Clearly, in a time of social distancing (and, for some, self-isolation), there are additional factors to consider when arranging a house move. The health of the individuals involved in the move, and of the general public, must of course be the priority.
The Government have stated that where a property is vacant, the transaction can be continued with, as long as all parties follow the guidance on home removals. Where a property is not vacant, the Government are recommending that completion be delayed until the current stay-at-home measures are no longer in place. It should be noted that the police have emergency enforcement powers to prevent people from unnecessary movement, although “critical home moves”, where a new completion date cannot be agreed, are exempt from such enforcement.
Should I withdraw from my sale or purchase?
In our opinion, and that of the Government, absolutely not. The property market plays an important role in the overall economy of the country, and if you wanted to move house before the Coronavirus outbreak, you will probably still want to afterwards too.
The sensible option at present is for all parties to be mindful of the unprecedented situation that we find ourselves in, and to adapt as necessary to ensure that no party takes unfair advantage of any other party or the situation that they find themselves in.
It may be that the sale or purchase moves a lot slower than usual, with the overall transaction taking several months rather than weeks, but there is nothing to stop the legal work being done behind the scenes. At Meaby & Co, we are all working remotely, and while the working day is certainly different, it is “business as usual” as far as possible.
What is the guidance on home removals?
Notwithstanding that the Government are advising anyone who has exchanged contracts already to try to delay their move, a number of moves will clearly still need to go ahead anyway.
The Government are advising removals firms to honour existing contracts and commitments, as long as the move can be carried out safely. Their current advice is that work carried out in people’s homes can continue, as long as the tradesperson (and, it goes without saying, the person who is moving house) has no Coronavirus symptoms. Social distancing measures are vital, of course, as is hand-washing.
Should my conveyancing contract be amended to deal with delays caused by Coronavirus?
The Government have suggested that the conveyancing contract could be amended to include “explicit contractual provisions to take account of the risks presented by the virus”, although we are currently advising clients not to do this, if at all avoidable, on the basis that the ever-changing and unprecedented scenario in the UK means that it is simply not possible to account for all eventualities.
Where an additional clause is to be used, it will clearly require not only the agreement of both buyer and seller to the clause, but will rely on a great measure of goodwill from both parties. It is an unavoidable fact of life that some parties will seek to manipulate a contractual clause for their own benefit, and there would be nothing to stop one party from claiming that they have a right to withdraw from the contract, whereas the other party may disagree with that, inevitably resulting in litigation to resolve the dispute. The preference, as far as Meaby & Co are concerned, would be for our clients not to subject themselves to the potential for avoidable litigation.
What happens if I’ve already exchanged contracts?
If contracts have already been exchanged on your sale or purchase, you are therefore in a legally binding contract with your seller or buyer. You are therefore obliged to complete as stated in the contract, unless you and your seller/buyer can agree to amend or cancel the contract. You would need to reach an agreement with your seller/buyer and then both instruct your respective solicitors to action the amendments.
The Government are now advising that where you are moving into a property that is currently occupied, all parties should work together to agree a delay to the completion date as long as social distancing measures remain in place. If no such agreement is reached, social distancing measures should be taken to minimise the spread of the virus.
Where no agreement is reached to amend the contract, but one party is still unable to complete, that party would be in breach of contract. For a buyer, this can be particularly serious as the deposit paid when contracts were exchanged (usually 10% of the purchase price) may be at risk.
Upon breach of contract, the party not responsible for the breach can serve the other with a “notice to complete” which gives the party in breach ten working days to complete. If the contract can still not be completed within those ten working days, the contracts is rescinded (cancelled).
A standard conveyancing contract does not contain a “force majeure” clause, allowing Government action, pandemics, acts of war, etc, to cause the contract to be cancelled, and therefore both parties would remain under contract and thus liable to each other for any breach of that contract. If the seller were unable to vacate as planned (perhaps due to self-isolation or even actually suffering from the virus), the seller would be in breach of the contract irrespective of the reasons. While it is hoped that any buyer would be sympathetic towards this, that does not necessarily have to be the case (remember, we’re talking “legally” not “morally”).
A knock-on effect of this is that the buyer’s mortgage offer may expire as a result of the seller’s failure to complete, although the Government have also noted this morning that they are in discussions with UK Finance, who represent the most prominent mortgage lenders, about a 3-month extension being made available to all mortgages where contracts have already exchanged. It should be emphasised though that this is not finalised yet, and any borrower would still have to apply for an extension.
What happens if an extension to the contract would result in my mortgage offer expiring?
As a buyer, the expiry of your mortgage offer is something that you must avoid. Without a valid mortgage offer, you can not complete your purchase and you would potentially lose your deposit and you could also be sued by the seller for any consequential loss suffered by the seller.
At present, many lenders are putting a block on new lending, which means that if your mortgage offer expires, you may struggle to obtain a new mortgage offer. Even if you then find a new lender, you would quite possibly find that the lender would be unable to value the property due to social distancing measures, that they would be unwilling to lend as much (based on an anticipated downturn in the market) or that the rates offered by the lender would be less attractive.
UK Finance have confirmed that, following consultations with the Government, all major mortgage lenders are working to enable a 3-month extension to all mortgage offers where contracts have already exchanged, although as noted above this will still rely on borrowers applying to the lender for an extension. UK Finance have also advised that if a borrower’s circumstances were to change, resulting in their contract to purchase the property causing them financial hardship, the lenders will work with the borrower to help them manage their finances.
Assistance from estate agents
The Government are encouraging estate agents to work with their sellers and buyers to agree a new moving date where sales are due to complete on occupied properties while the emergency social distancing measures are in place. They are being urged to prioritise anyone with symptoms or who may be self-isolating.
All estate agents have closed their offices to the public, but most are still working remotely and we would encourage our clients to liaise closely with their estate agents to agree a mutually convenient completion date, bearing in mind that the evolving situation means that it may not be possible to set anything in stone just yet.
It should also be noted that estate agents are being advised by the Government to remain patient and to advise their clients to remain patient, and not to encourage an exchange of contracts if it is not essential to do so.
What if my property is not yet on the market?
Given that estate agents will not be in their offices as per usual, it may be difficult to put your property on the market in the usual fashion. That said, estate agents will still be available on the telephone to offer general valuations and advice. Of course, viewings would be difficult to arrange, although an increasing number of estate agents are able to offer virtual viewings and walk-throughs (click here for an impressive demonstration of this, offered by Elliott James Prime Residential in Loughton, Essex).
There is plenty that you can do in the meantime, such as instructing a solicitor to start working on the sale in readiness for a buyer to be found once the property is ready to be marketed. This would involve obtaining Land Registry title documents, dealing with ID verification (which can be done remotely), completing the various forms relating to the sale, such as the Fittings and Contents Form, and liaising with any landlord or freeholder for information relating to service charge.
My property is currently on the market – what next?
Current advice is not to allow visitors to your home, as viewings will be considered non-essential under the current social distancing guidelines. As mentioned above however, your estate agent may be able to conduct virtual viewings.
Should you accept an offer, or if you have recently accepted an offer or had your offer to purchase a property accepted, the conveyancing process can continue as normal. It should be noted that, due to a number of factors, including the likely inability of surveyors and mortgage valuers to value the property, staff shortages at mortgage lenders, estate agents and some solicitors, and currently a very high workload for most solicitors dealing with the most urgent of transactions (i.e. those which have already exchanged, or which are on the cusp of exchanging), the process will likely take longer than normal.
Surveyors are currently being advised not to undertake “non-urgent surveys” in homes which are occupied, so this will naturally delay most purchases. Of course, we strongly recommend against any buyers deciding to proceed without a survey of the purchase property, should you feel tempted to take that risk.
At Meaby & Co, we like to think that we keep the conveyancing process as short as possible and that as long as everything goes smoothly, with a co-operative estate agent and solicitor acting for the other side, we should be able to achieve an exchange of contracts in four to six weeks for a freehold property, and six to eight weeks for a leasehold property. This is likely to stretch out somewhat now, and there are many variables to keep in mind, not least the constantly evolving Government advice on restrictions of movement.
Meaby&Co is authorised and regulated by the Solicitor’s Regulation Authority (SRA Number 447880) and registered in England and Wales with registered number OC322672 at 2 Camberwell Church St, London, SE5 8QY.