What is the position in a conveyancing transaction if it is not possible to complete because of coronavirus (COVID-19)?

What is the position in a conveyancing transaction if it is not possible to complete because of coronavirus (COVID-19)?

Produced in partnership with Chris Bryden of 4 King’s Bench Walk

On 13 March 2020, the Law Society issued guidance in respect of residential conveyancing transactions in light of coronavirus. It is suggested that there is unlikely to be a drafting solution appropriate to every case, and exchanging contracts on a ‘business as usual’ basis may be preferable to using new provisions, but it is up to individual conveyancers to make this assessment. It is further stated that if completion does not take place after contracts have been exchanged, as a result of coronavirus, this will amount to a default and the relevant contractual provisions will apply unless the non-defaulting party takes a good faith view—but in chains of transactions it may not be possible to do this without incurring a penalty.

Many conveyancers are incorporating additional terms into the contract prior to exchange to try to prevent the prospect of default. One suggestion is to agree to exchange and complete on the same day, which can then be pushed back if necessary. However, that leaves uncertainty and the risk that a member of the chain will refuse to proceed unless a discount is offered. Alternatively, it may be possible to agree that if any party in a chain is unable to complete because of coronavirus, the parties will treat contracts as not having been exchanged and therefore all parties negotiate as if that were the case. It may also be possible to include a provision allowing a 14-day extension (to deal with the maximum period of self-isolation) in the event that a coronavirus diagnosis is received without there being an event of default. It would also be possible, though clearly problematic, to include a termination provision without penalty in the event that completion cannot take place on the scheduled date, though this is not likely to be something easily agreed to.

Finally, it may be possible for powers of attorney to be granted, to enable the completion of the conveyancing process if the issue is the ability to attend in person, or to pass on the work to a colleague or local firm, or for the parties to agree to complete but not to require vacant possession for 14 days after completion.

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