Backing out of a house sale due to Covid-19? How will the property sale process change in the face of coronavirus?
What happens if you can’t continue with the property sale contract?
COVID-19 has caused great concern for those in the property market, and those about to enter the property market. Pending sales, and pending purchases. People backing out of a house sale. Will your contract fall over because of COVID-19?
For contracts that were exchanged prior to COVID-19, it is unlikely that there is any special condition, or force majeure clause, available to delay or terminate the contract without penalty. This may cause difficulties for those people who have lost their job and cannot continue with their bank obligations to pay the loan if the contract continues.
If this is the case for you, you should discuss it with your lawyer or conveyancer. Your lawyer or conveyancer may be able to negotiate with the other party to the contract, and also your bank, to arrange for a negotiated variation to the contract to delay it.
Negotiation and compromise in everyone’s best interests
It is best to work together with the other party to the contract. Everyone is in the same boat, so it is likely that even if you terminate the contract, the other party is unlikely to find another person to buy the property anyway in the current market.
Therefore, it would be better for everyone to agree to delay for up to, say, 90 days, in order for people to be able to get themselves back to normal.
Special condition to include in contracts to deal with coronavirus
For contracts that were exchanged after COVID-19, or are about to exchange, you should ask your solicitor to include a special condition dealing with coronavirus.
For example, if the government has made a direction for people to go into lockdown, making it impossible for someone to complete their obligations under the contract, or someone becomes ill with coronavirus, or comes into contact with someone who has the virus and has to self-isolate for 14 days, then the parties agree to delay the settlement for up to, say, 30 days.
How will you be able to settle the contract if you are in lockdown?
Fortunately, the property sale process can now be all online. If your lawyer or conveyancer has access to online verification of identification, online signing, and the online conveyancing portal PEXA, then you can buy and sell without even leaving your home.
Your real estate agent can email your lawyer or conveyancer the sales advice, the lawyer or conveyancer then emails you with the link to check your ID online, and then prepares the contract completely online, including a special condition saying the parties will agree to accept the parties electronically signing the contract.
They then email it to you using a special electronic signing program, which asks you to sign and then automatically emails it back to the lawyer or conveyancer. The contract can then be exchanged either by email, or over the phone and by post. All from the safety of your home.
Your lawyer can even advise you of the contract over the phone.
Necessity creates efficiencies and environmental benefits
PEXA, the online conveyancing system, has been up and running for about a year now. The banks, the lawyers and the conveyancers are almost all on that platform now, and the whole process, including the transfer, is prepared online, so there is no need for you to sign in person at all.
The virus is rapidly changing the way we would normally work and advise our clients, but everything can still be done in a much more efficient way, while simultaneously helping to reduce our environmental footprint.
For more information, please see How does coronavirus affect your retail, residential or commercial lease? and “I lost my job and can’t pay my rent!” – COVID-19 creates anxiety for tenants and landlords.