Can house purchases continue through the Covid19 pandemic?
How will House Sales and Purchases in Scotland proceed at the moment?
Five weeks ago when lockdown measures were announced due to the coronavirus outbreak, there was perhaps an expectation by those in the midst of conveyancing transactions, that their house sales/purchases would proceed as normal.
This has proven not to be the case for numerous reasons set out below.
Whilst just this week there been some movement on the transactional side of things, until there is relaxation of the lockdown in terms of non-essential travel and social distancing, it is likely that only a few transactions, meeting very specific criteria, will be able to proceed. Even then it probably depends on the purchaser’s appetite for proceeding at the moment.
What exactly happened?
- The day after lockdown, the Land Register of Scotland stopped taking in applications which meant that a purchaser who had paid for a house (and lender who had given a mortgage) couldn’t have their title or mortgage registered. That left purchasers at risk if the seller went bust.
- For various reasons, lenders reduced the number of mortgage products on the market.
- Scottish and UK Government recommendations urged “people … to delay moving to a new home while stay-at-home measures are in place”. That recommendation remains in place. The Law Society of Scotland have reiterated it to lawyers.
- As a result of that recommendation and the “stay-at-home” measures, removal companies are generally not operating. The British Association of Removers says that “all but the most essential move transactions” should be cancelled.
- House sales marketing has been similarly affected. There are obvious difficulties about marketing, showing your house to viewers and prospective purchasers viewing houses when “stay-at-home” measures are in place.
- Like every other business, many estate agencies and law firms furloughed staff making it difficult in practice for them to manage transactions along.
Has anything changed since then?
The Land Register in Scotland (in discussion with the Law Society of Scotland and lenders) have now set up a digital method of application so, today, 27 April, they have started accepting some very limited registrations again digitally starting with those earliest in date. They are still not fully open.
In any event, the “stay-at-home” measures continue to prevent the ability to arrange a house move easily.
I am in the middle of a transaction – where does this leave me?
Naturally, anyone who is negotiating a contract for the sale of their property wants to see that completed as soon as possible.
On the other hand purchasers might want to have the contract completed as quickly as possible in case the seller’s situation changes and their “dream house” purchase falls through. Or they might want to hold off in the hope that there may be a “market adjustment” i.e. price reduction.
The only scenario we envisage for there being any realistic possibility that a transaction can complete is where all of the following apply. If –
- there is no chain;
- the property being sold is already empty (or a sitting tenant is purchasing);
- a purchaser does not need to move in right away (or is a sitting tenant);
- the purchaser is a cash purchaser or the loan (mortgage) funds are certain to be given;
- the balance (the “deposit”) is not coming from a sale; and
- the seller can receive the disposition (title transfer deed) to sign it, have it witnessed (while complying with social distancing measures) and send it in to their lawyer. In most cases that can be achieved with a little effort and ingenuity but in some cases it cannot be done. That document is critical to the sale and without it the sale cannot go ahead. (Same applies to the purchaser regarding the mortgage document),.
In that case no physical move out or in is needed and the Land Register’s workaround should work. (Without getting too technical, please note this is not the same as the Land Register’s partial digital fix mentioned above). The further you move away from that fairly simple example, the more difficult it becomes.
Add to all that, the general economic uncertainty and job insecurity and purchasers are perhaps less keen to rush on and sellers are maybe having second thoughts about whether to stay put for a while.
The overall result is that the pause button has been well and truly pressed.
I don’t fit the above scenario. What should I do?
Some people (in our experience not many) want to push on with contracts regardless and others are more nervous about compliance with regulations and also health issues, which of course is the whole point.
There is no one size fits all. Every transaction has its own individual points and each person their own views and priorities.
We suggest trying to move your contract along to the stage where it is agreed in draft i.e. in principle with a possible date of entry agreed bearing in mind that everyone will be wanting to move on Lockdown +1.
Once it is clearer that lockdown is going to be lifted in such a way that removals can occur, check that your loan offer is still current and available. Keep in touch with us (or your own lawyer) about the state of the draft contract. Gear yourself up for a removal (in and/or out) ahead of time.
And meantime, stay safe.
Posted on 27th April 2020 by Robbie Wishart, Partner