The Law Society has issued advice to conveyancers, including the suggestion that buyers and sellers who fail to complete after exchanging contracts may escape penalty if the failure is because of coronavirus.
One leading conveyancing figure has gone further than this, suggesting that if contracts cannot complete because of coronovirus, all parties involved should simply go back to pre-exchange mode.
The Law Society guidance says that the normal contract provisions relating to default will apply, even where completion does not take place due to Covid-19.
However, it says that the ‘non-defaulting’ party could take a ‘good faith’ view, even where the transactions forms part of a chain.
The new guidance says that all those involved in a transaction should use pragmatism and common sense, including where chains are affected. But the Law Society cautions: “Inevitably there will be a few chains where one or more of the parties in a chain insists on taking a stand to gain an unfair advantage.”
The Law Society says that it has had “many questions” from conveyancers, with issues raised including:
- requests for properties being decontaminated
- refusal to vacate on completion because seller in isolation
- failure or disruption to parts of the banking system (such as CHAPS)
- inability to obtain search results if people are not available to carry out the searches
- reluctance on the part of removal company employees to enter properties
- difficulties in obtaining witnesses
- issues in mortgage lending surveys physical valuation
The Law Society is urging all its members to review their existing contracts, and if necessary insert additional provisions.
The guidance says: “We do not think that we can assess the position sufficiently to attempt to provide any suitable clauses for such a wide range of potential situations.
“Exchanging contracts on a ‘business as usual’ basis may be preferable to using new provisions, but you’ll need to make this assessment.”
Rob Hailstone, founder of conveyancing organising The Bold Legal Group, said that conveyancers are already drafting extra clauses.
He said: “To date, the most popular possible solution is to agree to exchange and complete on the same day. But, in my opinion, the uncertainty that leaves until the very last minute is unfair on all (including removal companies) and someone in the chain may say on the morning of the day) £5k off or I don’t proceed.
“The second favourite solution is to simply agree a long completion date. Problem there is that some mortgage offers may expire during that period.
“If at all possible, we need to agree a standard way forward.
“My own idea is that if any party in a chain is unable to complete because of a Covid-19 related event, all parties will treat contacts as not being exchanged and all parties and their advisors will proceed to act and negotiate as they would have done prior to exchange taking place.”
The Law Society’s advice to conveyancers contrasts with a lack – so far – of official advice to agents, particularly concerning viewings protocol and public access to offices. However, Propertymark has asked the health secretary for advice on how agents should proceed.