Don’t forget the COVID clause

Shortly after the UK lockdown began at the end of March 2020, so-called COVID clauses in residential sale contracts began to be used routinely across the sector. Such clauses provide a mechanism for parties to exchange contracts while retaining a degree of financial protection, by ensuring that they are not in default if completion is unavoidably delayed due to a defined “COVID event.” A party’s right to serve a notice to complete in these circumstances is also suspended.

The housing market reopened for business on 13 May 2020, and sales and completions can now resume provided they take place in accordance with government guidance. That guidance encourages ongoing flexibility around house moves and suggests that property lawyers should continue to factor COVID-19 into all sale and purchase contracts.

We can therefore expect COVID-19 clauses in one form or another to be with us for some time to come. Lawyers will want to protect their clients’ contractually against a possible second wave of infections and a further lockdown in the UK.

Frustration?

At the beginning of the lockdown, those who had already exchanged contracts to buy or sell residential property wondered if their contracts could somehow be frustrated by the crisis. However, it is widely accepted that a property sale and purchase contract will not be frustrated by an outbreak such as coronavirus.

The doctrine of frustration requires that the circumstances in which performance of the contract is called for would render the outcome radically different from that which the parties contemplated under the contract. This is not the case with a property contract during COVID-19, despite the range of practical hurdles that may be present.

If performed, the contract would deliver exactly what the parties had bargained for. So frustration has not provided the answer for buyers, or for those sellers who were unable to organise removal of their furniture or were ill and self-isolating as their completion date drew closer.

By Lisa Bevan, please read the full article on Taylorwessing.com.

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