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How is the property sector impacted by the Coronavirus outbreak? – 13th May 2020 Update
The Coronavirus pandemic has affected everyone in the UK in one way or another. Here we look at the property sector and the impact we are seeing on this. Hopefully this answers some questions and helps you to plan for your business or individual circumstances.
On 13th May 2020 some of the rules relating to the property sector have been relaxed and it is now possible to leave the place you live in order to carry out a number of activities relating to the renting, selling or buying of a residential property:
This should help to boost the property market again and our previous information has therefore been updated below in light of these changes:
Are all property transactions now able to be completed?
Where possible all transactions can still complete and the rules on completion of occupied residential properties have now been relaxed as there is no longer a restriction where someone needs to move out. The lockdown regulations now explicitly allow leaving your home for house moves, viewings and other steps required in the letting and selling of residential property.
This may mean that some of the transactions that were paused at the start of the outbreak may be able to be completed. To find out about your transaction you should contact your solicitor and/or lender to find out whether your transaction can now continue – it may take some time for all parties in a transaction to be in a position to complete.
Many of the transactions involving empty residential properties or commercial buildings were already completing as planned and the investment sector was still active.
What if I exchanged contracts before lockdown with completion during lockdown but still can’t complete?
Our advice throughout the coronavirus outbreak has been to try to exchange contracts and complete transactions at the same time to avoid the possibility of something going wrong and being in breach of contract. This remains the case even after the recent relaxation of the lockdown regulations.
However, if you exchanged contracts before the lockdown and were due to complete during the lockdown there could be various reasons why you could no longer complete on the set date, regardless of the updated regulations. In those circumstances it is unfortunately a case of negotiation with the other party. We are finding that a lot of people are prepared to negotiate amendments to contracts at the moment if the reason for the delay is coronavirus related, albeit that is not guaranteed.
Any party to a transaction who is ready, willing and able to complete but the other party does not complete on time can issue a notice to complete. This will usually mean that the defaulting party has 10 working days to complete and, if the buyer is the defaulting party, they must immediately pay over any outstanding deposit. In the event that completion does not take place within the timeline in the notice to complete the contract can be terminated and if the defaulting party was the buyer the deposit can be kept by the buyer and they can resell the property. Should they not be able to sell the property for as much the buyer may still be liable to make up the difference. Every transaction is different and therefore you must review the contract in the specific transaction and take advice on that.
It is therefore important to address any anticipated issue in completion as early as possible and to seek advice from your solicitor on how you may be able to negotiate an extension.
If you are entering into a new contract for purchase or sale of a property which it is not feasible to exchange and complete on the same day you should still try to have additional clauses added to the contract to cover the possibility of not being able to complete on time for a coronavirus related reason. Fieldings Porter have experience of drafting contracts in anticipation of this scenario and whilst we would prefer clients to exchange and complete simultaneously at the moment we are able to assist if this is not possible.
Is it still possible to buy property with a mortgage during the Coronavirus outbreak?
It is still possible to purchase a property with a mortgage during the Coronavirus outbreak. However, we are experiencing different approaches from different lenders. It is not yet clear how the lenders’ attitudes will change following the change in lockdown regulations and we will have to wait and see if they are now in a better position to proceed.
Up to now most lenders have been quite strict on timelines for requesting money due to their staffing levels and would not agree to a faster draw down of funds in the same way they normally would.
Some lenders had also frozen draw down of funds. This is not a withdrawal of the mortgage offer, but simply a pause until they can reassess their business or the outbreak. It remains to be seen whether the latest changes to lockdown regulations will lead to the lenders unfreezing the drawdown.
We were already experiencing that most lenders still want to do business and do want to lend money but were being slightly more cautious. This is because they don’t necessarily have all the information they normally would. In most cases valuers were unable to carry out physical inspections of property due to the social distancing rules and lenders are therefore not as well informed about the value of the property. As a result this means they were reducing the loan to value they are prepared to lend against and/or using desktop valuations using databases on value which may be a lower value than the property would ordinarily be valued at. There is also some caution as the impact on property prices is not yet known. We do not yet know how quickly the valuation of property will come back to normal following the changes in the lockdown regulations and it therefore remains to be seen how quickly the lending criteria returns to the previous levels, or if it does at all.
The message up to now has been that mortgages are still available, and most banks are prepared to lend but you will need to liaise with your bank or broker to find out what their current requirements are. Once a mortgage offer is issued liaise with your legal team to find out if the lender has provided any additional guidance on what is required to draw down funds.
Are properties still selling during the Coronavirus outbreak?
We were experiencing a fall in the number of new enquiries related to residential owner-occupied purchase. We expected this and think it relates to the inability to allow potential buyers to view your home while you are isolating in it in lockdown. Whilst there has been a relaxation of the lockdown rules which now allows viewings and property transactions to proceed in a more normal way it remains to be seen if sellers wish to allow potential buyers into their home. We will therefore have to see how long it takes for the residential market to return to normal.
We are still receiving a good number of enquiries relating to commercial properties and investment or development residential properties. We acted for several sellers and buyers in the recent Pugh & Co Auction that moved online due to the outbreak and properties were selling in that forum. Several online property auctions are now scheduled and would appear to be one of the main sales platforms up to now with a number having virtual tours of the properties.
You should always read the legal pack before bidding at auction and we would recommend taking formal legal advice.
If you are buying or selling property through auction Fieldings Porter’s Property Team will be happy to guide you through the process and provide you with legal advice as seller or buyer.
Can I remortgage my property, buy the property I am living in from my landlord, buy my freehold or transfer equity in my property at the moment?
Provided you can secure the funding to do so then transactions that don’t involve anyone to move are ideal transactions to be completed at the moment. Matters such as remortgaging your property, buying a property you are already living in, buying the freehold to your property or transferring equity between parties are good transactions to be completing at the moment as they are not impacted by the social distancing rules.
If you need any help or advice in relation to these transactions please contact Fieldings Porter’s Property Team who will be happy to help.
Can construction workers continue to work during the Coronavirus outbreak?
There is no restriction in place which prevents the construction industry from operating their business and the Government is now encouraging them to work. However, if construction businesses operate they must adapt their business and make sure that social distancing is exercised. Staff, customers and the public should not be put at risk whilst the business carries on working. Measures such as working 2m apart, hand washing, carrying out work only in vacant properties or outside are sensible steps that can be taken. It is advisable for only emergency works to be carried out inside residential properties that are occupied for the time being.
I am a residential landlord, do I still need to carry out maintenance to my properties during the Coronavirus outbreak?
Your responsibilities as a landlord are not diminished by the outbreak of coronavirus and you still have the same duty to your tenants to provide a property that is habitable. However, you should also not put your tenant at undue risk, bearing in mind their specific health circumstances. If any emergency repairs are required to important services to the property or to repair problems with the fabric of the building that make them unsafe you should try to complete the work if it is at all possible to do so whilst keeping the tenant safe.
If the repair is of a more routine nature and a delay in completing it will not render the building unsafe or endanger the tenant landlord’s should carry out a risk assessment as to whether it would be more appropriate to carry on with the repair now or delay until it is safer to do so. If the decision is to delay this should be kept under constant review and if the need for repair outweighs the risks to the contractor and tenant of doing the work it should be completed in the safest way possible.
Records should be kept of decision making in order to justify any delay to works, or decision to proceed in case they are challenged later.
I was in the middle of a transaction with another firm of solicitors. They have furloughed all their property staff, have stopped trading or are not processing property transactions at the moment – can you help?
Fieldings Porter are usually able to help in any property transaction even if you have started the process with another firm. We would need to discuss with you the progress that has been made, what has been done already and the reason you want to move to us. We can then advise you whether this is appropriate for you and our costs for you to do so. If you have any questions about moving your case to us please contact our Property Team.
Should you have any concerns or need additional advice in relation to property matters please contact Fieldings Porter's Property Team who will be happy to help you.
13th May 2020
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