COVID-19 - Will Lockdown Scupper My House Transaction?
- AuthorEmma Gilroy
With the Corona Virus outbreak continuing to make its mark on all areas of our lives, many of our clients are concerned about how it will affect the progress of their house sale or purchase. As we have seen, the Coronavirus situation is an ever-changing one, but based upon the latest Government advice, here are some of your questions answered:
Will my house sale be put on hold now the country is on lock-down?
The Government has now issued guidance on moving home. This says that there is no need for people to pull out of transactions, but where possible, they should look to delay completion so they are not physically moving home.
If you are thinking of buying and/or selling we can start this process for you and all the legal paperwork should be able to be processed during this time.
Completion should not take place while the stay at home measures are in force in most cases. It may be possible to exchange contracts with an agreed clause that delays completion until after the lock-down, but this should be discussed with your conveyancer, so they can explain the pro’s and con’s of doing this or delaying until the current measures have been relaxed.
If you wish to exchange and complete on your matter while these measures are in place, you may be able to do this in certain circumstances, such as when the property you are moving into is vacant; you already reside at the property you are buying; the transaction is a transfer of equity; you do not need to move into the new property or vacate your current property or the purchase is a buy to let purchase with a tenant already in occupation.
Where the exchange of contracts has already taken place with a set completion date you should look to agree a delayed completion with the chain. If this cannot be achieved, then the move may still be able to go ahead, as what is deemed under the guidance as a critical move.
Other third party factors to take into account, which may put your transaction on hold, including difficulties in obtaining removals (in the case of critical moves) or mortgage finance.
Removals have been classified as non-essential and would be subject to fines being levied. In circumstances where the home move is deemed critical, there is an exception which would allow them to undertake a domestic move, however, hygiene and social distancing advice issued by the Government must be followed and removers should ensure they are well, with no symptoms. Many removal companies are not undertaking removals during this time however, which could limit your ability to move.
Where a mortgage offer has been issued, the banks are being encouraged to extend these beyond the lock-down period. If you haven’t yet secured your mortgage offer with a lender, you will find that valuations will be on hold during this period. Additionally, staffing issues due to illness may mean that the whole mortgage process progresses much more slowly.
What if the other members of my chain are unready to proceed?
Where exchange has taken place already, it is vitally important that you check the position of other members of the chain and where at all possible, try to agree to a delay to the completion date.
Although under the contract you would have the right to serve a notice to complete, making time of the essence, in the current circumstances it is questionable whether this is a reasonable and viable option, let alone going against the Government guidance.
Where you have not exchanged, your options are to wait until the rest of the chain is able to proceed or else withdraw. In the current market, it would most likely not be beneficial to withdraw, so waiting it out may be your best bet.
Social distancing will be tricky during a house move. Do the regulations allow for this, since my move is critical?
The Government’s policy on social distancing is a strict one and you must comply with it.
We will not be responsible for any fines levied against you because you have failed to comply, particularly where you have acted against our advice.
I have already exchanged contracts and I have a fixed completion date. Will my house move still go ahead?
Where we have already exchanged with a fixed completion date, we will support you to proceed to completion if it cannot be delayed, as mentioned before. Where it is possible to agree to a delay, then this should be done wherever possible. Those who haven’t exchanged are advised to put their transaction on hold until stay at home measures have come to an end, or else look to include provisions in the contract relating to Covid-19 and completion.
What if an extension goes beyond the terms of a mortgage agreement?
UK Finance has confirmed that to support customers who have already exchanged contracts for house purchases and set dates for completion, all mortgage lenders are working to find ways to enable customers who have exchanged contracts to extend their mortgage offer for up to three months, so they can move at a later date.
If a customer’s circumstances change during this three month period, or if or the terms of the house purchase change significantly and continuing with the mortgage would cause house buyers to face financial hardship, lenders will work with customers to help them manage their finances as a matter of urgency.
I am halfway through a self-isolation period but I don’t want to delay my house move in case I lose my buyer. What should I do?
Anyone with symptoms who is self-isolating should follow medical advice and not move house for the time being. If moving is unavoidable for contractual reasons and the parties involved cannot reach an agreement to delay the transaction, you must follow advice on social distancing to minimise the spread of the virus.
If I have exchanged contracts but cannot proceed because I am infected where do I stand legally?
The transaction will be governed by the provisions in the contract unless all the parties involved agree otherwise. If completion does not go ahead after contracts have been exchanged due to COVID-19, the parties that fail to complete will be in default. So, 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. In light of the Government guidance, all parties should prioritise reaching amicable arrangements, preferably to delay completion.
If the transaction forms part of a chain, it may not be possible to avoid incurring a penalty. However, it may be the case that the contract you have signed is, in fact, frustrated, in legal terms – or incapable of being carried out - due to the unforeseen event of Covid-19.
This will very much depend on the circumstances of the individual case and, The Court will decide if the defence of a frustrated contract can be applied successfully. It is very difficult to prove Frustration however and very few cases have been successful. Trying to agree a variation of the contract by the insertion of a clause specifically relating to COVID-19 and delaying completion may be the simplest and most appropriate way to proceed.
Find the latest full Government guidance here.
Our Residential Conveyancing team is on hand with tailored legal advice to suit your individual circumstances. Get in touch today by email on firstname.lastname@example.org or by contacting one of our local offices below:
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