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Property transactions and Coronavirus (Covid-19)

The advent of Coronavirus is impacting on daily life for all of us and the repercussions look set to be with us for a significant period of time. Apart from the impact that there may be on physical and mental health, it is also affecting property transactions.

Buying and selling homes during this stay-at-home period

The Government is urging the adoption of a flexible approach. The Government has stated that, whilst there is no need to pull out of transactions, we all need to ensure we are following guidance to stay at home and away from others at all times, including adhering to the specific measures for those who are presenting symptoms, self-isolating or shielding, with prioritisation of the health of individuals and the public being paramount.

Where the property being moved into is vacant, you can continue with your transaction, whilst following Government guidance on home removals. However you should take into account that if you are involved in a chain of transactions and if any of the properties within the chain are occupied this will impact upon the feasibility of your move. You should also consider that it may not be easy or possible to arrange removals.

Where a property is currently occupied, the Government is encouraging all parties to do all they can to amicably agree alternative dates to move, for a time when it is likely that stay-at-home measures against coronavirus will no longer be in place.

The Government is advising that:

  • If you have already exchanged contracts and the property is currently occupied then all parties should work together to agree a delay or another way to resolve this.
  • If moving is unavoidable for contractual reasons and the parties are unable to reach an agreement to delay, people must follow advice on staying away from others to minimise the spread of the virus.
  • In line with Government’s advice, anyone with symptoms, self-isolating or shielding from the virus, should follow medical advice which will mean not moving house for the time being, if at all possible. All parties should prioritise agreeing amicable arrangements to change move dates for individuals in this group, or where someone in a chain is in this group.
  • Police powers will apply and any move will be subject to restrictions on social distancing.

What if an extension goes beyond the terms of a mortgage agreement?

UK Finance have stated 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 3 months to enable them to move at a later date.

If a customer’s circumstances change during this 3 month period or the terms of the house purchase change significantly and continuing with the mortgage would cause house buyers to face financial hardship, lenders have indicated that they will work with customers to help them manage their finances as a matter of urgency.

Removals firms

It should be borne in mind that it may not be possible to find a removal firm that can or that is willing to undertake removals at this time.

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Amending existing contracts

Where it is not feasible to go ahead with a move and contracts have already been exchanged parties should seek to agree to defer the completion date. This will need to be evidenced by a legal agreement supplemental to the existing contract.

To avoid contamination through a physical document, the parties will need to either e-sign the agreement to vary the existing contract or authorise their property lawyer to sign as agent on their behalf.

This will require a formal exchange process via lawyers. It will normally involve the need for agreement by all parties if there is a chain.

There may need to be a two-step process so that you delay the move until the end of the current stay-at-home period and the requirements about physical distancing, but with the ability to extend that timescale if the government restrictions are extended

You should consider what will happen if your circumstances change during any deferral period, for example, would you still be able to afford the mortgage if you lost your job and had to find new employment?

You should also consider that property values may well fluctuate during the period of deferral and this might impact your lender’s decision to lend. This will be particularly important if your mortgage makes up a large proportion of the house price, perhaps 60% or over.

If you’re both buying and selling, bear in mind that if your own buyer or seller’s circumstances change, and they need a mortgage, they may not be financially able to proceed with your transaction at the end of the restrictions.

You should also bear in mind that even when the restrictions are removed there may be other unavoidable delays in your move, perhaps if someone in the chain has died and their estate needs to be settled before the move can be completed. In that case you could agree a further delay or seek to end the contract.

Those who have not yet exchanged contracts

You can still continue with your transaction and should take this time to work with your property lawyer to progress the transaction and to read through the documents involved in moving house.

You should think very carefully before instructing your lawyer to exchange contracts, even where completion is a long way off, as the contract will be binding, and you would have to complete even if your financial position had changed.

You should consider instructing your lawyer to incorporate a suitable clause in the contract to seek to mitigate against any ongoing risk arising in conjunction with the virus.

Those who have to move during the stay-at-home period and requirements about physical distancing

You should only move during the restrictions if your move is critical and it is safe to do so, for example, where the property is empty. If the empty property is in a chain, it may not be possible to complete without breaking the chain.

You must follow advice from Public Health England and Public Health Wales on social distancing and must not endanger yourself or others during your move.

You should complete a deep clean if you are moving to a new home and must follow Government advice given for decontamination of your new home if you know, or have reason to believe, that the previous occupants, or someone which they had been in contact with, has coronavirus.

The contents of this article reflect regulations guidance and information available as at 26th March 2020 and cannot be relied upon in respect of specific property transactions. Please seek advice from a lawyer in respect of specific property transactions and how Coronavirus may impact upon these. Our team of Property lawyers at Clarke & Son will be pleased to assist.

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