How will the Covid-19 pandemic affect residential real estate transactions


The ongoing global Covid-19 pandemic has elicited considerable concern from sellers, buyers and their solicitors. There are, however, measures which can be taken to reduce the adverse implications which the virus could have on both existing and planned transactions.

Despite the unprecedented nature of the circumstances, there are some considerations which could offer respite from an untimely and potentially unnecessary collapse of a deal. It is important to remember that despite the strict social distancing rules, the Government has also stated that:

  • There is no need to pull out of transactions, particularly where contracts have already been exchanged.
  • If the property is vacant then the purchase can proceed to completion, provided rules on social distancing are followed.
  • The seller and the buyer should work together to agree the move or agree to defer a date, particularly where someone has symptoms or is self-isolating.

Complying with the Government's health regulations are imperative and must take priority. We set out below options which you may wish to explore. Please do contact us if you need specific advice, or have questions in relation to any points we have not covered.

Relevant legal doctrines

Caveat emptor: This means "buyer beware"

Breach of contract: Where a party to a contract fails to comply with the express or implied terms of the contract.

Frustration: Relief from the obligation to comply with a contract if it becomes impossible for a party to perform. It can apply regardless of whether or not it has been expressly referred to in a contract but there are strict requirements for it to apply.

Force majeure: The parties to a contract agree in a contract the circumstances in which a party may be relieved from their contractual obligations such as failure to construct the property within an agreed timescale.

New-build properties

Where you have already exchanged contracts for a property which is, or was, under construction, and have not been served with notice from the developer, you should enquire as to whether the developer envisages any difficulties in completing the construction and handing over the property to you by the timescales anticipated in the contract.

Most new build contracts will have a long stop date allowing for termination and the deposit to be returned where the developer has failed to complete by the long stop dates. Such contracts will often also contain a force majeure clause allowing the developer an extension of time, often of up to a further year, within which they must complete construction and deliver the apartment. Your seller and their customer care team should be able to provide you with an accurate update on whether completion timescales are likely to be met, and if not, provide clear information as to why not. For example, whilst current Government directives do not appear to have stopped all construction work, the social distancing guidelines and shortage of materials could result in a reduction in the pace.

Conversely, you as buyer, may also find yourself in a situation where through no fault of your own you are unable to complete. For example, banking systems may be disrupted; signatories may be unavailable or courier services may cease operations, meaning you are unable to return signed documents or send completion funds. This could put you in default of your contractual obligations. New build contracts do not usually have force majeure provisions in favour of a buyer, meaning problems caused by Covid-19 are unlikely to enable you to delay. The most pragmatic options are to consider whether you will be able to execute the documents (or require a power of attorney) and have a conversation with the developer at the earliest opportunity to see whether they are willing to delay the completion date without imposing any interest or other penalties. The developer may consider it better to allow you the opportunity to complete a little later but at the originally agreed price than to try to sell to someone new at a potentially lower price.

Anticipated transactions – should transactional parties go ahead and exchange contracts?

The volume of transactions has certainly reduced. However, price speculation and funding availability aside, negotiations could still proceed. Nothing will be binding until contracts have been formally exchanged and the due diligence process can itself take 6 weeks, or sometimes longer. From an optimistic perspective, this might mean that by the time both parties are ready, the worst of Covid-19 may have passed.

For deals which need to complete in the midst of the pandemic, cash buyers will be at a particular advantage, as will those who are without a chain, and those involving buyers who do not need to immediately move in to the property they are buying and therefore not requiring their sellers to provide vacant possession on completion. Completing in such circumstances will without doubt present its own unique set of challenges; cash buyers will still want to satisfy themselves as to the state and condition of the property (caveat emptor still applies), and where vacant possession will not be given on completion, careful consideration needs to be given to issues surrounding the risk in the property, insurance and the circumstances in which and the date by when the seller must vacate.

This has already seen increased focus on the drafting of contracts and the legal due diligence process. Bespoke 'Covid-19' clauses are appearing in contracts. These can be helpful in the right circumstances but need to be drafted carefully to minimise the chances of a buyer or seller trying to withdraw for non-Covid-19 related reasons. The Law Society has prepared a draft clause to assist lawyers. A long stop date should always be included in any Covid-19 clause.

Due diligence is also being affected and local authority searches are likely to be delayed together with the commissioning of EPCs given remote working policies. Sellers may be asked to be more helpful in their replies to buyers' solicitors' enquiries as opposed to telling a buyer to rely on its own searches and inspection of a property, as it may simply not be possible for a buyer to do this. This, in turn, could result in the increased risk of a seller being inadvertently liable for misrepresentation should they make any factually incorrect comments to the buyer, if it can be proven that this induced the buyer to exchange contracts and proceed with the purchase.


Whilst sales and purchases may temporarily slow down, there is scope for other transactions to continue as normal, if not increase. For example, lower interest rates could see more portfolio refinances (subject to lender appetite and acceptance of desktop valuations), agents are undertaking virtual viewings and currency fluctuations may play a part in renewed international interest.

Although the fuller economic effect of Covid-19 remains to be seen, with a degree of tolerance, cooperation, clear communication and creativity, there is no reason why some transactions cannot go ahead unhindered. Whilst complete normality may not resume for some time yet, real estate deals are still going ahead and we are confident this will remain the case.




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