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Coronavirus and Moving Home Your options regarding exchange of contracts and completion

Published on June 11th, 2020

Ellie Parr
Solicitor & Director

At Houldsworth Solicitors we are committed to achieving the right outcome for our clients on every single matter. This ‘new normal’ is a challenging time for buyers, sellers and solicitors and it is important to proceed in a way that protects both your health, your legal position and which is in accordance with the Government Advice.  Every matter is different so there is no ‘one size fits all’ solution however it is important to consider the pros and cons of all of your options. 

What is the Government Advice?

The most recent advice (at the time of writing) from the government can be found on the official government website by clicking here

“People are free to move home, however the process of finding and moving into a new home is likely to be different, as those involved in the process will need to adapt practices and procedures to ensure that the risk of spread of coronavirus is reduced as far as possible. It is vital that everyone stays alert and safe.”

“Once you have agreed to move home by exchanging contracts or signing a tenancy agreement, you have entered into a legal agreement to move. We encourage all parties to be as flexible as possible over this period and be prepared to delay moves if needed, for example if someone becomes ill with coronavirus during the moving process or has to self-isolate. You should not expect to move into any home where people are ill or self-isolating.

How Coronavirus is affecting home moves

During the initial lockdown, many people had already exchanged contracts and were legally obliged to complete on their sale or purchase during the lockdown period. There are several risks involved in moving home during the pandemic which may affect you (or any other party in the chain of transactions). For example: -

  • staff at the buyer's or seller's solicitor or the lender are not available;
  • the buyer or seller (or anyone living with them) is unwell and/or self-isolating;
  • the government introduces mandatory measures to reduce transmission;
  • there is disruption to the post or the banking system;
  • the buyer cannot carry out standard pre-completion searches due to staff shortages at the Land Registry;
  • a lender withdraws their offer to finance the purchase; or
  • there are delays elsewhere in the chain.

How can you proceed?

Option 1 – Proceed in the usual way on a standard contract (The ‘business-as-usual’ approach)

The risk in proceeding this with is that you or one of the other parties in the transactions may be unable to complete on the agreed completion date for one of the reasons set out above. If you are the party that is unable to complete (for example your removal firm cancels on you at the last minute) then you will be subject to a significant financial penalty. The longer the chain the higher the financial penalty. If you proceed in this way then the risk can be reduced by minimising the time between exchange of contracts and completion. 

Option 2 – A simultaneous exchange and completion 

This is not usually something recommended by property lawyers in usual circumstances however this reduces the legal risk of you being in breach of contract. A simultaneous exchange of contracts involves exchanging contracts and completing on the same day meaning that the legal obligation to proceed and the physical move take place on the same day. The risk is, of course, that the transaction may not happen on the day and you have had to go to the expense or making arrangements to move (booking time off of work, removals etc). If one of the parties is not able to exchange and complete you will not be able to claim compensation from them as no contract is in place although equally you would not be subject to any financial penalty either if you could not complete for whatever reason. 

Option 3 – Proceed with a ‘Coronavirus Clause’ in the contract 

You ask your conveyancer to negotiate and add (prior to exchange) a clause to the contract providing that (under certain circumstances) the completion date be delayed or for the contract to be rescinded (cancelled). 

For example, if you become hospitalised due to Coronavirus the contract addendum could allow for you to delay completion. A buyer may also find that their mortgage offer is withdrawn. If this is the cause the rider to the agreement could provide that a buyer could rescind the contract and regain their deposit.  Do however expect a slight delay if you proceed in this way. The amendment to the contract would need to be negotiated and agreed by both sets of lawyers (even more if there is a chain) and then explained to their clients.

There is still a risk however as there is a risk that that completion will not take place on the pre-agreed date if you, your purchaser/vendor or someone in the chain is affected and needs to rely on the coronavirus clause. It is also possible that the chain could collapse altogether if one party is not able to proceed. For example if the first time buyer at the bottom of the chain is made redundant and loses their mortgage offer the contract (and the remainder of the contracts in the chain) would need to be rescinded. 

Conveyancing Glossary

Exchange of Contracts:

The exchange of contracts takes place (usually over the telephone) between the buyer’s lawyer and the seller’s lawyer. At this point the contract becomes legally binding on both parties, the deposit is paid to the seller and a completion date is set.

Completion Date:

The date that is agreed between the parties when contracts are exchanged when the Seller moves out of the property, the Buyer moves in and the money changes hands.

On rare occasions one of the parties is unable to complete the transaction on the completion date. In these circumstances the party who fails to complete suffers a financial penalty which can be significant.