Coronavirus: Guidance and support for homebuyers and residential developers

Jody Proudman, of Harrison Drury’s property litigation team, and Jackie Bate, from the commercial property team offer guidance for residential developers and people buying or selling private residential homes during the coronavirus pandemic.

Last updated March 30, 2020

On March 26, 2020 the government published advice on home moving during the coronavirus COVID-19 pandemic. The guidance applies to people buying or selling private residential homes in the UK in which they intend to live. The government also included specific advice to professionals within the residential property industry including conveyancers.

Can people still move house?

The overarching message from the government is for parties to adapt and be flexible in altering the usual processes relating to moving house. Following this recent government advice, there should be no reason to pull out of transactions, and parties are encouraged to do all they can to amicably agree alternative dates to move house after the government’s stay at home rules are lifted.

For home buyers that have already exchanged contracts, they are advised to delay moving. If the property is currently occupied all parties should work together to agree a delay or another way to resolve the matter.

Whilst a development property is usually unoccupied prior to purchase, these issues may extend along property chains and may undermine property transactions within the chain, resulting in the collapse of the purchase.

Revising contracts to incorporate completion extensions

The recent government guidance confirms that conveyancers should advise clients who are ready to move, not to exchange contracts on an occupied property, unless they have made explicit provision regarding the risks presented by restrictions due to coronavirus.

Harrison Drury’s property litigation team can advise on contracts in order to help extend completion dates.

Managing the threat of closure of residential developments

Other issues developers may encounter during this difficult time include maintaining build schedules and attempting to ensure sites do not come to a total standstill due to employees or subcontractors falling ill and/or following isolation guidance.

Further government advice is expected to clarify the scope of ‘essential and non-essential’ sites which will no doubt have an impact on the continuation of home building in the current climate.

Where developers are smaller businesses (SMEs) and are losing revenue and seeing cashflow disrupted, the government’s Coronavirus Business Interruption Loan Scheme (CBILS) may provide financial support.

The government has also set up the Coronavirus Job Retention Scheme (commonly referred to as ‘furlough’) which is designed to help SMEs retain members of staff and continue trading as seamlessly as possible after Government restrictions are in time abated.

Harrison Drury’s property litigation team can advise clients who may be considering joining these schemes, particularly with advice on terms of funding, charges and assets.

Considerations regarding mortgages and finance

Residential developers need to be aware that potential purchasers may be severely limited in their ability to continue with transactions where they are mainly or wholly reliant upon mortgage finance.

Lenders are currently working with the Bank of England to try and ensure that where possible, people taking out mortgages to finance purchases of property are assisted to ensure they are financially able to do so. Workers in sectors affected by the pandemic such as the hospitality industry, may have seen incomes depleted or have turned to Universal Credit for support and therefore may not be able to maintain a sufficient level of income to continue to meet the affordability requirements of a particular lender.

It is also hoped that mortgage lenders will be flexible in their approach to mortgage expiry dates, but again much is subject to borrowers’ ability financially to continue with their proposed lending.

For advice on existing contracts or residential developments please contact Jody Proudman or Jackie Bate from Harrison Drury’s property litigation and commercial property teams, on 01772 258321.