The government has issued some guidance for the public and the industry in relation to home buying and selling. Read the guidance.
Following the prime minister’s announcement on Monday 23 March, a government spokesperson said on 25 March: "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.”
We’ll be publishing further guidance as soon as possible.
Where moves do need to go ahead, all those involved should take care to follow government guidance on social distancing and hygiene. See Public Health England’s guidance for households with possible coronavirus (COVID-19) infection.
If you’re acting for someone who has exchanged contracts and has a completion date within the next few days, and you, your client and the other side are able to proceed, which may be very difficult given the position with removal firms, there’s currently nothing to prevent you doing so.
This is subject to following current guidelines in respect of public health:
- 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
This is a very high bar and it may not be possible to comply.
We’re seeking further clarity from government and will monitor closely as the situation develops. We’re hoping for official guidance to be published in the next few days.
The announcement about social distancing has obviously increased the impact of coronavirus (COVID-19) on conveyancing transactions.
We continue to receive many questions from members but the nature of these has now changed. Many relate to the immediate issues in relation to completion where contracts have been exchanged.
We understand that this is a very difficult time for you and your clients. The situation is unprecedented, and we’re becoming aware all the time of different aspects of the impact of the pandemic on those moving home and our members.
The restricted movement requirements impact on many parts of a conveyancing transaction. What everyone wants to understand (and ideally control) is who bears the risk in various situations.
The focus of this note, now that the restrictions on movement are severe, are on those transactions where contracts have already been exchanged.
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 and 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 requirements of Public Health England:
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’s no specific ‘force majeure’ provision in the Standard Conditions of Sale and it may be that it would be difficult to imply one.
A contract is frustrated if it’s incapable of being performed due to an unforeseen event (or events) which is not the fault of either party.
It may be that the contract might be frustrated by isolation or restrictions on movement and activity, but it’ll 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 the provisions relating to rescission 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’s 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, care must be taken 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.
In response to the question ‘What if I am struggling to comply with a conveyancing undertaking?’, the Solicitors Regulation Authority say:
“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 do their best to make sure that their security systems are not breached.
Electronic signatures and witnessing
Even though the government on 3 March 2020 supported the view of the Law Commission about the validity of electronic signatures for deeds, HM Land Registry have their own requirements.
In terms of electronic signatures, our view is that these:
- can be used to sign contracts to sell/buy unless the contract is being executed as a deed
- cannot be used for deeds
- probably cannot be used where a signature needs to be witnessed unless the witness was present when the electronic signature was affixed – in which case a wet ink signature could have been used
- cannot be used where a wet ink signature is required, for example, for documents for HM Land Registry and some lenders
See our practice note on virtual signing
At present, if contracts have not been exchanged, you should encourage clients not to exchange until the situation is more settled.
We’re in contact with HM Land Registry, HMRC and UK Finance and hope to provide further information shortly.
HM Land Registry
See all the latest information related to Companies House and COVID-19
Companies House says it has plans in place to maintain services during the coronavirus (COVID-19) outbreak.
If, immediately before the filing deadline, it becomes apparent that accounts will not be filed on time due to the company being affected by COVID-19, you may make an application to extend the period allowed for filing.
If you do not apply for an extension and your accounts have been filed late, an automatic penalty will be imposed.
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 protocol
- Act with courtesy and co-operate 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
There are obviously indications of a marked market slowdown. If you need advice and support in relation to your business generally, see: www.GOV.UK/coronavirus.
If you have any comments or suggestions, email email@example.com.