Residential conveyancing: breach of contract during covid-19 outbreak

With the impacts of the coronavirus outbreak continuing to ricochet through the economy, the process of buying and selling property has never been more stressful for buyers and sellers alike. 

Government advice so far has been to encourage the general public to delay moves during the lockdown period, even if contracts are already exchanged.  In practical terms, new transactions have been stymied by the social distancing rules contained in the Health Protection Regulations 2020, with estate agents, valuers, surveyors and removals companies finding it difficult to carry out their work in the current climate. 

Funding has also been affected, with many mortgage lenders tightening their lending criteria and insisting on larger deposits before agreeing new mortgage offers, or extending existing offers for up to three months as they encourage prospective purchasers to effectively ‘sit out’ the ramifications of the Covid-19 pandemic. However, where contracts are already exchanged and completion dates have been set, delaying completion may not always be possible if buyers and sellers are to avoid breaching their contracts. 

If you are close to exchanging contracts but have not yet done so, our advice is as follows:

  • In line with government guidelines, clients should, where possible, delay exchanging contracts and agreeing a fixed completion date until the Health Protection Regulations 2020 have been relaxed. 
  • If this is impractical or unavoidable, then we will discuss with you whether we make provision in the contract for a possible delay of the completion date after exchange without breaching the rest of the contract. Whether this is appropriate, and the wording of the clauses, will depend on the nature of the transaction, whether it falls within a chain of related transactions, the funding situation and the circumstances of the other parties. 

If you have already exchanged contracts but not yet completed your transaction, you should be aware of the following risks:

  • If there is no provision in the contract to allow for a delay to the contractual completion date then breaching the agreed timescale could lead to the loss of a deposit, penalty interest and the potential responsibility for the other party’s wasted costs. 
  • An argument might be made that in some cases the impacts of the Coronavirus could be deemed to have ‘frustrated’ one side’s ability to complete the contract, but with no Force Majeure (“Act of God”) clause in the standard conditions under which most residential property is bought and sold in England and Wales the risks of breaching the sale contract as outlined above still loom large. Where possible, buyers and sellers should adopt a ‘good faith’ position, and work together to keep the transaction on track. We will help establish that dialogue and do our best to ensure you avoid the repercussions listed above. 
  • If appropriate, willing parties can agree to vary a contract after it has been exchanged, either to agree a new fixed completion date beyond what was previously agreed or to insert a new set of clauses to allow the existing completion date to be moved if either party is unable to complete their side of the contract because of the impact of the Coronavirus on their health, their ability to give vacant possession or arrange removals in good time.  
  • If completion does take place, then be aware that removals companies will be hindered by the social distancing rules. It’s better to accept a delay to the arrival of your possessions then risk the financial penalties that a late completion could bring.
  • Factor in the possible need for decontamination of a property before moving in. Government advice in that regard can be found here.

As always, the earlier we speak to you about your concerns on these points the more choices you will have as the situation develops. For further advice on the impact of the Coronavirus on residential conveyancing transactions please speak to Gerard McLachlan, head of our residential property team.

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.