There could be a wave of legal disputes as off-plan buyers seek to get out of purchase deals after the lockdown - and some developers are already pondering action against buyers who have ‘gone cold’.
Law firm Boodle Hatfield says the impact of the lockdown on the housing market may push the values of some new build developments “substantially below” their original purchase price.
If investors decide they will not complete, they may lose the deposits they have paid.
The law firm says this problem was relatively widespread following the collapse of property values after the credit crunch in 2008-2009.
At that time, in some new build developments, scores of investors had to be pursued to ensure they completed transactions they were legally committed to.
“The contracts of most residential new-build developments are fairly clear cut and deposits would be at risk. Many purchasers also forget that this might not be the end of it. You may be liable for any additional loss the developer makes from selling that property, on the market, for less than you originally agreed” says Colin Young, property disputes partner at Boodle Hatfield.
“There are certainly developers are now exploring their options over deals where the buyers seem to have gone cold. Once the lockdown is over we expect that buyers who should have already completed will start being asked to agree to a new timetable” he adds.
The company says the situation will be at its most difficult where a buyer, possibly based overseas, has committed to buy several units in a scheme - a developer taking action may find the process costly and difficult.
“However, if a development has not been finished on time then a purchaser may take steps to serve a notice to complete so that it can rescind and reclaim the deposit if the seller is unable to comply” adds the company.