The residential property market could be thrown into chaos by the coronavirus (COVID-19) pandemic, leaving buyers and sellers unable to complete transactions.
Graham Ireland, who is a director and head of conveyancing at WHN, fears serious problems could arise in the conveyancing process if the buyer or seller becomes infected part way through – with the law allowing very little flexibility where sickness is concerned.
Another concern is that the rising number of people going into self-isolation could mean fewer properties entering the market. Meanwhile, buyers may be deterred from viewings and making offers due to their own health worries and financial uncertainty.
Graham commented: “The conveyancing process is especially vulnerable to disruption because so many of the crucial elements depend on human interaction. If contracts have been exchanged, the lack of legal leeway could cause challenging problems for buyers and sellers.
“The implications are quite daunting for the party failing to complete. This could be for a variety of reasons, for instance the need for either party to self-isolate, the availability of witnesses to sign essential documents, or the removal company going bust, experiencing staffing problems or refusing to enter a property where the owner is showing symptoms of the coronavirus or has self-isolated.”
Other potential issues include requests from buyers for the decontamination of properties; confusion in the banking system; and difficulties with physical survey valuations.
Graham continued: “The contractual situation is that the party able to complete is entitled to serve notice on the party who can’t. This gives the defaulting party 10 working days to complete the transaction. A particularly thorny issue is that interest of between three and four per cent above the base rate is accrued on the purchase price.”
This cost would have to be met by the party who had delayed the completion. They would additionally have to pay the other party’s costs for contingencies such as furniture storage and temporary accommodation if someone in a property chain was forced to vacate the property they had just sold.
Graham added: “In the worst case scenario, the buyer or seller could end up terminating the contract because completion hadn’t happened. In a situation like that, the seller could retain the deposit if it was the buyer’s default that meant completion could not happen.
“While there is no tried and tested way of making sure a transaction isn’t disrupted by the effects of coronavirus, the parties could agree to a special condition in the contract making allowances for a delay if the virus meant either of them couldn’t complete on time. The Law Society has already said that they would frown on this being adopted in all property transactions.”
