27 Mar 2020

Update: Property settlements during Coronavirus

Update: Property settlements during Coronavirus

Many people planning to move home this week or in the near future have been left in limbo by the Coronavirus outbreak.

Robert Fraser, Senior Property Partner at Aberdein Considine, explains the problem and where it leaves people planning to buy or sell a home in the short-term.

What is the problem?

There are multiple issues settling transactions in the current climate after people were urged to stay at home by the government.

The main one is that the Registers of Scotland has closed, without warning or an emergency action plan. This is where the deeds for homes, and the security a lender takes over a home during the term of a mortgage, are registered.

As a result of this, some lenders have taken the decision not to release loan funds. Some are prepared to release funds following agreement with the Registers of Scotland, UK Finance and the Law Society of Scotland. The list of lenders agreeing to this is growing, but many are still not on board.

The second issue is that some chains have collapsed already, which has had a knock-on effect to transactions due to complete.

Thirdly, some people do not want to move in light of the government advice and wish to stay at home.

Finally, removal companies are unavailable, which is forcing some people to stay put.

The advice from the government is clear,  in the short-term, they do not want social contact to occur unless it is an emergency or absolutely necessary.

Why is the Registers of Scotland closing an issue?

From a client's point of view, the most important part of the transaction is getting the keys. However, for the lawyer acting for you, the most important point of the transaction is getting a title deed and security registered.

The deed transfers ownership of the property from one party to the other, and the security gives the lender ability to recover its money should the homeowner default.

Without a registered security, a bank won’t lend, and without a registered title, a purchaser does not legally own the property.

Is there a solution?

A few transactions which fulfill all the requirements and are due to settle immediately may go ahead to settlement.

Otherwise, the Registers of Scotland indicated earlier this week that it may be possible to open the Register if a certain document (called an Advance Notice) had already been registered with them prior to the lockdown.

Even then, the Registers of Scotland said they will  proceed on a case-by-case basis, and only where emergency need can be demonstrated. For example, if someone was to be left homeless without a deal settling.

This also requires agreement from lenders, and the majority of lenders have now agreed to proceed on this basis. However, as mentioned above, some have not. This is why chains are collapsing.

Where does this leave purchasers and sellers legally?

There are two main scenarios here. 

Where the transaction is concluded, with a signed missive, it is legally binding. In normal circumstances, this means that if one party is unable to meet their legal obligation to buy (or sell) the home in question, they can be pursued for loss by the other side.

However, what we have here is an inability to perform the contract agreed due to the Register being closed. Clearly this is nobody's fault and an unprecedented set of circumstances.

Practically, the best thing to do here is agree to complete the deal when the Register re-opens and it is safe to do so.

The other scenario is where the deal has not yet been concluded, and in this situation the advice at this time is to await confirmation of the Register reopening.

Again, what we recommend here is a renegotiation to seek agreement for completing the deal when the Register re-opens.

Contact us

If we are acting for you, your solicitor will be in touch to update you on the latest as the situation evolves.

We also have a contact centre where clients can reach us on 0333 0164 315. This line is open from 8am to 6pm, Monday to Friday, and from 9.30am to 12.30pm on Saturday.

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