The Freezing of the Residential Property Market

Background

At the end of March, the Government effectively suspended the Residential Property Market issuing official guidance telling people in the early stages of buying or selling properties to delay the transaction all the while emergency measures were in place.

Of course, this is highly problematic for those caught between exchange of contracts and completion. 

What to do if you’ve exchanged contracts

Usually, if a buyer failed to complete on the contractual date, they would be in breach of that contract and the seller would be able to serve a “Notice to Complete”.  Failure to comply with that could cost the buyer their deposit.

However, with the market in this “frozen” state, it is likely to be equally impossible for the seller to complete and so what needs to happen in these situations is that the parties need a good dose of faith and common sense in order to negotiate an extension.

Of course, that may not always be possible and there may always be parties seeking to take advantage and force people’s hands thereby causing contracts to be breached and significant financial loss.

We are finding that a number of people are seeking to delay but we are equally finding parties who wish to proceed and are abiding by guidance to exchange and complete contemporaneously where that is possible.

The considerations in these situations need very carefully to take into account the availability of the mortgage and, indeed, practicalities like ensuring that removal firms are available to honor bookings made or, indeed, take new bookings.  We have also found that if there is a need to progress a case to exchange of contracts, then we can insert a clause in the contract that allows for either party to agree a delayed completion in the event that the failure to complete is due to Coronavirus.

In these circumstances, again, a flexible completion date conditional upon dealing with financial aspects as above and removal services being available is key.

Key points

Below, please find enclosed the key points that are relevant to this current state of affairs: –

• Buyers and sellers have been urged by Government to delay moving due to the Covid-19 crisis but it is NOT an outright ban…yet.
• There are different situations arising for “critical home moves”, for example where frontline staff need to relocate during the current crisis, and also where a property being purchased is empty.
• The Government is looking to develop a standard legal process for moving completion dates without penalty.
• Mortgage offers are usually valid for up to six months but it has been generally agreed that a three-month extension will be allowed to enable a delayed completion date and so as to avoid the expiration of mortgage offers which might penalise a buyer.
• The best advice is not to exchange contracts at all and to put the matter “on hold”. Otherwise, a contemporaneous exchange and completion or an exchange with a carefully worded clause to accommodate a delayed completion is next best.
• Please bear in mind that it is impossible to have property viewings at the moment be they from potential purchasers, surveyors, valuers or estate agents.
• If purchasing “new build” then please note that the majority of sites are temporarily suspended as well and that, consequently, there is almost certainly going to be a delay in the building work being finished.
• Finally, it is being widely predicted that house prices are likely to fall. The agents, Savills, predicted a 10% drop but this is entirely speculative at the present time and it is currently impossible to say what the market will do given the current lockdown in place and the unknown duration of it.