majeure event?

  • Housebuilders are not key workers. Guidance states that you should work from home where possible and if not possible, you can go to work i.e. housebuilders can still ‘go to work’.
  • Many contractors are relying on force majeure as grounds for suspensions of works on site e.g. they cannot get workforce/materials on site. A lot will depend on precise drafting of each individual contract.
  • As a matter of contract, the Government does not consider Covid-19 as grounds for force majeure (this statement is more likely to apply to Model Form contracts).
  • Under JCT contracts, a contract breach would entitle the injured party to claim time but not costs.
  • Under NEC contracts, a contract breach would potentially entitle the injured party to claim time and costs.
  • Under bespoke contracts, the contract breach position will depend on the specific terms. Bespoke contracts tend to be stricter on force majeure events.

Getting contractors back on site

  • The HBF have been making the point to Government that you cannot close down a construction site like it is a shop.
  • Even if and when sites open up there are issues eith materials now and even finding merchants and utility operators that are open for business.
  • There may be issues timing the reopening of construction sites with the fact that many contractors have only recently been furloughed. Timing will be key in ensuring that labour and materials are available as and when sites start to open.

What measures are local planning authorities (LPAs) taking to reduce the impact of lockdown?

  • COVID-19 is having a significant impact on LPAs. In London, LPAs are being encouraged to substitute in person site visits with camera and drone operations.
  • The Government has already issued emergency legislation to facilitate virtual planning committee meetings.
  • Many LPAs are now requesting electronic submission of documents . For documents posted to LPAs pre-lockdown it is advisable that senders contact their LPA to confirm receipt.
  • Unless further changes are made to legislation, the current position is that planning applications that expire this summer/during the epidemic will remain expired.
  • It is advised that parties check their LPA’s website frequently for the latest updates.

What should we all do to drive recovery from this challenge?

  • It is important for developers, utilities providers, building merchants etc. to keep communication channels open so that everyone is coordinated and ready to go when restrictions are lifted.
  • To help stimulate the market the HBF is speaking with the Government regularly to discuss incentives such as stamp duty holidays and an extension of the Help to Buy scheme beyond the current deadline. They are also looking to engage with Homes England to discuss the possibility of volume purchasing homes from developers.
  • Industry leaders are pushing for a sharp “V” shaped recovery, but the speed of any recovery will depend on the Government’s assistance in re-stimulating the housing sector.
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We are trying to avoid some of the same issues faced following the 2008 financial crisis, which can be circumvented by improved communication and collaboration between industry players

Stewart Baseley, Executive Chairman of the HBF

Disclaimer

This information is for educational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.

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