Property

COVID-19 and residential conveyancing transactions

In November 2021, the government updated its guidance on home buying and selling during the coronavirus (COVID-19) outbreak.

Where moves go ahead, all those involved should take care to follow government's public health guidance:

  • properties not being occupied with cases (or suspected cases of) COVID-19
  • occupants not being in a state of isolation

See the UK Health Security Agency’s (UKHSA) guidance for households with possible or confirmed COVID-19 infection.

The need to self isolate may impact on many parts of a conveyancing transaction.

It's important for all parties to understand who bears the risk in various situations.

This guide focuses on transactions where contracts that have been exchanged need to be delayed due to a positive COVID-19 test result or requirement to isolate.

It covers:

After exchange

The key issue at every stage is to point out as many of the likely risks as you can.

You’ll want to:

  • assess the clients’ appetite for risk
  • set out the options and likely consequences for each option
  • establish whether your client wants to proceed and, if they do, how they want to do this

It’s important to:

  • explain all risks
  • confirm advice in writing
  • make sure the client acknowledges having had the advice in writing

You may need to discuss these issues across any chain.

The contract may need to set out how completion might happen in the circumstances to satisfy the UKHSA's requirements.

The transaction will be governed by the provisions in the contract unless the parties agree otherwise.

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.

There is no specific ‘force majeure’ provision in the Standard Conditions of Sale and it may be difficult to imply one.

Frustration

A contract is frustrated if it’s incapable of being performed due to an unforeseen event (or events) that is not the fault of either party.

The contract might be frustrated by isolation or restrictions on movement and activity, but this will depend on the circumstances of the individual case and, ultimately, the attitude of the courts.

It’s difficult to envisage what might happen to a contract if it’s frustrated. Some commentators have suggested that rescission provisions might apply.

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.

Each situation is likely to have different implications and a different outcome. There is no certain and fixed answer.

Variation to contracts after exchange

If contracts have been exchanged but completion has not taken place, and the parties want to vary the contract, the parties must take care not to create a new contract unintentionally.

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.

You’ll need to review the standard and special conditions if a new contract may be formed on the revised date.

Remember there are risks in giving professional undertakings rather than expressly varying a contract.

Undertakings

In response to the question “what if I am struggling to comply with a conveyancing undertaking?”, the Solicitors Regulation Authority says:

“Our rules provide that you should perform all undertakings given by you within an agreed timescale or if no timescale has been agreed then within a reasonable amount of time.

“Before giving any undertaking in these current circumstances you should always consider if you can properly implement it and you should have regard to all the eventualities that may affect your ability to perform it. You may want to add something new into your undertakings to take account of the risk of delay due to the effects of coronavirus.

“If you find yourself in a situation that you are not able to comply with an undertaking that you have given, you should let your client or the other side know as soon as possible.

“If a failure to comply or delay is beyond your control due to the impact of coronavirus, should any complaint be made, this would be taken into account by us as a mitigating circumstance.”

Increased risk of fraud

The unusual circumstances are providing an increased opportunity for fraud.

Everyone will need to be on the alert and take extra care to make sure that their security systems are not breached. 

Read our guide on cybersecurity and fraud prevention

General principles

Focus on your client’s best interests and explain the risks to them.

Using pragmatism and common sense, it’s hoped that transactions can continue to take place without too much disruption, but we know that this is difficult for you and for your clients.

If chains are affected, the aim would be to provide the same solution and let the risk fall in the same place across the chain, but we acknowledge that this may be very difficult to negotiate.

Inevitably, there will be a few chains where one or more of the parties in a chain insists on taking a stand to gain an unfair advantage, but we hope these transactions will be in the minority.

Follow the Conveyancing Protocol

Act with courtesy and cooperate with third parties.

Maintain high standards of courtesy and deal with others in a fair and honest manner.

Make sure the proper internal and external arrangements for file management have been communicated to your client in relation to holiday and sickness absence.

Explain the risks and consequences of different ways of proceeding to your clients.

Read the Conveyancing Protocol

If you need advice and support in relation to your business generally, check the government's COVID-19 hub.

If you have any comments or suggestions, email property@lawsociety.org.uk.

Social distancing

During social distancing restrictions, we created sector-specific guidance for conveyancers , including draft rider clauses to help defer completion dates where necessary.