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Sales contract ‘Covid clauses’ become more widespread

Leading lawyer makes comments over the weekend in the national press as long-term effect on buyer and seller confidence begins to creep in.

Nigel Lewis

‘Coronavirus clauses’ in sales contracts are set to become more widespread in the housing market, a leading property lawyer has claimed.

Ruth Barnes of London firm Winckworth Sherwood made the claim within an article in a national newspaper over the weekend that, although such clauses are only currently appearing in approximately 5% of contracts, this is likely to ramp up as vendors and buyers realise it is going to take at least another year before virus subsides.

These ‘Covid clauses’ are designed to protect both sides from the worst effects of the pandemic on housing transactions.

They enable buyers and sellers to withdraw from contracts or delay a completion date without forfeiting their deposit, and have been rising in popularity since the lockdown began in April.

According to law firm Taylor Wessing, Covid clauses using contain three key points, namely that:

  • The parties’ right to serve a notice to complete will be suspended while an event related to COVID-19 prevents the other party from completing;
  • A party will not be in breach of its obligations because of a delay caused by COVID-19,;
  • Either party may terminate the contract if completion does not take place by a specified long-stop date, fixed at an agreed date beyond the contractual completion date.

Triggers include government restrictions on moving home, collapsed chains, the closing of the Land Registry, illness, self-isolation or mortgage being withdrawn ‘due to Covid’.

barnes“Sellers can get cold feet when they’re approached with these clauses and that is the reason why they are generally resisted as much as possible,” Barnes (Left) told The Sunday Times.

“I wouldn’t be surprised if it became more prevalent over the next few months as people are concerned about their jobs and entering into contracts.

“Housebuilders will want to get exchanges under their belts, so they may need to build in a bit more flexibility to give buyers that comfort.”

Read more about Covid and sales transactions.


August 3, 2020

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