An estate agency says it’s using so-called Covid Clauses in contracts to keep transactions on course.
Knight Frank says it’s writing ‘Coronavirus Event’ clauses into some contracts to protect buyers and sellers from claims that may arise due to delays during the virus outbreak.
Such clauses typically cover delays triggered by parties in the buying process having to self-isolate, disruption to Land Registry searches and removals, as well as the ability to transfer money or sign documents.
It says completion dates are typically left flexible and can be reviewed on a rolling basis; the use of relatively distant completion dates means that after an agreed point in the future either side can walk away without penalty.
A statement from the firm says: “A number of simultaneous exchanges and completions are also taking place, which minimise the risk of anything untoward taking place between these two stages, which are usually several weeks apart. Furthermore, some buyers are paying reduced exchange deposits of five to seven per cent compared to the usual 10 per cent to minimise the financial risk.”
The agency says that in terms of its London activities, one in five property sales underway in London when the pandemic struck have fallen through “meaning the vast majority of buyers and sellers have held their nerve.”
“You’d be surprised by how much activity there still is. Buyers and sellers can see what is going on in the world and are most are prepared to wait it out. Some sales are falling through but you’d expect that in a normal market” explains James Clarke, head of London sales at Knight Frank.
The agency warns that of course the number of new deals starting from scratch is now small, but the pipeline that existed a month ago was buoyed by the new year ‘release’ of pent up demand after years of Brexit uncertainty.
The agency says that although some buyers are requesting price reductions to reflect the added uncertainty created by the pandemic, it is happening in an ad hoc manner.
“One buyer asked for a reduction to cover their rent between now and whenever the completion date will be” says James Gubbins from Knight Frank’s Mayfair office. “We worked out the buyers’ daily rent and suggested that instead of the reduction the vendor would cover their rent, showing they were prepared to do everything they could to get the deal completed as soon as possible.”