The Lemon Fool

Anyone know what the situation is with moving house in the next few days? British Association of Removers has issued advice recommending only moves already underway are completed with any others planned being cancelled or rescheduled. Whilst it is only advice and Gov appear silent on it, it seems unlikely that every Remover in the chain will decide to go against the advice.

Presumably a new completion date can be mutually agreed, but what if someone in the chain decides to dig their heels in.....say the bottom link who is a FTB currently in rented whose landlord has a new tenant lined up?

Has the chain exchanged contracts yet?

dealtn wrote:Has the chain exchanged contracts yet?

Yes, completion date is Thursday this week.

If you've actually exchanged contracts then you are bound by the contract to (a) give vacant possession if you're selling; and (b) pay for the house if you're buying. If you fail to complete on time you will be liable to pay penalties.

However, if everyone involved in the contract agrees there's no reason why you can't agree to defer completion, or even abandon the contract entirely. The problem arises if there's a chain and one person refuses to do so.

It could possibly be argued that the contract has been `frustrated' - i.e. that it's impossible to perform because of government action, and is therefore automatically terminated - but I think it would take more stringent restrictions than these in order for that argument to work.

In purely practical terms I think it'd be in most people's interests to try and achieve completion, even if it is difficult, as it seems quite clear that the situation will get a lot worse before it gets any better, and if you defer completion now you may be forced to attempt a further deferment when it's no longer possible - for example because the solicitors involved have ceased trading.

If you haven't actually exchanged contracts yet then I would think the safest option is just to abandon the transaction entirely for the time being, though I suspect that sellers will be rather less keen to do so than buyers.

Thanks for the reply. It's not, it's family....contracts have been exchanged with completion due 26th March.

Same here hoping to complete on Friday, contracts exchanged two weeks ago.

For info: Turns out the removal firm are working until close of play Friday and then stopping for the duration. Huge relief because my sister's seller was insisting on going ahead anyway and there's no way she could move on her own (three bed house, 20 years of contents, all into a rental van? Even assuming you can still get rental vans....). Big big problem brewing there....wonder if the Gov has it in their sites?

All the removal companies I have called say not doing any removals even if you have exchanged contracts.

Was supposed to be moving today. All now stopped and trying to sort out the mess.

Our buyers mortgage company are apparently saying they will have to reapply when ready, so it is likely we will all have to cancel contracts down the chain and probably lose the sale.

production100 wrote:Our buyers mortgage company are apparently saying they will have to reapply when ready, so it is likely we will all have to cancel contracts down the chain and probably lose the sale.

You may be fortunate, in that the other people in the chain will all agree. However, I can envisage many situations where someone will not agree to release someone from a contract.

It seems inevitable that this situation will have a severe effect on the housing market. Not only are people not going to be viewing houses, many will no longer want to enter into any long term commitment until their employment situation is much clearer, and that could be a long time off.

Furthermore, lenders are bound to restrict lending massively, firstly because of affordability problems as people's incomes become more uncertain, but secondly because valuers, fearing a huge number of claims, will begin to downvalue houses very substantially, so that lenders will not advance anywhere near enough to buy at current prices.

So anyone at the moment who has sold a house and exchanged contracts is going to be thinking that if they agree to release the buyer they may never be able to find another buyer at anywhere near the current price. In that situation many sellers will simply refuse to release and insist on completion.

If the buyer refuses, or is unable to complete the purchase then they can, and probably would, be sued for breach of contract. If, say, a sale had been agreed at £500k, the buyer pulls out and the best price the seller can get is £400k or even £300k then they can sue the buyer for the difference.

Of course in some cases it wouldn't be worth it - probably most first time buyers, for example. But most people who are buying while selling their own will have a substantial asset in the shape of their existing house, and could probably satisfy a substantial judgment against them.

The people in the moist dangerous position are those who have exchanged to sell to a FTB but also exchanged to buy another house. The FTB is highly likely just to walk away and may well be not worth suing, but they will then be unable to complete on their purchase with the consequences mentioned.

Whilst I'd hope that people would behave generously in a situation like this it doesn't take much to trigger a `survival of the fittest' mentality, and I can foresee some very serious problems ahead.

Clitheroekid wrote:
Whilst I'd hope that people would behave generously in a situation like this it doesn't take much to trigger a `survival of the fittest' mentality, and I can foresee some very serious problems ahead.

Only a serious issue for those in a situation where contracts have exchanged, but yes it does impact other chains too which may collapse.

Surely there must be some sort of 'force majeure' clause in any contract, or is it not embodied in common law so that it does not need to be specifically included in a contract?

Dod

Today my daughter was advised that her mortgage switch to another lender would not take place. So no chains or house moves involved, and the transaction still isn't taking place. This is the response from her solicitor:

Thank you for your email. As you may be aware the Land Registry closed until further notice on the 24th March 2020 and we are therefore currently waiting for the lender to confirm if they are willing to proceed and they in turn are waiting for their industry body, UK Finance, to give guidance on whether or not they should continue to lend or place all transactions on hold until such times as the lockdown in the UK is lifted and the Land Registry re-opens.

This relates to the Land Registry in Northern Ireland, so other jurisdictions may or may not have the same LR closures. The lender in this case is Santander. So apart from willingness to complete contracts, do the issues that affect my my daughter also impact mortgage lending in E/W/S? E.g. is there guidance form UK Finance?

Looks like the English LR is trying to keep going

https://www.gov.uk/government/news/coro ... r-services

Dod101 wrote:Surely there must be some sort of 'force majeure' clause in any contract, or is it not embodied in common law so that it does not need to be specifically included in a contract?

No, house sales in England are conducted under the terms of the Standard Conditions of Sale, published by the Law Society. They contain no `force majeure' provisions at all. If you are contracted to buy or sell land then the contract is binding, and you break it at your peril.

There is a doctrine known as `frustration' that applies to contracts, and this would be the most obvious possible solution. Frustration occurs where there is a significant change of circumstances, which renders it physically or commercially impossible to perform the contract, or would render contractual performance radically different from the obligations that were originally agreed to.

If it operates then the contract is discharged automatically and immediately, and the contracting parties are supposed to be left in a position as if the contract had never existed. The Law Reform (Frustrated Contracts) Act 1943 permits recovery of monies that were paid under the contract before it was discharged, subject to an allowance for expenses incurred by the other party.

However, the threshold for establishing frustration is high. Mere inconvenience, hardship, or financial loss involved in performing the contract is insufficient to amount to frustration, and that's where a lot of people in conveyancing transaction may come unstuck. It may well be financially disadvantageous to complete the sale / purchase, but that's a long way from it being impossible.

So it would be a very brave (or very foolish) buyer / seller who decided that it was safe to break the contract on the basis that it had been frustrated. Because of the sums likely to be involved there would almost certainly be litigation as a result, and if the party who had broken the contract failed to establish frustration they could be looking at not just paying the claim itself but tens of thousands in legal costs on top.

One might have expected the professional bodies to have offered some guidance, but the Law Society has a reputation for being as much use as a chocolate teapot in situations like this, and the only `guidance' offered so far is bland and useless.

Still, it's an ill wind - litigation lawyers will have a field day after all this.

Update: Sister's buyer (ftb) has completed so Sis is at least in a position to fulfill her obligations. Looks like they have been very lucky.

The Law Society have issued some revised guidance today - https://www.lawsociety.org.uk/support-s ... nsactions/

Unfortunately, as with previous advice it's little more than a statement of the obvious.

It's also misleading and inaccurate at times. Under the heading `Frustration' is says "It’s difficult to envisage what might happen to a contract if it’s frustrated. Some commentators have suggested that the provisions relating to rescission might apply."

This is nonsense. If a contract is frustrated it ceases to exist, so any "provisions relating to rescission" automatically disappear with the contract.

Furthermore, the guidance completely ignores the provisions of the Law Reform (Frustrated Contracts) Act 1943, which is crucially important legislation in this context.

I can't personally see that frustration would apply. It's a very high threshold to cross, and the mere fact that people may incur inconvenience or a financial loss does not, of itself, make the contract impossible to perform.

And all the guidance regarding social distancing etc is just that - guidance. It's not illegal to ignore it if the circumstances dictate, so I don't see how the guidance could be prayed in support of frustration.

Under the heading "After Exchange" the guidance states: "The contract may need to set out how completion might happen in the circumstances to satisfy the requirements of Public Health England" Eh? If contracts have already been exchanged then it's self-evident that the contract will not and cannot contain any such provision. Any such provisions would need to be agreed by way of a variation.

It would be far too dangerous to rely on frustration to wriggle out of an onerous contract. The only way this can be resolved is by primary legislation, but I suspect HMG have other priorities at present.

Sensible precautions and common sense should prevail but when have they ever?

Common sense does not seem to be common.

Our buyers have issued a notice to complete - but as that is impossible I guess the contract will be cancelled and they will probably claim expenses.

Fortunately it looks like the people we are buying from are more sensible and we are hoping not to lose our deposit, although we may no longer be in a position to purchase.

It seems the Governments emergency powers public health control of disease order that you must not leave the house, while it stopped the moving company from moving us, does not count as a valid reason not to move with our buyers.

Chris

production100 wrote:Our buyers have issued a notice to complete - but as that is impossible I guess the contract will be cancelled and they will probably claim expenses.

Issuing a notice to complete is a fairly drastic measure. Although if you fail to comply with it the buyer may `rescind' (cancel) the contract they also have the option of seeking an order from the court for `specific performance' - i.e. an order from the court that you must comply with the contract and vacate the property.

Actions for specific performance are - or at least up till now have been - very rare in residential conveyancing, but I can foresee that more people will be seeking such orders, as the traditional remedy of simply suing for the losses may not be an adequate remedy in some cases.

It seems the Governments emergency powers public health control of disease order that you must not leave the house, while it stopped the moving company from moving us, does not count as a valid reason not to move with our buyers.

There's a specific exemption from the requirement to stay home if you're moving house. Regulation 6 of the Health Protection (Coronavirus, Restrictions) (England) Regulations 2020 states:

6.(1) During the emergency period, no person may leave the place where they are living without reasonable excuse.
(2) For the purposes of paragraph (1), a reasonable excuse includes the need —
(l) to move house where reasonably necessary;

I would therefore recommend that you carefully consider whether or not, taking this exemption into account, it really is impossible for you to move. I'm sure your solicitor will have explained the potential consequences of breaking the contract, but the hassle of actually completing the move may turn out to be a lot more bearable than the financial consequences of not doing so.

Thanks for the reply.

The exemption to move house was added after the date we were contracted to move and was therefore not relevant.

And no it is not possible for us to move - no moving company will move us.

Chris