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Published 22 abril 2020
This is the first in a series of risk management alerts for law firms. We will be publishing articles which we hope will be relevant to all of the core of practice areas which are particularly affected by COVID-19. We are starting with conveyancing given the immediate impact that the current crisis has had in this area. Look out for further alerts in the coming weeks.
The hazards of operating through the pandemic are perhaps most keenly felt by conveyancers, particularly where the parties have already exchanged contracts and cannot complete the transaction as originally agreed.
Guidance endorsed by the Law Society and supported by key stakeholders, including government departments, has been designed to help conveyancers navigate the challenges presented by the outbreak. Key points to note are:-
(i) Where possible, purchasers should delay moving to a new property given the current lockdown. Conveyancers should keep a close eye on how this develops and it is expected that new guidance will follow once restrictions are lifted.
(ii) Where contracts have already been exchanged, and where the property is already occupied, parties are encouraged to work together to find a solution. That might mean delaying completion. In those circumstances, parties should agree a written variation to the contract. This can be e-signed or, with proper written instructions, conveyancers are authorised to enter into those agreements on their clients’ behalf.
Specific guidance on the drafting of variation clauses has been issued by the Law Society, and can be found here.
(iii) Unoccupied properties are generally less problematic because the risk of spreading the virus is lower, but this advice should still be considered especially where the transaction is part of a chain. Generally, home moves should only be completed where they are absolutely critical, and we recommend that this is interpreted conservatively.
(iv) Parties are encouraged to cooperate but there is nothing to prevent an opportunistic party serving a Notice to Complete, failure to comply with such a Notice could mean that contracts are lost. Swift action is therefore often necessary.
The pandemic gives rise to several risk management issues, not least the need to ensure that e-signing procedures are followed correctly and/or that a clear audit trail is maintained, demonstrating the solicitor’s instruction to sign a document. Those agreements should also be formally exchanged, where possible using the Law Society’s formulae for exchange. Deferred completion dates should be discussed between the parties, with the date on which restrictions are lifted by the government as a point of reference.
Other issues to watch out for include:-
(i) Mortgages. The expiry of a mortgage offer could jeopardise a transaction. Protecting clients by engaging with lenders is important, in order to avoid the risk of a claim at a later date.
(ii) Searches may need to be updated should a considerable period of time elapse before exchange and/or completion can be effected. Firms should not forget to advise their clients about the potential for additional costs.
(iii) Undertakings. New undertakings should be given with caution. Where a previous undertaking cannot be complied with, the SRA recommends early engagement with the parties, including your own client. The SRA has confirmed it will take a ‘pragmatic’ approach to regulation during the pandemic, but it will expect firms to take heed of its recommendations and to have at least tried to do the right thing.
This general guidance does not obviate the requirement for solicitors to consider the individual circumstances of a particular client and transaction. Consider the potential impact of a loss of employment, for example, on a client’s ability to proceed. In the worst possible situation, the death or incapacity of a party may mean that a transaction cannot proceed. It remains to be seen but there may also be an adverse impact on the value of property. In such cases rescission of the contract is a potential option, if the parties agree.
It is important that conveyancers address these issues as far as possible as soon as they can. Firms who do not plan appropriately and consider, for example, how they can reconcile their own need to protect their business through the use of furloughing with the needs of their clients, could face claims at a later date.
Where clients ignore firms’ advice to comply with the guidance, lawyers should record their advice in writing, setting out all of the risks, and they should ask clients for written confirmation of their instructions.
Ultimately firms should act sensibly, having regard first and foremost to the health and safety of their own staff, their clients and third parties, especially since we expect that other property professionals, including estate agents, surveyors and removal firms will look to conveyancers to take the lead in the transaction.
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