The Coronavirus has had a dramatic impact on all our lives over the last few weeks with the population being required to understand and adapt to new social norms such as self-isolation and social distancing to slow the spread of the virus.
As well as our health, it has also had a dramatic impact on the world economy. Dealing with just the immediate changes to property law in England and Wales, we have put together a summary of 10 things in property law that have changed or have been affected by the Coronavirus pandemic.
- Residential Leases
A landlord must serve 3 months’ notice if it wants to commence possession proceedings against the tenant of an assured shorthold tenancy (by way of a section 8 notice under the Housing Act 1988). This notice period will apply to any notice seeking possession, or a notice to quit, served on a tenant (it also includes possession claims based on anti-social behaviour). This applies until 30th September 2020 (or longer if extended). Once the 3 month notice period has ended a landlord would then need to take court action if the tenant is unable to move. Similar extensions to the notice periods required for possession apply to the following tenancies: Rent Act 1977: protected and statutory tenancies; Secure tenancies; Flexible tenancies; Assured tenancies; Introductory tenancies and Demoted tenancies.
- Commercial Leases
A landlord cannot commence forfeiture proceedings for non-payment of rent against a tenant where the Landlord and Tenant Act 1954 applies to the tenancy. This new provision will apply until after 30th June 2020 but may be subject to extension. The remedy of forfeiture will still be available to landlords where a tenant breaches other covenants under a lease (subject to the terms of the lease) but they will still need to serve a section 146 notice to start the ball rolling.
- Landlord Covenants
A commercial lease will usually contain covenants to be performed by a landlord, such as to allow access or provide services. Given the effective lockdown across sectors, landlords should think carefully about what services they can continue to provide and what any tenants still operating actually want. It would be pragmatic for the landlord and tenant(s) to discuss the provision of services and revert to a skeletal service where practical – with the tenants benefitting from a reduction in service costs!
- Viewings, Surveys and Valuations
Even with lockdown measures in place properties can be put on the market. However, there are some obvious challenges when social distancing rules are to be abided as you should not allow people in to view your property. Where a property is not vacant, prospective purchasers will not be able to view the property and their surveyor will be unable to carry out a survey (such as a homebuyers report). Where a mortgage is required, the lender will arrange a valuation of a property. Although these are often “drive-bys” (valuers often do not need to enter the property), this may be an issue for older properties or those internally altered and ‘best in class’ on a street. We understand that some valuations are being carried out virtually (desktop valuations) but this is not currently accepted by all lenders.
- Moving House
The rules on social distancing, essential work and the corresponding lack of removal companies have made it difficult to move house on a completion date agreed under contract. Both the Law Society and the Government have issued guidance that parties should only move house where contracts have been exchanged and it has proved impossible for the parties to agree a deferred completion date. Click the following links for more information here and here. Other potential hurdles for exchanged contracts are the financing of the purchase and any chain of associated transactions.
- Force Majeure
Force majeure clauses are contractual provisions which alter the obligations and/or liabilities of the parties under a contract when an extraordinary event or circumstance beyond their control prevents one or all of them from fulfilling those obligations. The provisions may allow temporary suspension of the performance of the obligations, a time extension within which to do so and/or termination. A party to a contract will only be able to rely on an event of “force majeure” to excuse themselves from a contractual obligation if the contract expressly contains a force majeure provision. Where a contract does contain a force majeure clause, the party relying on it would typically need to show that the event was beyond their control, that the event prevent or delayed their performance of the contract and that all reasonable steps were taken to mitigate the event. In terms of Covid-19, ideally, you would want your force majeure clause to include reference to “pandemic” or “epidemic”. An “Act of Government” is a common insured risk but this is one of the current grey areas with insurers in determining whether the instance is an order or merely a recommendation of the Government. Alternatively, you may be able to rely on some catch-all wording such as “Act of God” although that will require careful consideration of the above principles and is unlikely to be accepted by a counterparty that has much to lose without a fight!
- Extensions of Time
The onset of the Covid-19 pandemic will, invariably, delay construction projects meaning that developers are likely to be in a position where they are not able to deliver their project by the contractual target date. You should consider a review of your current construction contracts and, where necessary, negotiate an extension to the target date (or any other significant milestone dates) and ensure such variations are documented (such as in a deed of variation). This is particularly important where liquidated and ascertainable damages are payable should construction works not be completed by a specified date. If you are the Employer on a project you need to be wary of prolongation costs. If in doubt please speak to one of our construction team as there is a big difference (in terms of cost) between an agreed extension of time and prolongation.
- Contractual Notices
Most commercial contracts provide that contractual notices must be served by post or recorded delivery and some specifically exclude email as a valid method of service. In the current climate, it would be prudent to ensure your contracts provide that notices must also be emailed to a specific address (as well as being posted) to avoid an argument that the recipient did not receive the notice. You may also need to consider amending existing contracts to provide for the same and/or to create generic addresses that multiple people have access to in order to ensure such notices are not inadvertently missed by holidays or illness. If that is not possible, appropriate procedures should be put in place to ensure notices which are posted to your usual place of business (or to the address specified in the contract) are accessed regularly.
- Signing Documents
The validity of electronic signatures has long been a topic of debate among lawyers, and is coming under increasing scrutiny. Any document which effects a disposition of land, such as a lease or a transfer, will need to comply with the Law of Property (Miscellaneous Provisions) Act 1989 – which states that signatures on such documents must be in writing – notwithstanding the difficulties in obtaining ‘wet ink’ signatures. However, we expect to see an increase in the use of electronic signatures for the execution of contracts as organisations alter their internal procedures and it is plausible that further legislation concerning the use of electronic signatures may be forthcoming.
- Statutory Declarations
These are most commonly used when seeking to exclude the security of tenure provisions of the Landlord & Tenant Act 1954 (’54 Act’). Although they can be sworn by a solicitor on behalf of their client, an independent solicitor must be present when they do so (there is currently no case law confirming that this can take place by video conferencing/face time etc) – this is unlikely to be practical to facilitate given social distancing. However, it is also possible to exclude the security of tenure provisions under the ‘54 Act by the tenant completing a simple declaration and waiting two weeks before entering the lease. In practice we think that the completion of a simple declaration is likely to be the most practical way forward, particularly given the additional time it is currently taking for documents to be signed by parties.
For more information, please contact Dan Moan, Partner in our Real Estate & Projects team, or Grant Duranti, Ollie Grech or Peter Antoni.
