Conveyancing – and completions – likely to be heavily disrupted by virus, says Law Society

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.

https://www.lawsociety.org.uk/support-services/advice/articles/covid-19-and-residential-conveyancing-transactions/

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8 Comments

  1. #ImpressiveConveyancing

    With conveyancing standards as low as they are, we must not encourage conveyancers to start trying to draft their own contract clauses, or they will delay transactions as they try to have their muddle drafting accepted, and the wording may not work and so frustrate chains and cause their themselves PII claims.
     
    Instead THE simplest of advice – ensure there is the tightest gap between exchange and completion.
     
    AND….from today, don’t hang about asking inane enquiries – get – the – deal – to – an – exchange!

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  2. Rob Hailstone

    I don’t believe that buyers and sellers who fail to complete after exchanging contracts may escape penalty if the failure is because of coronavirus. If there is a financial loss anywhere in the chain it is highly likely that the person or persons ultimately causing that loss will be held accountable.
    Conveyancers need to advise clients who are about to exchange contracts, what their legal position might be if they, or someone in their chain, can’t move/provide vacant possession on the day of completion due to a Covid-19 related event taking place.
    Conveyancers are already drafting their own additional clauses to be inserted into contracts in order to try to protect their client’s interests. Problem is, as of yet, there is no standard clause, so exchanges may be delayed whilst debate, discussion and negotiations take place.
     
    I am hoping that the main conveyancing and other stakeholder bodies, get together, soon to come up with a recommended solution that is fair to all.

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  3. Nemo Conveyancer

    I fail to see how any clause could fairly protect both parties; if completion fails then someone will suffer loss. Property contracts do not make provision for any other illness/injury, nor should they.
    The idea of ‘unexchanging’ has the same issues.
    As above, don’t try to be too clever. Try to exchange as close to completion as practically possible. When exchanging, ensure that clients understand the way that a failed completion will operate and the risks to them should they be unable to complete. Suggest ways that they can understand and mitigate the risk, for example:
    – What is their removal company’s policy on cancellations/COVID?
    – Can they move some items out sooner?
    – Can they devise a plan B?
     

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  4. Alan Murray

    “AND….from today, don’t hang about asking inane enquiries – get – the – deal – to – an – exchange!”

    I’m not sure this is the time for the usual inane, unprofessional points scoring. Everyone needs to be sticking together.

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  5. Rob Hailstone

    I agree Nemo that property contracts do not make provision for any other illness/injury. However, these are unusual times and we should be making efforts to help reduce consumer misery by thinking outside of the box.
    Like I said: Conveyancers are already drafting their own additional clauses to be inserted into contracts in order to try to protect their client’s interests. Problem is, as of yet, there is no standard clause, so exchanges may be delayed whilst debate, discussion and negotiations take place. We need to try to stop this.
    Not sure what the unchanging problem is if all parties have agreed?
     
    A short exchange/completion date may be the best solution, but like you, would like to hear from the removal companies.

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    1. Nemo Conveyancer

      My issue with the unexchanging idea is that it creates the same problems as you suggest with a Simultaneous. It creates uncertainty and is open to exploitation. 
      Where contracts are exchanged ahead of completion, which will simply have to happen in some cases, removals will get booked. If completion is delayed due to COVID, those removal fees still need paying. If a client has to pay these through no fault of their own then they will feel wronged and will question the existence of a clause that prevents the recovery of these sums.
      If there is to be a clause, then I completely agree that it needs to be standard and imposed unilaterally. Which is a shame that the Law Society’s response was so weak. 
      I am aware that picking holes in others ideas without being clever enough to think of a better solution makes me a terrible human!

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      1. Rob Hailstone

        If playing Devil’s Advocate makes you a terrible human (I don’t think it does), then at times we all are:)

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  6. Rob Hailstone

    So, I try to get industry to work as one for the benfit of all and get dislikes?

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