Client Guidance to Property Transactions during the Covid-19 Pandemic

We are committed to helping those who want to buy and sell property to do so in a way which minimises risk and also reflects the government advice.

We appreciate that many clients agreeing sales and purchases at this time of year are keen to be in their new property. Given the latest national lockdown we have to advise that there may be some delays.

Whilst we will always do our best and will liase with others involved in the process to overcome any hurdles, we should make you aware that the speed of the transaction is outside of our control and there are many factors that can prevent a sale or purchase proceeding.

Every transaction will be different. This guidance is intended to explain the options open to you.

It is important that you read it carefully and make sure that you fully understand these options and the advantages and disadvantages associated with each.

If you’re unclear, it’s essential that you ask and we’ll be happy to explain further.

Government advice

The most recent advice from the government includes:

“People are free to move home, however the process of finding and moving into a new home is likely to be different, as those involved in the process will need to adapt practices and procedures to ensure that the risk of spread of coronavirus is reduced as far as possible. It is vital that everyone stays alert and safe.”

And:

“Once you have agreed to move home by exchanging contracts or signing a tenancy agreement, you have entered into a legal agreement to move. We encourage all parties to be as flexible as possible over this period and be prepared to delay moves if needed, for example if someone becomes ill with coronavirus during the moving process or has to self-isolate. You should not expect to move into any home where people are ill or self-isolating.

Your legal adviser should be able to help you to ensure that any contract you enter into has sufficient flexibility to allow the purchase to be delayed in the event that an individual in one of the parties contracts coronavirus or has to self-isolate.

We encourage you to be as flexible as possible if you are asked to delay your move, and in turn, you can speak to your legal advisor about this.”

Exchange of contracts

The buyer and seller each sign an identical contract.

When the property lawyer acting for each of them exchanges the two parts of the contract, a completion date is fixed and the transaction becomes binding on both parties.

Completion

The date that is agreed between the parties when contracts are exchanged when the seller moves out of the property and the buyer moves in.

For a variety of reasons, there are occasions when one of other of the parties is unable to complete the transaction on the completion date and, very occasionally, the transaction is never completed.

In these circumstances, the party who fails to complete suffers a financial penalty which can be very substantial, especially if the transaction is one of a chain of transactions.

The impact of coronavirus (COVID-19)

During the initial lockdown period, a number of people who had exchanged contracts were unable to complete on the agreed date for a variety of reasons.

The fact that COVID-19 is likely to be a problem for some time to come means that there are new risks to buying or selling a property.

New risks

The new risks which have arisen are:

• you or your buyer/seller or someone in your or their household may be unable to move out, either through illness or the need to self-isolate
• you or your buyer/seller may be in hospital
• there may be a further lockdown which prevents you or your buyer/seller from moving
• moving might be in breach of government regulations or contrary to government guidance
• there may be difficulties in obtaining removal services
• your or your buyer’s mortgage offer might be withdrawn or the financial position might change of one of the parties
• the UK financial system fails to deliver the purchase or mortgage money
• any of these problems might occur to another party in the chain of transactions on which your move is dependent There may be other risks arising from COVID-19 of which we are not currently aware. If the number of COVID-19 cases continues to fall, these risks will be less prevalent but will continue to exist for some time.

First choice

You enter into a standard contract in the same way as you would have done prior to COVID19.

Risk:

You, your buyer/seller or someone in the same chain of transactions as you is unable to complete on the date agreed for completion.

If it’s you, you will suffer a significant financial penalty. The longer the chain of transactions, the greater the loss.

Even if it’s not your fault, you will not be able to move, will suffer considerable inconvenience and possibly financial loss as well.

To minimise the risk, the period between exchange of contracts and completion should be as short as reasonably possible.

Second choice

Exchange of contracts and completion take place on the same day.

Risk:

You will have to arrange to be ready to move on the date agreed by all parties in the chain for completion, including booking removers but will not know for certain until the day whether completion will take place.

If it does not, you may lose any deposit you have had to pay to your removers.

You will not be entitled to compensation from the party who is not ready to move, but equally if it’s you, you will have no liability to any other party in the chain.

Third choice

This is designed to achieve as far as possible the flexibility contained in the government advice.

You ask your property lawyer to add a clause to the contract which specifies certain situations (which may reflect some or all of the new risks) in which completion can be delayed if one of the stated situations arises after exchange of contracts.

It will be necessary for all contracts in the chain of transactions to contain similar provisions.

If as a result of one of the new risks you’re unable to proceed with the transaction, you will not have any financial liability to the other parties in the chain.

Risk:

Although contracts have been exchanged, it will still be a possibility that completion will not take place on the agreed completion date if you, your buyer/seller or someone in the chain is affected by one of the new risks.

It’s also possible that the chain could collapse if one party is not able to proceed as a result of one of the new risks. If that occurs, you may not be entitled to any compensation from the defaulting party.

Last Updated 3rd November 2020