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31/03/2020

COVID 19 Advice in Relation to Property Transactions

31 March 2020

In light of the current Corona pandemic the Law Society and HM Government have issued guidance in relation to all property related transactions.

The Law Society guidance must at times be read in conjunction with government advice and the advice provided by the Law Society should in no way be read as contradicting the advice of the government.

The government guidance can be accessed by following the link below:

https://www.gov.uk/guidance/government-advice-on-home-moving-during-the-coronavirus-covid-19-outbreak

As there are both legal and medical implications of committing to purchase or sell a property in the current climate we would advise you to review and consider the Government’s current official guidance available at the link above.

At present once contracts have been exchanged for the sale and purchase of a property it is not possible to vary the terms of such contract without agreement of all parties. In addition the terms of any proposed lending may impact on the ability of parties to conclude a transaction in accordance with the contract.

In accordance with the guidance of the Law Society, as issued on 29 March 2020 our advice in relation to buying and selling properties in the current pandemic is as follows:

  • Home moves into occupied properties should only take place where contracts have already been exchanged and it has proved impossible for the parties involved to agree a deferral.
  • You are encouraged to agree an appropriate deferral and we would advise you only to proceed if an agreed deferral has proved impossible.
  • The police emergency powers are disapplied only for critical home moves.
  • Moves into unoccupied properties may continue, subject to the points below.
  • When moves occur, they must do so in a way which takes account of the guidance currently in force from Public Health England and Public Health Wales. You should make yourself aware of the requirements applicable at the time you are looking to move and if you need assistance with this please let us know.
  • If, against our advice, you choose not to agree a deferral or if a deferral cannot be agreed between the parties you must notify us in writing, specifically confirming your instructions to continue to complete the sale/purchase in accordance with the contract. If, at the time of receiving those instructions it remains legally possible to do so, we will act on those instructions.

For your information, once an agreement to defer completion has been agreed, the following steps will need to be taken:

  • All parties will need to enter into a written agreement varying the terms of the contract;
  • This document will need to be signed either by way of an e-signature or by your legal representative acting on your behalf;
  • Where you wish us to sign on your behalf we will have to provide us with written authority to do so;
  • Once the variation document is signed the buyer and the seller’s solicitors will date the document;

Other Points to Note on Deferral of Completion

  • Mortgages
    • While generally lenders have agreed to extend the mortgage instructions for three months we will need to establish whether any formal confirmation is necessary and if so ask the lender to provide it.
  • Searches and costs
    • Depending of the date the initial conveyancing searches were carried out and the period of deferment there may be a need to refresh searches with an associated cost to you.
  • Costs
    • The original estimate we gave to you in relation to the cost of the transaction will no longer be accurate given the additional work required where a transaction is deferred. We will be able to give you a revised estimate once the principle of deferment and the substantive terms are agreed. In addition there may be additional administration costs and disbursements due to any deferment. We will be able to advise on this as and when we become aware of the same.
  • Negotiation
    • In order to avoid increased legal costs we would advise that the terms of any deferral are agreed either directly or through your estate agent.
  • Terms of Deferral
    • You may wish to seek a two-step deferral process so that you delay the move until the end of the current stay-at-home period and the requirements about physical distancing, but with the ability to extend that timescale if the government restrictions are extended.
    • Once the government restrictions end there will be a period of time agreed before you move to enable everyone to get ready for the move. This might be one or two weeks. Make sure the timescale will give you enough time to find removals and arrange your move especially in circumstances where there is likely to be an increased demand for these services.
  • General considerations
    • As stated above there is a formal process required to effect a deferral of a completion date which will involve your conveyancer exchanging agreements on your behalf with the other party to confirm the new arrangements.
      o If you’re buying a property with a mortgage you should check whether you will need written confirmation from your lender to this extension. (Lenders generally have agreed to extend mortgage offers by three months).
    • Consider what would happen if your circumstances change during this period, for example, would you still be able to afford the mortgage if you lost your job and had to find new employment?
    • You should also consider that property values will fluctuate during the period of deferral and this might impact your lender’s ability to lend. This will be particularly important if your mortgage makes up a large proportion of the house price, perhaps 60% or over.
    • If you’re both buying and selling, bear in mind that if your own buyer or seller’s circumstances change, and they need a mortgage, they may not be financially able to proceed with your transaction at the end of the restrictions.
    • You should also bear in mind that even when the restrictions are removed there may be other unavoidable delays in your move, perhaps if someone in the chain has died and their estate needs to be settled before the move can be completed. In that case you could agree a further delay or seek to end the contract.

Advice where you have not yet exchanged contracts

  • You MUST consider the government guidance on moving home and you MUST review this regularly in order to ensure compliance. This is a fast moving situation and you may need to change your instructions.
  • You can still continue with your transaction and should take this time to work with your conveyancer to progress the transaction and to read through the reams of documents involved in moving house.
  • You should think very carefully before instructing your conveyancer to exchange contracts, even where completion is a long way off, as the contract will be binding, and you would have to complete even if your financial position had changed.
  • You should make sure that if you do instruct your conveyancer to exchange, that they have incorporated a suitable clause in the contract to deal with any ongoing risks caused by the virus.

Advice for clients who have to move during the stay-at-home period and the requirements about physical distancing

  • You should only move during the restrictions if your move is critical and it is safe to do so, for example, where the property is empty. If the empty property is in a chain, it may not be possible to complete without breaking the chain.
  • You must follow advice from Public Health England and Public Health Wales on social distancing and must not endanger yourself or others during your move.
  • You should complete a deep clean if you are moving to a new home and must follow the advice given for decontamination of your new home if you know, or have reason to believe, that the previous occupants, or someone which they had been in contact with, has coronavirus.

Our property team is here to help. Please call us on 01484 821 300.