23 April 2020 | Comment | Article by Caroline O'Flaherty

Lockdown Lawyers: “How COVID19 is changing the way we do property law”

Caroline O'Flaherty working from her home office in lockdown | Hugh James

 

There’s no doubt that the property sector is being hit very hard right now. In particular, there are 6 key areas to highlight:

  1. Housebuilders
    Plot sales have suffered as customers don’t want to commit to purchases because of the current market and uncertainty over their jobs. Some who’ve exchanged may not be in the position to complete, they may not be able to move because they’re ill, or the chain or mortgage offer has been affected. Any house moves at this time must strictly follow Government guidance to ensure people’s health and well-being are not being put at risk. Showrooms have been shut and construction on site has been halted.

  2. Developers
    As planning committees have been suspended, the process of getting a site to the development phase has slowed down. Developers are sitting tight unable to further develop existing schemes. A number are focussing more attention on speculative land acquisitions or strategic land options

  3. Registered Social Landlords
    RSLs are affected by both of the sections I mention above, but they’re also reviewing their build contracts as schemes will now not be delivered on time. Some contractors may not make it through the current period and some may look for extensions of time or look to claim force majeure.

  4. Leases
    Tenants are keen to slow down the process and not enter into new leases. The majority of tenants are looking to change quarterly rent payments to monthly rent payments or obtain rent holidays or reductions. This is naturally a headache for Landlords who are currently unable to take any legal action. Most landlords want to ensure they still have tenants at the end of this period - preferring an income stream to void properties, so they’re reaching compromises with their tenants. There is concern amongst landlords/funds as to what rental stream will be forthcoming at the end of the June quarter as it is anticipated this will be far worse than the March quarter - especially if lockdown extends into May.

  5. Funds
    Funds are awash with monies to invest and are spending this time doing market due diligence and research.

  6. Public Sector
    Resources have had to be redirected to core services, such as childcare. There’s evidence that this sector is reviewing its property portfolios to see whether assets can be disposed of to generate much-needed receipts.
 

We might be doing things differently, but we're still Hugh James 

With this in mind, as lawyers, we’re responding in a number of ways.

Right now, we’re providing a lot of practical advice to our clients – including construction advice on existing build contracts, dealing with plot sales/residential conveyancing and landlord and tenant issues. There’s an increasing need for us to provide support to in-house public sector legal teams whose resources are being stretched. See how we can help here

We’ve also had to adapt in some interesting ways.

We’ve put in place an unprecedented number of ‘Powers of Attorney’ so that Hugh James can sign contracts and transfers on behalf of our clients. Before lockdown came into force, we suggested powers of attorney to our key clients to ensure that transactions could complete.

I and my colleague, Richard MacPhail, both live in Penarth, so we implemented a new “social distancing” signing of contracts protocol under the powers of attorney we hold.

socially distanced signing of a document | Hugh James

It’s a simple but very effective process.

I usually pop the contract on my front porch, Richard (or the Big Mac as we know him) pops round (as part of his exercise for the day) bringing his own pen. I then step back into my hallway and he signs and then steps away from the contract. Where the contract is in a plastic ring binder it then gets a liberal spray of the Dettol disinfectant stored on my hallway table.

I can safely say these are the most surreal circumstances for signing contracts but it ensured we got three transactions for clients over the line before the Welsh Government financial year-end on 31 March!

I’ve also witnessed some impressive innovation spring up within the sector. For example we have housebuilder clients who have got around the issues of handing over of keys on completions by installing key safes on their vacant properties which they can release remotely.  

At the moment the land registry is still processing applications but we anticipate that there will be an increasing pressure on the Land Registry to alter its practice of not accepting documents with e-signatures (save for digital mortgages).

 

New technology

Even lawyers who would consider themselves technical dinosaurs have had to upskill quickly in the current environment. There is no stopping email and video conferencing is the new norm for meetings. And what is not to love about VC? No time wasted travelling, lower carbon footprint, and an ability to turn your video off if your make-up is not quite right!  

I completed my first three-way contract exchange with the Welsh Government and a local authority on a Microsoft teams meeting in the last month! It was the fastest exchange I’ve ever managed with three public sector bodies.

It is a strange new world. When lockdown lifts, I do not think we are going to be returning to the way we were working pre-COVID-19.  

 

About the Author

I'm Caroline O’Flaherty, a partner in Hugh James’ commercial property department. I specialise in advising on complex development site acquisitions for the RSL and extra care sectors.

I provide disposal and acquisition advice to the Universities, further education and public sectors in relation to their portfolios and also negotiates commercial leases.

I work closely with the Hugh James property dispute resolution team, led by Robert Phillips and Iwan Jenkins in the construction team.

The construction team thinks the property team spends its time colouring in plans and the property team is convinced the construction team is constantly playing with lego sets.

Disclaimer: The information on the Hugh James website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. If you would like to ensure the commentary reflects current legislation, case law or best practice, please contact the blog author.

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