Blandy & Blandy partner, Luke McMath, explains how the housing market and conveyancing can continue through the COVID-19 crisis.

The COVID-19 pandemic is causing the greatest disruption in the conveyancing market since at least the withdrawal of Mortgage Interest Relief at Source (MIRAS) in the 1980s.

Disruption so far mostly consists of a party in the transaction being unable to provide vacant possession of the property because they are (or another party is) self-isolating or an inability to deal with any removals.

Further likely disruption will include the inability to deal with the necessary signed documentation (although we suspect this is something which will have been discussed between conveyancers and their clients prior to an exchange from this point onwards).

Potential future disruptions could include the complete closure of offices, withdrawal of Land Registry services, banking facilities and, sadly, even the possibility of death. Buyers in particular are also fearful of a fall in the market.

What then, are the options if you are currently engaged in a conveyancing transaction?

The following options are being discussed:

  1. Continuing with the transaction under Standard Conditions for Sale. These conditions have the advantage of many years of usage and certainty but, under the current environment, this would seem to leave a disproportionate risk, particularly with the buyer, as deposits can be forfeited in the event of a delayed completion. Additional damages could also apply.
  2. The use of a bespoke coronavirus clause. We have drafted these and seen a few others being suggested. They mostly have the same intention of pushing back the completion date until after the crisis is passed but with provision that if the crisis does not pass within an agreed timescale then the contract is terminated and the deposit returned. Such clauses are, of course, untested as there has never been such an issue before although commercial practitioners have had long experience with ‘Act of God’ type clauses.
  3. The elimination of the time period between exchange and completion. Essentially, if contracts can be exchanged and the transfer is completed at the same time, then there is no risk of the contract going wrong. This is the safest mechanism for proceeding but, in many cases, is not practicable as removals need to be booked and a lot of advanced preparation put in place with the risk that either party could withdraw at any time. It would be particularly hard to implement this within a chain of conveyances.
  4. Delaying the transaction. We are seeing a few cases where buyers are concluding their enquiries and placing themselves ready to exchange but, rather than exchanging contracts, the parties are sitting back and waiting to see how the crisis develops.
  5. Withdrawal from the transaction. This does, of course, have the advantage of creating certainty.

Whatever coping mechanism is used it is certainly the case that no transaction should proceed to exchange without a careful discussion with the conveyancer as to the potential options.

This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.

 

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