• On 23 March 2020, Prime Minister Boris Johnson announced a suspension of all but essential movements for at least the next three weeks. This now calls into question the impact this will have on house moves.

    On 24 March 2020 the Government clarified that if you are able to put a pause on your house move, then you should. Therefore, any property transactions where there will need to be physical movement by people to complete should not proceed to exchange unless a delayed completion date can be agreed. This is not to say that the legal process cannot continue, but the point when the contract becomes legally binding (exchange of contracts) needs to be delayed until a completion date can be agreed and achieved by all parties in the chain.

    A Government spokesperson said on 25 March 2020: “Home buyers and renters should, as far as possible, delay moving to a new house while emergency measures are in place to fight coronavirus. If moving is unavoidable for contractual reasons and the parties are unable to reach an agreement to delay, people must follow advice on social distancing to minimise the spread of the virus.”

    What is clear is that if a move does go ahead all those involved should take care to follow governments guidance on social distancing and hygiene.

    Furthermore, the British Association of Removers has advised its members (removal companies) that they should only complete any moves that are underway and immediately cancel or postpone any move that has not yet started.

    Below, we consider the wider legal impact coronavirus may have on a conveyancing transaction. In light of the current crisis, there are many questions being asked, such as:

    • What if I am not allowed to vacate the property?
    • What happens if the banking system fails?
    • What if there is a delay or failure to get search results because workers are not there to carry out the searches?

    The contract used for a conveyancing transaction incorporates the Standard Conditions of Sale (Fifth Edition). There is little movement available in this legislation to manoeuvre in this crisis, so from a conveyancing perspective it will depend upon what stage of the process you have reached to understand who bears the risk in various situations. So let’s examine the key stages.

    Before exchange

    If you have not yet exchanged contracts, then you have not entered a legally binding contract. You may walk away from the transaction (either as a seller or buyer) and be under no legal obligation to compensate the other party. Obviously, this may not be welcome by the other party, particularly if you are just about to exchange contracts.

    You may want to still proceed but  ask your solicitors to add a clause to the contract to suit a particular circumstance – for example a clause to cover any potential delay due to the Coronavirus – but this would need careful consideration and would need to be agreed by every party in the chain. Of course, there is a difference between a situation where coronavirus is present and all others where it is a possibility.

    The Law Society’s guidance suggests that exchanging contracts on a ‘business as usual’” basis may be better than using new provisions, but this is something for you to decide with your lawyer.

    After exchange

    If you have exchanged contracts and completion does not take place on the completion date due to coronavirus, the party who did not complete will be at fault. So, for a seller, you would be at fault if you failed to give vacant possession (for example you couldn’t vacate the property because of self-isolation or couldn’t get a removal company to remove possessions).

    A buyer may default by not paying the balance of purchase monies due on the completion date, for example. Therefore, under the Standard Conditions of Sale, the defaulting party will have to pay compensation to the other party which will be calculated at the contract rate (usually 3 or 4% above Base Rate) and will be payable until completion does take place.

    In addition to this, the other party is able to serve notice on the defaulting party which will then make time of the essence and the defaulting party has 10 working days to complete.

    Under the current crisis, a non-defaulting party may take a view of ‘good faith’ and so instruct their lawyer not to serve notice to complete or even claim compensation. However, if there is a chain, then this may not be possible without incurring a penalty.

    If a ‘good faith’ view is not viable and completion does not take place, the non-defaulting party can withdraw (rescind the contract) and if a buyer is at default, they will lose the 10% deposit plus accrued interest. They may also find themselves subject to claim for damages from the seller. If a seller is at default, the buyer is entitled to their deposit back with any accrued interest.

    Conclusion

    It is very important to focus on what is best for you and to use common sense. Here at Brachers, we are happy to discuss any concerns you may have. If there is a chain, the Law Society recommends that the same solution applies to each transaction in the chain and it is hoped that nobody in the chain takes unfair advantage.

    Despite the uncertain times, it is still ‘business as usual’ at Brachers. If you require any support or guidance with your property transaction, please get in touch.

    You can be assured that we will continue to main our high standards of courtesy and deal with others in a fair and honest manner. We can also reassure you that we have proper internal and external arrangements in place for looking after property transactions and will keep you fully updated at all times.

    If you have any questions about your house move, then please do not hesitate to contact our Property team.

    Please note the information provided in this article is up to date as of 26 March 2020.

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    Take a look at our Property and Conveyancing page for useful information, resources, guidance, details of our team and how we may be able to help you

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