Two bites of the apple- limitation in professional negligence cases
In light of the restrictions on movement imposed by the Government to combat COVID-19, the Ministry of Housing, Communities and Local Government has issued “Government advice on home moving during the coronavirus (COVID-19) outbreak”. This has led to concerns that the UK housing market has been put on hold.
Below are some of the key questions being asked:
The Government’s guidance applies to people buying or selling private residential homes which they intend to live in. The overarching objective is to protect public health and maintain social distancing measures by preventing people coming into contact with each other as much as possible. The stage of the transaction where this is most problematic is on completion, where people are physically moving around and, potentially, into premises that other people have been occupying.
The Government’s guidance can be read in full here. Please note that it is likely that this guidance will be subject to change.
Key points from the Government guidance are that:
There are situations where a property does not need to be occupied straight away, for example, because it is being purchased as an investment property, the buyer intends to carry out works or the buyer is currently renting and has time left on their existing tenancy. In these cases, there is no need for completion to be delayed and the transaction can proceed as normal.
If moving into unoccupied property at the moment, it is advised that parties take account of current Government guidance on social distancing.
It is recommended that parties defer exchange and completion to a time when it is likely that social distancing measures will no longer be in place.
Where parties have already exchanged contracts, they should try to agree to the completion date being deferred. If it is impossible for the parties to agree a deferral, then completion can still take place but they must follow the Government’s advice on staying away from others to minimise the spread of the virus.
Where parties have not exchanged contracts, they should consider whether it is possible to delay the transaction. If they still want to proceed, they need to carefully consider the risks presented by the virus and ensure that suitable clauses are included in the contract to take account of those risks.
Exchanging contracts on a property obliges the parties to complete on the agreed completion date. There is a risk that current or further Government measures or changes in parties’ personal or financial circumstances could make it impossible to complete on that date.
Under the Law Society’s Standard Conditions of Sale, which govern most standard residential transactions, if a party is unable to complete on the completion date:
Parties should think very carefully before deciding to proceed to exchange. However, if appropriate the following provisions could be considered to allow transactions to exchange now:
There is no set time period between exchange and completion. The parties could agree to an extended time period and complete in a few months’ time, when social distancing measures may be relaxed.
The contract could provide that completion can take place on a specific date in the future “or earlier by mutual agreement between the parties”, thereby allowing completion to take place sooner, if social distancing measures are relaxed earlier than expected.
The contract can provide that if completion cannot take place due to certain defined “coronavirus events”, the completion date can be delayed with a long stop date for completion.
By agreeing to this, the consequences and penalties for failing to complete, for example, the payment of late completion interest and ability to serve a notice to complete, could be suspended during this time.
Careful consideration would be needed when specifying the “coronavirus events” to ensure that as many eventualities as possible are covered. There are some more obvious scenarios, such as the risk that the buyer or seller may be ill or self-isolating. However, what if the Government imposes more restrictive measures? What if there is disruption to services, such as the post, couriers or banking system? What if standard pre-completion searches and inspections are not available? All these risks should be covered.
The parties could agree that if completion cannot occur by a set date, either party may terminate the contract and the deposit is returned.
When agreeing to extend the period between exchange and completion, it should be borne in mind that, under the Standard Conditions of Sale, the property will be at the risk of the buyer from exchange. This means that the buyer will still be obliged to purchase the property if it is damaged after exchange and should insure the property from this date. The buyer may want to alter this position, particularly if the seller will continue to live in the property.
If you would like to discuss how the Government's current advice may affect your property transaction, please contact a member of our Real Estate & Construction team.
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