The Residential Property Market
By Rachel McGurk| Partner
With coronavirus here for the foreseeable future, there is growing concern in the residential’ property market about how this will impact upon the conveyancing process. The Law Society, as our governing body, acknowledges that the law offers little guidance in case of ill-health and there is unlikely to be any drafting solution which would be appropriate to every case.
In relation to contracts which have been exchanged, if completion does not take place due to the virus, the party not completing will be in default and the contract provisions relating to default will apply unless the non-defaulting party takes a “good faith” view. If the transaction forms part of a chain of transactions, it may not be possible to take such a view without incurring a penalty.
In the event of someone in your chain being unable to complete on the due date because of the coronavirus, the Standard Conditions for the sale of the property (as drafted by The Law Society) state that if either party fails to complete on the day of completion, the injured party has the option to serve notice to complete on the other party. The period of the notice is ten working days including the date of the service of the notice. Under the terms of the contract there are a range of penalties which can include the payment of interest, damages, the loss of any deposit paid and the potential for a claim for other losses, for example, having to move out and having to live in a hotel or putting goods into storage to the extent that the interest does not cover those losses.
This two-week period may be sufficient to allow for the isolation period to pass so that completion can take place. During that period however interest would accrue on the purchase price against the party who cannot complete, usually at a rate of 4% above base rate until completion takes place.
If completion still does not take place, the person who is able to complete can terminate the contract. If that person is the seller, they can keep the deposit. If that person is the buyer, they are entitled to have the deposit returned.
There is no guarantee that the effects of coronavirus will not affect a transaction but if contracts have not yet been exchanged, the parties can agree to include a clause in the Contract which allows for a delay should the coronavirus make it impossible for a party to complete. This is not however completely satisfactory since there is a difference between a transaction where coronavirus is a presence or all other situations where it is a possibility, for example, persons in self-isolation.
Any provision therefore would need to be carefully drafted and considered by all parties (including the wider chain) to be effective.
The Law Society provides that it may be possible for new provisions to be negotiated to suit particular circumstances, but they do not consider that bespoke clauses are necessary or desirable as standard. In fact, the reverse may be true. They consider that exchanging contracts on a “business-as-usual” basis may be preferable to using new provisions.
At Hansells, we are of the opinion that by focusing on the best interests of our clients and by using pragmatism and common sense, it is hoped that matters can be dealt with without too much disruption to the usual process.
We shall continue to maintain our usual high standards of courtesy and co-operate and deal with others in a fair and honest manner as we are used to so doing.
If you require any further information please call us on 01603 615731 or email [email protected]