The Ministry of Housing and the Law Society have issued new guidance for the property industry and the public on how to approach home moves in the current Coronavirus lockdown.
On Monday, Prime Minister Johnson put the nation on temporary lockdown in a bid to quell the spread of the Covid-19 virus. After some confusion, we’ve now had some clarification from a Government spokesperson on what that means for property buyers and tenants. Here’s the official line:
- Home buyers and renters should, as far as possible, delay moving to a new house while emergency measures are in place to fight coronavirus.
- If moving is unavoidable for contractual reasons and the parties are unable to reach an agreement to delay, people must follow advice on social distancing to minimise the spread of the virus.
- Anyone with symptoms, self-isolating or shielding from the virus, should follow medical advice and not move house for the time being.
- Where moves do need to go ahead, all those involved should take care to follow government guidance on social distancing and hygiene.
The full official Government guidance for agents, conveyancers and the public is below and at www.gov.uk. The Law Society has supplemented these notes with some more granular advice; the full briefing note is below, or visit www.lawsociety.org.uk for the latest updates.
Official Government advice on home moving during the Covid-19 coronavirus outbreak
From The Ministry of Housing, Communities & Local Government, 26th MarchThis guidance applies to people buying or selling private residential homes which they intend to live in.
Buying and Selling Homes during this stay-at-home period
Given the situation in the UK with regard to the outbreak of coronavirus (COVID-19), we urge parties involved in home moving to adapt and be flexible to alter their usual processes.
There is no need to pull out of transactions, but we all need to ensure we are following guidance to stay at home and away from others at all times, including the specific measures for those who are presenting symptoms, self-isolating or shielding. Prioritising the health of individuals and the public must be the priority.
Where the property being moved into is vacant, then you can continue with this transaction although you should follow the guidance in this document on home removals. Where the property is currently occupied, we encourage 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 (COVID-19) will no longer be in place.
In the new emergency enforcement powers that the police have been given to respond to coronavirus, there is an exemption for critical home moves, in the event that a new date is unable to be agreed.
Recognising parties will need to alter common practice, we have sought to ease this process for all involved by:
- Issuing this guidance, developed with Public Health England, to home buyers and those involved in the selling and moving process;
- Agreeing with banks that mortgage offers should be extended where delay to completions takes place in order to prioritise safety; and,
- Working with Conveyancers to develop a standard legal process for moving completion dates.
Advice to the public
What does this mean for my property move which is scheduled whilst the stay-at-home measures to fight coronavirus (COIVD-19) apply?
- Home buyers and renters should, where possible, delay moving to a new house while measures are in place to fight coronavirus (COVID-19).
- Our advice is 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 matter.
- 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.
What if an extension goes beyond the terms of a mortgage agreement?
UK Finance have today confirmed 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 three months to enable them to move at a later date.
If a customer’s circumstances change during this three 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 will work with customers to help them manage their finances as a matter of urgency.
If your home is not yet on the market
Getting your home onto the market may be more challenging than usual in this period.There should be no visitors to your home. You can speak to Estate Agents over the phone and they will be able to give you general advice about the local property market and handle certain matters remotely but they will not be able to start actively marketing your home in the usual manner.
- If you are thinking about selling, you can use this time to start gathering together all of the information you will need to provide to potential purchasers.
- Advice for people to stay at home and away from others means you should not invite unnecessary visitors into your home, including: Property Agents to carry out a market appraisal or take internal photographs prior to marketing your home; and Energy Performance Certificate assessors.
Viewings
If your property is already on the market, you can continue to advertise it as being for sale but you should not allow people in to view your property.
- There should not be any visitors into your home, and you should therefore not let people visit your property for viewings. Your agent may be able to conduct virtual viewings and you could speak to them about this possibility.
Accepting offers
The buying and selling process can continue during this period but you should be aware that the process is likely to take longer than normal.
- You are free to continue to accept offers on your property, however the selling process may take longer.
- Advice for people to stay at home and away from others means you should not invite visitors into your home, including prospective buyers or advisors.
Exchanging contracts
Once you have exchanged contracts, you have entered into a legal agreement to purchase that home.
- If the property you are purchasing in unoccupied you can continue with the transaction.
- If the property you are purchasing is currently occupied, we recommend that all parties should work either delay the exchange of contracts until after the period where stay-at-home measures to fight coronavirus (COVID-19) are in place, or include explicit contractual provisions to take account of the risks presented by the virus.
Advice to industry
All businesses must follow the Government’s latest Guidance for employers and businesses on coronavirus (COVID-19).
Estate Agents
Estate Agents should ensure they are able to support clients during this period:
- Agents should work with their clients and other agents to broker a new date to move where sales are due to complete on occupied properties in the current period where emergency measures are in place to fight coronavirus (COVID-19).
- Agents should prioritise support for anyone with symptoms, self-isolating or shielding from the virus, and those they are in chain with, to agree a new date.
- In line with advice for certain businesses to close, agents should not open branches to the public during this period, or visit people’s homes to carry out market appraisals.
- Agents should ensure that employees can work from home, to support existing clients and advise potential new clients.
- Agents should continue to progress sales where this can be done whilst following guidance to stay at home and away from others.
- Agents should advise clients to be patient and not to exchange contracts unless the contracts have explicit terms to manage the timing risks presented by the virus.
Conveyancers
Conveyancers should continue to support the sales process as far as possible and should make sure their clients are aware of the difficulties of completing transactions in this period:
- Conveyancers should continue to support the sales of unoccupied properties as far as possible.
- Conveyancers should make every effort to support clients who are due to complete on occupied properties in the stay-at-home period to change this date.
- Conveyancers should advise their clients who are ready to move not to exchange contracts on an occupied property unless they have made explicit provision for the risks presented by the virus.
- Conveyancers should prioritise support anyone with symptoms, self-isolating or shielding from the virus and those they are in chain with, and we urge them to do all they can to help a new date to be agreed in these circumstances.
Surveyors
Surveyors should not expect to carry out non-urgent surveys in homes where people are in residence, and no inspections should take place if any person in the property is showing symptoms, self-isolating or being shielded. It may be possible to carry out some of your work online and also carry out urgent surveys on empty properties, or those where the occupants are out of the property or following guidance to stay at home and away from others.
- Surveyors should follow the latest Government guidance which currently (26 March 2020) states that work carried out in people’s homes can continue, provided the tradesperson is well and has no symptoms of coronavirus (COVID-19).
- It is important to ensure Government guidelines are followed, including maintaining a 2 metre distance from others, and washing their hands with soap and water often for at least 20 seconds (or using hand sanitiser gel if soap and water is not available).
- No work should be carried out by a person who has coronavirus (COVID-19) symptoms, however mild.
Removals Firms
There will be people who have already committed to moving home; where possible we are encouraging them to delay their move but a small number of moves may need to go ahead. We would urge everyone to take all sensible precautions to ensure the move can happen safely.
- Removers should honour their existing commitments where it is clear that the move can be done safely for the client and your own staff and it is clear that the moving date cannot be moved.
- Removers should follow the latest Government guidance which currently (26 March 2020) states that work carried out in people’s homes can continue, provided the tradesperson is well and has no symptoms or coronavirus (COVID-19).
- It is important to ensure Government guidelines are followed, including maintaining a 2 metre distance from others, and washing their hands with soap and water often for at least 20 seconds (or using hand sanitiser gel if soap and water is not available).
- No work should be carried out by a person who has coronavirus (COVID-19) symptoms, however mild.
Updated Law Society guidance to conveyancers advising clients on house moves 29th March 2020
This includes specific advice to conveyancers. You should note that, ‘prioritising the health of individuals and the public must be the priority.’
Nothing in this guidance should be read as contradicting that advice.
The government has made clear an overall direction of travel. Home moves into occupied properties should only take place where contracts have already been exchanged and it has proved impossible for the parties involved to agree a deferral.
You should encourage your client to agree an appropriate deferral and only advise them to proceed if that has proved impossible.
The police emergency powers are disapplied only for critical home moves.
Moves into unoccupied properties may continue, subject to the points below.
When moves occur, they must do so in a way which takes account of the guidance currently in force from Public Health England and Public Health Wales. You should advise and help your clients to make themselves aware of the requirements applicable at the time they’re looking to move.
It’s important to try and avoid allegations, however unjustified, that the conveyancing profession is encouraging its clients to carry out transactions against the spirit as well as the letter of government requirements. However, once you’ve provided advice about deferring the transaction and the client or clients instruct you in writing to continue to complete the contract then, if it’s legally possible to do so, you must follow your client’s instructions.
The response to the coronavirus epidemic is, and will continue to be, fast changing.
Conveyancers need to keep up to date with guidance as it evolves and changes with health advice.
It is not possible for this guidance to cover every eventuality, despite our best endeavours. We hope that you’ll use your common sense in applying it and will always bear in mind the overall objectives of government policy in this public health emergency.
Amending existing contracts
The sector trade and representative bodies including, the Law Society, Society of Licensed Conveyancers, Conveyancing Association, CILEx and Bold Legal Group, have worked together to agree the outline of a process for deferring a completion date.
As always, every case should be treated on an individual basis and any clauses or processes suggested should be amended and tailored to those individual needs.
Once all parties have agreed to defer the completion date, in order to comply with s.2 of the Law of Property (Miscellaneous Provisions) Act 1989, conveyancers should exchange a written agreement to vary the 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 conveyancer to sign as agent on their behalf.
This will require a formal exchange process. You should make it clear that there is not an intention to create a new contract; only an intention to vary the existing contract.
Conveyancing Quality Scheme members should effect exchange under one of the Law Society’s formulae for exchange. Others may do so too, or may effect exchange in another way. In chains of transactions it may be easier to use the formulae. The undertakings will need to be altered to confirm that the original document will be sent when the coronavirus COVID-19 restrictions are lifted.
Before exchange of the agreement effecting the deferred completion date, conveyancers should ensure their clients understand the benefits and risks and are advised in accordance with their own circumstances.
The following advice may be relevant but this is not intended to provide an exhaustive list of the potential circumstances which might arise.
Mortgages
While generally lenders have agreed to extend the mortgage instructions for three months you should establish whether any formal confirmation is necessary and if the lender to provide it.
Searches and costs
Remember that your normal obligations apply to your client and lender client and you should consider prior to the eventual completion whether you will need to refresh searches.
As always, you have a duty to advise clients of the potential for additional costs involved in managing their transaction whether those are your own costs or additional disbursements.
Advice for clients who have already exchanged contracts
Agree either directly or through your estate agent that your transaction can be deferred.
It’s a good idea to have 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.
The clause should state that once the restrictions end there will be a period of time agreed before you move to enable everyone to get ready for the move. This might be one or two weeks. Make sure the timescale will give you enough time to find removals and arrange your move especially in circumstances where there is likely to be an increased demand for these services.
There’s a formal process required to effect a deferral of a completion date which will involve your conveyancer exchanging agreements on your behalf with the other party to confirm the new arrangements.
If you’re buying a property with a mortgage you should check whether you will need written confirmation from your lender to this extension. (Lenders generally have agreed to extend mortgage offers by three months).
Consider what would happen if your circumstances change during this 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 will fluctuate during the period of deferral and this might impact your lender’s ability 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.
Advice for clients who have not yet exchanged contracts
You can still continue with your transaction and should take this time to work with your conveyancer to progress the transaction and to read through the reams of documents involved in moving house.
You should think very carefully before instructing your conveyancer 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 make sure that if you do instruct your conveyancer to exchange, that they have incorporated a suitable clause in the contract to deal with any ongoing risks caused by the virus.
Advice for clients who have to move during the stay-at-home period and the 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 the 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.
Law Society Guidance: Coronavirus and residential conveyancing transactions 25th March 2020
If you’re acting for someone who has exchanged contracts and has a completion date within the next few days, and you, your client and the other side are able to proceed, which may be very difficult given the position with removal firms, there’s currently nothing to prevent you doing so.
This is subject to following current guidelines in respect of public health:
- properties not being occupied with cases (or suspected cases of) coronavirus (COVID-19)
- occupants not being in a state of isolation, and
- all parties abiding to social distancing requirements
This is a very high bar and it may not be possible to comply.
We’re seeking further clarity from government and will monitor closely as the situation develops. We’re hoping for official guidance to be published in the next few days.
The announcement about social distancing has obviously increased the impact of coronavirus (COVID-19) on conveyancing transactions.
We continue to receive many questions from members but the nature of these has now changed. Many relate to the immediate issues in relation to completion where contracts have been exchanged.
We understand that this is a very difficult time for you and your clients. The situation is unprecedented, and we’re becoming aware all the time of different aspects of the impact of the pandemic on those moving home and our members.
The restricted movement requirements impact on many parts of a conveyancing transaction. What everyone wants to understand (and ideally control) is who bears the risk in various situations.
The focus of this note, now that the restrictions on movement are severe, are on those transactions where contracts have already been exchanged.
After exchange
The key issue at every stage is to point out as many of the likely risks as you can.
You’ll want to assess the clients’ appetite for risk, set out the options and likely consequences for each option and establish whether your client wants to proceed and, if they do, how they want to do this.
It’s important to:
- explain all risks
- confirm advice in writing
- make sure the client acknowledges having had the advice in writing
You may need to discuss these issues across any chain.
The contract may need to set out how completion might happen in the circumstances to satisfy the requirements of Public Health England:
The transaction will be governed by the provisions in the contract unless the parties agree otherwise.
If completion does not take place after contracts have been exchanged due to COVID-19, the parties not completing will be in default.
The contract provisions relating to default will probably apply unless the non-defaulting party takes a ‘good faith’ view. Notices to complete, penalty interest and deposit loss may all come into play.
If the transaction forms part of a chain of transactions, it may not be possible to take such a view without incurring a penalty.
There’s no specific ‘force majeure’ provision in the Standard Conditions of Sale and it may be that it would be difficult to imply one.
Frustration
A contract is frustrated if it’s incapable of being performed due to an unforeseen event (or events) which is not the fault of either party.
It may be that the contract might be frustrated by isolation or restrictions on movement and activity, but it’ll depend on the circumstances of the individual case and, ultimately, the attitude of the courts.
It’s difficult to envisage what might happen to a contract if it’s frustrated. Some commentators have suggested that the provisions relating to rescission might apply.
It may be that contracts will not be frustrated. So many factors are involved in making the determinations and the court has, in recent times, shown a marked reluctance to make such a finding.
The expectations, assumptions and responsibilities of the parties must be taken into consideration. That a contract would be held to be frustrated in the current circumstance is not something that can be treated as a presumption.
Each situation is likely to have different implications and a different outcome. There’s no certain and fixed answer.
Variation to contracts after exchange
If contracts have been exchanged but completion has not taken place, and the parties want to vary the contract, care must be taken not to create a new contract unintentionally.
Creation of a new contract may impact on insurance. Risk passes on exchange – will insurers need to be notified that technically a new contract has been formed?
Even changing the date of completion may create a new contract rather than varying an existing one.
You’ll need to review the standard and special conditions if a new contract may be formed on the revised date.
Remember there are risks in giving professional undertakings rather than expressly varying a contract.
Undertakings
In response to the question ‘What if I am struggling to comply with a conveyancing undertaking?’, the Solicitors Regulation Authority say:
“Our rules provide that you should perform all undertakings given by you within an agreed timescale or if no timescale has been agreed then within a reasonable amount of time. Before giving any undertaking in these current circumstances you should always consider if you can properly implement it and you should have regard to all the eventualities that may affect your ability to perform it. You may want to add something new into your undertakings to take account of the risk of delay due to the effects of coronavirus.
“If you find yourself in a situation that you are not able to comply with an undertaking that you have given, you should let your client or the other side know as soon as possible. If a failure to comply or delay is beyond your control due to the impact of coronavirus, should any complaint be made, this would be taken into account by us as a mitigating circumstance”.
Increased risk of fraud
The unusual circumstances are providing an increased opportunity for fraud.
Everyone will need to be on the alert and take extra care to do their best to make sure that their security systems are not breached.
Electronic signatures and witnessing
Even though the government on 3 March 2020 supported the view of the Law Commission about the validity of electronic signatures for deeds, HM Land Registry have their own requirements.
In terms of electronic signatures, our view is that these:
- can be used to sign contracts to sell/buy unless the contract is being executed as a deed
- cannot be used for deeds
- probably cannot be used where a signature needs to be witnessed unless the witness was present when the electronic signature was affixed – in which case a wet ink signature could have been used
- cannot be used where a wet ink signature is required, for example, for documents for HM Land Registry and some lenders
See our practice note on virtual signing
At present, if contracts have not been exchanged, you should encourage clients not to exchange until the situation is more settled.
After completion
We’re in contact with HM Land Registry, HMRC and UK Finance and hope to provide further information shortly.
- HM Land Registry: Update: 25 March 2020
- Companies House: See all the latest information related to Companies House and COVID-19
Companies House says it has plans in place to maintain services during the coronavirus (COVID-19) outbreak.
If, immediately before the filing deadline, it becomes apparent that accounts will not be filed on time due to the company being affected by COVID-19, you may make an application to extend the period allowed for filing.
If you do not apply for an extension and your accounts have been filed late, an automatic penalty will be imposed.
General principles
Focus on your client’s best interests and explain the risks to them.
Using pragmatism and common sense, it’s hoped that transactions can continue to take place without too much disruption, but we know that this is difficult for you and for your clients.
If chains are affected, the aim would be to provide the same solution and let the risk fall in the same place across the chain, but we acknowledge that this may be very difficult to negotiate.
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, but we hope these transactions will be in the minority.
Follow the protocol
- Act with courtesy and co-operate with third parties
- Maintain high standards of courtesy and deal with others in a fair and honest manner
- Make sure the proper internal and external arrangements for file management have been communicated to your client in relation to holiday and sickness absence
- Explain the risks and consequences of different ways of proceeding to your clients
There are obviously indications of a marked market slowdown. If you need advice and support in relation to your business generally, see: www.GOV.UK/coronavirus.
