Do I Need a ‘Covid Clause In My Property Contract?

September 01, 2020  |   Posted by :   |   Blog

We’ve tried our best to keep you up to date with all the latest guidelines when it comes to buying and selling property during the coronavirus outbreak, and the latest addition to the party is something called a ‘Covid clause’.

Since the property market re-opened in May, not only do we have to negotiate the usual potential pitfalls, such as gazumping, broken buyer chains, and deals falling through at the last minute, but what happens if somebody within the transaction falls ill with coronavirus or there’s a local lockdown when you’re about to move?

Enter the Covid clause. New provisions to house moving contracts are increasingly coming into play to help protect buyers and sellers in the event that their deals are affected by coronavirus concerns. Covid clauses relate to pre-defined events such as one party contracting coronavirus and having to self-isolate, or lockdown restrictions putting things on hold. This ensures that neither party is found in breach of contract in case such an event occurs and offers an extra element of reassurance and stability to the whole process.

In usual circumstances, if one party fails to complete by the date agreed, they are given a ‘notice to complete’, after which the contract may be terminated – and if it is the buyer who defaults on the agreement, the seller is entitled to keeping the deposit. However, when dealing with the uncertainties of the coronavirus situation, conveyancers and property solicitors have had to adapt quickly to the needs of their clients. Covid clauses help to avoid unexpected and unintentional contract breaches, and provide a more flexible option for buyers and sellers to arrange completion dates. This might mean offering a longer window of opportunity for the completion to take place, extending the period of notice, or setting down an agreement that if the transaction is affected or delayed by a ‘coronavirus event’ either party can terminate without a financial penalty.

A ‘coronavirus event’ might include:

  • Illness, quarantining, or self-isolation of the buyer, seller, or people who live with them
  • Unavailability of conveyancing, financial, or estate agent staff, or disruption to their facilities
  • Government measures such as local or national lockdowns, or further changes to moving guidelines
  • Disruption to essential services such as banks, the post office, moving companies and storage facilities
  • Inability to carry out searches and inspections, or have documents signed by witnesses due to lockdown or similar disruptions
  • Withdrawals or expiries of mortgage offers due to delays caused by coronavirus
  • The collapse of any other part of a transaction chain due to a coronavirus event

It’s highly recommended that all parties in the same chain consider putting similar Covid clauses into their contracts to protect everybody from these issues. Hopefully, you’ll never have to fall back on these kinds of safeguarding measures, but it never hurts to have them in place!

For more advice on moving in the current market, and how to protect your transaction with a Covid clause, please get in touch with our property experts at Frances Lindsay & Co – or get a free conveyancing quote to get you started with your move!





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