In light of the recent lockdown due to the coronavirus (COVID-19), there will inevitably be a significant impact on property transactions. While most firms have been preparing for their staff to be able to work from home, in order to avoid as much disruption as possible, the effects are likely to be far reaching.
There could be a significant delay in remitting funds if any party, or their representatives, are unable to access banking or office facilities. There are also issues with being able to complete original documents which may now be locked down in offices. In addition, albeit that the current restrictions are likely to prohibit moving, one party in a transaction (or someone involved in their transaction, such as a family member, their lawyer or a removals firm) may be diagnosed with coronavirus or be in a self-isolation situation on the Completion Date and, therefore, be unable to complete.
Potential effect of failure to complete or late completion
The current heightened risk is that any party in the transaction is at risk of not being able to complete due to another party in the transaction failing to complete their contract as a result of coronavirus.
We would, therefore, urge caution whether to exchange at all and to consider a simultaneous exchange and completion. This may not, however, be practical for a chain, as there is no guarantee that the transaction will complete until the day itself, which makes booking removals and other arrangements very difficult.
Under the Standard Conditions of Sale, in the event of a party not being able to complete on the Completion Date, their willing party will be entitled to serve a Notice to Complete on them, which will give them 10 working days to complete (“Notice to Complete”). Provided completion takes place within this timeframe (and penalty interest is paid/deducted), the defaulting party must complete. If completion does not take place, the willing party can rescind the contract and the deposit will be forfeited if the buyer defaulted and returned to the buyer if the seller defaulted. If a deposit of less than 10% has been paid, the balance of 10% will also become immediately due.
Following late completion or the rescission of a contract, the defaulting party may also still be subject to a claim from the willing party to reimburse any other losses (such as storage costs, alternative accommodation costs, cancelled removal fees, additional mortgage interest). If, as a result of the defaulting party’s failure to complete, the willing party is sued by their buyer or seller for such costs, this would also form part of the willing party’s claim. The potential implications are therefore significant for both buyers and sellers.
We would be hopeful that if there are problems, most parties in the transaction will work together and take a pragmatic approach to ensure that transactions can complete as quickly as possible. However, if one party wishes to strictly enforce a breach of contract, the rest of the chain will have little choice but to follow. We would therefore encourage you to think about arrangements you could make, should you or a member of your family need to self-isolate during the moving period.
It is anticipated that the Government may issue some further guidance for house moving, In the meantime, the British Association of Removers’ current recommendation to its Members is, you “should only complete any moves that are underway and immediately cancel any move that has not yet started. It is equally evident that our absolute priority now must be on ensuring the safety of our staff and our customers, and of course their respective families and so we must make every effort to release all of our crews from ‘the coalface’ at the very earliest opportunity. There will of course be many more questions asked and answers needing to be given over the next few days, but it is imperative that we react now to that very explicit instruction from the PM…”
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