Handling a property chain in COVID-19

Industry bodies, including the Law Society, have recently released updated guidance on the conveyancing process as the COVID-19 pandemic continues.

We examine the guidance so that you know how to handle a property chain in the COVID-19 pandemic. The priority remains to minimise risk whilst supporting conveyancers to work together safely to keep the wheels of the property market turning.

Clear conveyancing instructions required

From the outset of an instruction, conveyancers must be clear to their clients about the options, the risks and the consequences at each stage of a transaction up to completion. This is of particular importance following COVID-19 restrictions and the new procedures put in place to allow for them. It is important for the client to understand that the transaction may require flexibility from them and matters may change at short notice.

Provisions can be negotiated in contracts but the outcome cannot be guaranteed at the outset. As soon as it is established who is acting for the other side, conveyancers need to establish certain criteria.

What should conveyancers establish?

• How fellow conveyancers are working and whether they are accepting electronic procedures such as Mercury signing.
• Whether the conveyancers, as well as the parties throughout the chain, have any specific requirements in order to move the transaction along safely and without risk.
• How and when exchange of contracts will take place, taking social distancing into consideration.
• How the current situation may affect completion taking place. Consideration must be given as to whether standard conditions in the Standard Conditions of Sale need to be amended in the contract.
• Full details of the whole chain to avoid unnecessary delays, which can be settled early on.

It is vital for conveyancers to only give undertakings that can be performed. Amendments to undertakings must be made to suit the transaction as necessary, for example, to confirm that original documents will be sent when it is practically reasonable to send them.

Risks to a property chain in COVID-19

Conveyancers must make it clear to their clients that COVID-19 presents a risk of completion being delayed or possibly not taking place at all.

They will need to advise on how the provisions of the contract will affect them if this happens.  For example, there is a risk of entering into a legally binding contract to find that weeks down the line, one party is unable to perform their obligations due to COVID-19.

One solution to this risk would be to delay exchange of contracts and simultaneously exchange and complete on the same day. Where there is a property chain all parties will need to agree for this method to work and it is not always suitable for everyone involved.

The date for the simultaneous exchange and completion can be provisionally agreed a week in advance, which will give parties the time to arrange removal companies and make other practical arrangements.

Such an agreement is not legally binding and does still present risks. For example, removal companies may not agree to fixing dates until exchange has taken place. These risks must be assessed against the benefit of having a short period of time between exchange and completion.

Keeping the period between exchange and completion short might provide the most fair and reasonable compromise. This period could be limited to a certain number of days but care must be taken to allow enough time to ensure clear pre-completion searches are received and the certificate of title is submitted to allow enough time for lenders’ draw down times.

Any new completion provisions added to the contract must apply throughout the chain and risk should be apportioned fairly. The UK Government have produced guidance on responsible contract behaviour during the COVID-19 emergency.

Make sure the client is aware of a late collapse

Throughout the transaction, even at the point of submission of the certificate of title, it is important for the conveyancer to keep their client aware that even at this late stage, this does not eliminate the possibility of someone in the chain testing positive for COVID-19, developing symptoms or being told to isolate and so no longer being able to leave the house. Everything can come to an immediate halt at very short notice.

The individual circumstances of the client and all parties involved must be given full and proper consideration throughout the duration of the transaction and all parties must be alert to the possibility of a second wave of the virus which could result in them not being able to perform the move if the UK, or part of it, is forced back into lockdown at short notice.

Issue of furlough

Conveyancers must advise their buyer clients that if they are put on furlough leave their lender may not be prepared to lend the same amount as initially agreed.  Clients must be encouraged to check the status of their mortgage offers regularly and to keep their lenders updated on any changes to their employment or financial status.

Self-isolating risk

As the Government increases testing and introduces the new NHS Track and Trace app, more people who are asymptomatic may have to self-isolate at short notice and this may mean that they are not able to leave their homes to physically move house.

If contracts have already been exchanged at this point they may incur significant financial penalties. If a client is hospitalised as a result of COVID-19, the contract would not be frustrated and they could still be obliged to complete (depending on the contract terms).

The client must also be made aware that they may move into a property where somebody has had COVID-19 or was suffering from symptoms. Conveyancers should discuss all of the risks and how they can be addressed.

If you require assistance with handling a property chain in COVID-19, contact our residential property solicitors.