With Covid cases still on the rise and the threats of a stricter lockdown, where does this leave conveyancing transactions? A Covid clause can be inserted into the standard conveyancing contract to create a process if a party is unable to complete on the transaction due to a Covid defined event.
Moving during COVID: What are all the options you have in the current climate?
- Continuing under the standard terms of the contract
- Inserting a COVID clause or similar clause to the contract
- Exchanging and completing on the same day – this may not be available if there is a chain
- Delaying the transaction till the current levels of restrictions and cases has subsided
- Withdrawing from the transaction – no one wants this to be the option parties choose
What is a Covid defined event?
Well, these vary between riders but the most common events are:-
- Mandatory lockdown measures from the government
- A party having to self-isolate or quarantine
- Issues with removal firms or with conveyancers
- Withdrawal of lender funding
- Delays in the chain
What if you exchange on a standard contract?
If you were to proceed without a Covid rider then the party at fault would breach the contract due to the inability to complete on the date specified in the contract. Breaches resulting from Covid are treated no differently from any other breach of contract. This would result in notice being served on them by the chain and ultimately would result in financial penalties.
What are the downsides?
The main issue is there would be uncertainty on a revised completion date. Not all parties may agree to a completion date.
What about the SDLT holiday?
Covid Clauses have a general length of 2 to 3 months. If no date has been agreed at this point the transaction falls away and deposits will be given back. With the SDLT holiday fast approaching this needs to be considered by the purchasers when agreeing to the terms.
Is it too late once we have exchanged without a clause?
Whilst not ideal, the terms of the exchanged contract can be varied if agreed upon by all parties in the chain. The Law Society Guidance is for chains to be flexible with completion where possible. All parties are being urged to be understanding in the current situation even if there is no legal duty to do so.
Outside of Essex, London or Suffolk