One of the largest capital assets, if not the main capital asset in most financial applications ancillary to a divorce in the UK, is the family home and other buy-to-let or holiday properties. Post Brexit and the Election the property market appeared on the up and stronger however selling a property to release (and share) this capital in the current health crisis poses a huge issue and the question is what a property is now worth and when/ how it can be sold. This article seeks to explore some of these issues.
1. Is there even a property market at the moment
Mark Hayward, CEO of NAEA Propertymark (National Association of Estate Agents), hosted a webinar on Rightmove’s website today (Thursday the 2nd April 2020) indicating that Rightmove are still seeing millions of property searches on their website every week and receiving thousands of enquiries. He attributed this to the fact that there are still a lot of people with a huge interest in property. His view is that these people fall into 2 categories – (i) those that would like to move (day dreamers) and (ii) those that have to move (and will buy/move), for reasons including divorce. He advised that people are doing their homework during the lockdown: looking and planning so that the moment that the stay at home rules are lifted they will be able to move quickly. The housing market is expected to see a massive spike in activity once the stay at home rules are lifted. As such the guidance, so far as estate agents are concerned, is that there is still mileage in placing a property on the market, leaving it on the market and/or looking for a new property to move to upon in a divorce. A selling/ purchasing party cannot undertake any viewings in person during the crisis but many estate agents now offer virtual tours using computer technology and so people can still virtually view a property and be in a position to make an offer and move as soon as the stay at home rules are lifted. Other things can also be done remotely such as the EPC, the searches, obtaining a mortgage and valuing the property (lenders can do an automatic valuation online) and exchange of contracts. It is completion that is made difficult by the stay at home rules.
2. Can either parties complete on a sale and move at the moment (during the time of the current stay at home rules/ curfew)?
The government has issued guidance on moving home during the health pandemic – See here, which says the following:
We urge parties involved in home moving to adapt and be flexible to alter their usual processes. There is no need to pull out of transactions, but we all need to ensure we are following guidance to stay at home and away from others at all times, including the specific measures for those who are presenting symptoms, self-isolating or shielding. Prioritising the health of individuals and the public must be the priority. Where the property being moved into is vacant, then you can continue with this transaction although you should follow the guidance on home removals. Where the property is currently occupied, we encourage all parties to do all they can to amicably agree alternative dates to move, for a time when it is likely that stay-at-home measures against coronavirus (COVID-19) will no longer be in place.
The guidance is therefore, where possible, to delay selling/moving while measures are in place to fight coronavirus. If contracts have already been exchanged and the property is currently occupied then all parties are advised to work together to agree to delay matters. (for contractual reasons). The government guidance does not require agents and parties to stop completing on a property purchase but to be flexible unless the move is critical. Properties/ situations where a move may well be possible and be complaint with the rules to stay safe include –
- If the move is unoccupied
- If the property is a newbuild (again unoccupied)
The greater risks arise where completion of sale and the prospective move of home is into a previously occupied property (due to the risks of transmission of COVID-19). The Law Society guidance to conveyancing solicitors is that there is nothing to prevent its’ members completing on a sale where both parties to the transaction are willing so long as PHE guidance is followed and the properties are not occupied with cases of COVID-19 or suspected cases nor are the occupants self-isolating at the date of completion and all parties abide by social distancing during the move (see here). This is of course easier where the move is into an unoccupied or new property. It would be advisable otherwise to sanitise the property prior to moving in. It would be worth a party moving considering having the property subject to a professional deep clean before moving in. The government has given some, as follows –
- Wear disposable or washing-up gloves and aprons. These should be double-bagged, then stored securely for 72 hours then thrown away in the regular rubbish after cleaning is finished,
- Using a disposable cloth, first clean hard surfaces with warm soapy water. Then disinfect these surfaces with cleaning products. Pay particular attention to frequently touched areas and surfaces, such as bathrooms, grab-rails in corridors and stairwells and door handles,
- If an area has been heavily contaminated, such as with visible bodily fluids, from a person with coronavirus (COVID-19), consider using protection for the eyes, mouth and nose, as well as wearing gloves and an apron,
- Wash hands regularly with soap and water for 20 seconds, and after removing gloves, aprons and other protection used while cleaning.
3. What is a “critical” move?
The caveat to the government guidance is where parties have already exchanged contracts and the move is “critical”. “A critical move” is not defined but is being interpreted as transactions where one party has to move due to work, family or health reasons (including vulnerability). No body (whether the government, Police or the Law Society) is policing the completion of sales so responsibility for deciding whether a sale is critical is subjective and down to personal autonomy.
4. What if a party’s move is in a chain?
The responsibility for whether a property sale completes therefore falls to the parties to the transaction and the conveyancer – to ensure that of the transaction completes it is done safely. If one party wants to withdraw or delay from a transaction this usually has a domino effect down the chain and therefore a great deal of communication and flexibility is required. The key is tolerance, patience and communication.
5. What about removal companies (to move a party)?
The British Association of Removals (“BARS”) has set out that they will not provide lorries or movers during the pandemic. BARS says its’ members have to touch an average of 700 items during the average house move, which poses a health risk to each removal person. This leaves people who are moving (those that consider the move to be critical) to self-move or find a removal company who are not a member of BARS, which should be done with caution.
6. What about mortgage offers?
The usual mortgage in principle offer expires after 6 months, which may pose an issue if completion is delayed. However, UK mortgage lenders and building societies have given their commitment to extend existing mortgage offers for three months from their current expiry dates where clients have already exchanged contracts on the same mortgage rate as the original mortgage offer. This allows the chain to delay completion whilst moving home is difficult, and after the government advice that moves should be delayed where possible. That said it is a concern that the Lloyds Banking Group and Barclays have now temporarily pulled many of their mortgage offers from the market unless the customer has a deposit of at least 40% of the value of the property. The lender may also ask for updated proof of income at the date of completion which again may be problematic if the lender’s circumstances have changed and they have not worked during the stay at home rules or not worked at the same level f remuneration, and if so this will be subject to the lender’s discretion.
7. What if we need to delay the implementation of a financial remedy order?
Given the issues highlighted above, parties who are currently implementing financial remedy orders may need to agree extensions to dates for sales, transfer of property and payments of lump sum funded by mortgage offers yet to be obtained.Courts will almost certainly grant coronavirus related requests for extensions to deadlines.HMCTS have confirmed that there are no application fees to apply for a coronavirus related adjournment of a hearing [see here]. Whilst no such relief has been granted with regards to application fees for requests for extension to a court deadline, it is certainly worth asking the court to waive the fee if the request is coronavirus related.
8. Are valuations worth the paper they are written on?
A more fundamental question is the impact of the pandemic on valuations of property and assumptions of value obtained prior to the crisis.For cases in proceedings or in discussions as to settlement, there will be understandable nervousness about relying on recent valuations.Where valuations and housing need assessments are critical to settling needs cases, parties may be advised to take a wait and see approach.Can we settle cases at all based on current valuations?As always in financial remedies, this depends on the attitude to risk for those involved.
9. Is a final order or agreement undermined by the current uncertainty?
There has been much discussion amongst financial remedy practitioners as to whether the current crisis could constitute a barder event, In other words, if a case has recently settled on the basis of an assumption as to valuation, and the property market has collapsed, is this a new event which could invalidate the basis upon which the order was made and allow it to be revisited? In Myerson v Myerson  EWCA Civ 282 the 2008 financial crisis and the massive consequential collapse in the value of the husband’s shareholding did not amount to a barder event and the court found that “the natural processes of price fluctuation whether in houses, shares or any other property, and however dramatic do not satisfy the Barder test”. At present it is too early to tell what the long-term impact will be on house prices because of the difficulties in valuing property in a market which is effectively on hold. There is an argument that the worldwide pandemic and completely unprecedented shut down of business and housing market could not have been foreseen as a “natural price fluctuation” and it seems likely that it will be worthwhile for at least some practitioners to argue the case for a barder appeal. Whether or not such arguments will be successful is as unpredictable as the global pandemic itself and the long-term impact on the economy and house prices generally.
Selling properties and moving home, like all areas of life, has been made problematic by the health crisis with the inevitable impact on financial applications in divorce. Parties are being urged by the courts and tribunals to consider arbitration and mediation in all financial remedy cases. Early communication between parties and flexibility is key.
This article was written by Rosalind Fitzgerald of Bindmans LLP and Maria Scotland of 5 St Andrews Hill Chambers.