Please note: The information in this blog is correct as of 27/03/2020. With the developing nature of the COVID-19 situation, guidance is expecting to change. We will do our best to keep this information up to date but would always advise you speak with a solicitor for advice on your circumstances.
UPDATE: A more recent coronavirus and conveyancing update can be found here.
Following on from our recent blog outlining the guidance issued by the Law Society last week, further guidance has been issued in light of the Prime Minister’s announcement of the stricter social distancing measures on Monday 23rd March.
On 25th March, a government spokesperson said:
“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. Anyone with symptoms, self-isolating or shielding from the virus, should follow medical advice and not move house for the time being.”
The Law Society’s guidance states that proceeding with these completions is subject to the following public health guidelines:
- properties not being occupied with cases (or suspected cases of) coronavirus (COVID-19)
- occupants not being in a state of isolation, and
- all parties abiding to social distancing requirements
If any party in a chain is unable to satisfy either of the first two requirements, completion must be delayed and parties in such circumstances have been encouraged to use a common sense approach before commencing any action for breach of contract but this will not always be possible.
The third requirement presents a more practical problem as, by the very nature of clearing properties into removal vans will result in people coming into close contact. It will therefore be necessary to follow the Public Health England guidance as closely as possible and to consult with your removers as to how this will be achieved to ensure compliance.
When contracts are exchanged, the completion date is, in the vast majority of cases, set for a specific date. The risk at present is that should any party in the chain not be able to satisfy the first two requirements set out above due to contracting Coronavirus between exchange and completion, it will be necessary to delay completion. In the current circumstances, it may be advisable for all parties to a transaction or in a chain to agree a contractual provision before exchange of contracts that deals with the risk of one or more of the parties being infected at the point of completion, as there is no specific ‘force majeure’ provision in the Standard Conditions of Sale and it may be that it would be difficult to imply one.
As confirmed by the Law Society:
“If completion does not take place after contracts have been exchanged due to COVID-19, the parties not completing will be in default. The contract provisions relating to default will probably apply unless the non-defaulting party takes a ‘good faith’ view. Notices to complete, penalty interest and deposit loss may all come into play. If the transaction forms part of a chain of transactions, it may not be possible to take such a view without incurring a penalty.”
If you anticipate being in a position to exchange contracts during the Coronavirus “lockdown” and your transaction to be impacted in any way, please discuss this with your conveyancer, who will advise on the most suitable way forward specific to your circumstances.
After Exchange of Contracts
A contract is frustrated if it is incapable of being performed due to an unforeseen event (or events) which is not the fault of either party. Whilst there is no definitive answer to this yet, it may be that a contract is frustrated by isolation or restrictions on movement and activity, depending on the circumstances of the individual case and the attitude of the courts.
The Law Society state that:
“It may be that contracts will not be frustrated. So many factors are involved in making the determinations and the court has, in recent times, shown a marked reluctance to make such a finding.
The expectations, assumptions and responsibilities of the parties must be taken into consideration. That a contract would be held to be frustrated in the current circumstance is not something that can be treated as a presumption.”
Unfortunately, it will not be until either specific guidance is issued by the government or a claim for frustration is tested at court that we will know how cases involving Coronavirus should be treated.
Variation of Contract after Exchange
In the event a transaction or chain is or may be impacted by Coronivirus after contracts have been exchanged, the parties may consider that variation of the existing contract/s constitutes a common sense approach and avoids the risk of parties being held in default as a result of contracting the virus.
Care must however be taken not to create a new contract unintentionally by varying the existing contract with the Law Society warning:
“Creation of a new contract may impact on insurance. Risk passes on exchange – will insurers need to be notified that technically a new contract has been formed? Even changing the date of completion may create a new contract rather than varying an existing one. [Conveyancers will] need to review the standard and special conditions if a new contract may be formed on the revised date.”
Clearly, the current pandemic has placed conveyancers and clients in unchartered waters, with each firm introducing its own policies to deal with the risks posed by the virus not just to staff and clients but also to transactions. Until either the government or the Law Society issue specific rules on how to manage the various risks posed by the virus to the conveyancing process, there will be some variance between the approaches taken by conveyancers. Your conveyancer will be able to provide you with guidance as to what impact this has on your transaction / chain.
For further advice on conveyancing transactions during the COVID-19 outbreak, get in touch with Farleys’ residential property team on 0845 287 0939 or submit your enquiry through our online contact form.