COVID-19 delay clause for property contracts26/03/20
An industry standard clause has been proposed to deal with COVID-19 delays. This is currently aimed at residential property sales, but can be adapted for use in other circumstances, including commercial property, auction sales and development transactions.
Here we explore what the clause says and the impact it may have on you and your property contracts.
What does the clause say?
The clause allows for completion to be pushed back if delays are caused by any of the following issues which arise from the coronavirus pandemic:
- Unavailability of staff
- Illness/self-isolation of the buyer or seller
- Any governmental measures designed to reduce transmission
- Unavailability of services (e.g. postal services, removal services etc)
- Inability to get documents properly executed, e.g. due to unavailability of witnesses
- Delays in obtaining search results or in surveying/inspecting the property
- Unavailability or withdrawal of finance
- Delays elsewhere in the chain
A longstop date is agreed between the parties—if the delays aren’t resolved by that longstop date then either party may terminate the contract and walk away from the deal.
What are the advantages of this clause?
The main advantage is that it will encourage purchasers to exchange knowing there is a safety net if they encounter any COVID-19 issues. It will also benefit sellers if there are delays in them arranging for documents to be completed on time.
What are the disadvantages of this clause?
The disadvantage of this clause is, of course, uncertainty around completion dates because these can be delayed, or the transaction could fall through entirely. But this is likely to be outweighed by the advantage of being able to get into contract despite the current uncertainties.
There are also some changes that can be made to increase certainty, e.g. to oblige the parties to use reasonable endeavours to overcome any such issues and placing an appropriate longstop date by when completion must occur failing which the agreement can be terminated.
How can Capsticks help?
We are already actively advising clients on using wording of this nature, adapted for their projects, including on large portfolio transactions. If you have any questions please do not hesitate to contact Spencer Vella Sultana or Susie Rogers to discuss.