Buying and selling houses during lockdown: to move or not to move?
We’ve seen a lot of articles and blogs on this topic and thought we’d offer a bit more detail.
Covid-19 and the current lockdown situation has of course caused concern for everyone, but what if you are due to move house? What are the implications of the lockdown: should you exchange contracts if you haven’t yet, what happens if you have exchanged but don’t want to move during lockdown, and what risks are there if you don’t go ahead ?
The Government has advised people who are buying and selling homes to do whatever they can to put any transactions on hold.
On 26 March 2020, the government issued guidance for people who are in the process of buying and selling properties, based on measures that had previously been announced by the housing minister.
They have said that there is no need to pull out of any transactions already underway, but that purchases should only continue currently if they are moving into a property which is already empty.
So, what if the property is occupied? House purchases are often part of an interdependent chain so…. All parties are encouraged to do all they can to agree alternative dates to move, looking to a time when the stay-at-home measures will be relaxed by the government.
There are of course exemptions for any home moves which are thought to be critical such as where a new date cannot be agreed but of course, social distancing must be observed at all times.
If any of the buyers or sellers are self-isolating, then the parties should again prioritise reaching an agreement to change the move date.
The legal stuff
If you have not yet exchanged contracts, you may wish to speak to your conveyancer about negotiating the terms surrounding completion with the other party, to make it suitable to the situation and to protect your position, although it would be impossible at the current time to foresee every possible situation. Prior to exchange, the contract is not binding and in the majority of circumstances, the parties can walk away without consequence.
However, if you are inclined to exchange contracts during this time, then you should consider carefully the implications this may have and whether additional provisions need to be included in the contract. Your conveyancer will be able to help you here.
If you have already exchanged contracts, then your first point of contact should be your conveyancer and the other party to discuss any implications of what has already been agreed and signed.
Once contracts have been exchanged, you have legally committed to complete and therefore would be at risk of breaking the contract, with the party breaking the contract being in default. However, with agreement from both parties, it is simple to agree to vary the terms of the contract, maybe by adding a clause that delays the move by a set amount of time.
If the move forms part of a chain, this will need to be considered very carefully as there will be a higher risk of a breach and incurring a penalty, however the conveyancers should aim to provide the same solution down the chain, and let the risk fall in the same place on each property.
Inevitably, however, there may be one or more properties in the chain insisting on taking a stand to gain an unfair advantage.
If one party is determined to complete, and the other is not, the party ready to complete can serve notice on the non-completing party allowing them further time (usually 10 working days unless this has been changed in the contract) to complete. During this time, interest will start to kick in and will apply until completion takes place.
If this time period runs out, the party willing to complete can terminate the contract. If a deposit was paid on exchange, the selling party would be entitled to keep this if they are ready to complete, and in the alternative, if the buyers are willing to complete but the sellers are not, they would be entitled to a full refund of the deposit money paid.
Your conveyancer or solicitor should also consider whether any force majeure clauses in the contract can apply, as a move may not be possible due to the “unforeseeable event” that is the pandemic the country is now facing. Whilst Covid-19 was not a foreseeable event a few weeks ago, any exchanges that have taken place recently may not be able to rely on this, as it is now a foreseeable event.
The bottom line is, if you have not yet exchanged, it may be time to reconsider and negotiate this for a time when things are more certain.
Already have a mortgage in place?
UK Finance has announced, on 26 March 2020, that mortgage lenders would allow home movers who have already exchanged contracts to extend their mortgage offers for three months, which therefore means they can delay the move for up to three months.
What about the people who help with moving?
The government has said that conveyancers should continue to support the sales of unoccupied properties and advise clients not to exchange contracts until the risks have been considered fully.
Surveyors should not carry out non-urgent surveys and should not conduct any surveys where people are self-isolating.
Removal firms have been strongly recommended to complete any moves that are already underway and cancel or suspend any that have not yet started. However, the decision as to whether to continue rests entirely with the individual companies.
In these uncertain times, the best advice is to speak to your solicitor so that you can consider all of the options and the risks.