Commercial and Agricultural Property transactions during the coronavirus pandemic
Agriculture and Commercial Property specialist Rebecca Jepson considers the impact of the coronavirus pandemic on commercial and agricultural property transactions.
Despite the coronavirus outbreak, commercial and agricultural property transactions are progressing. If you have already exchanged contracts or are about to do so, it is important to consider the implications of the current restrictions on the timeline for completion. The parties involved should be openly discussing the best way for the transaction to proceed with as little disruption as possible to their respective businesses and whilst minimising the risk to their employees and members of the public.
Availability of funds
A key consideration will be the availability of funds, if a transaction is being financed through bank or other borrowings. In some cases, banks are taking longer than usual to release funds for completion. It is therefore important that clients keep in touch with financial advisers, brokers and their respective funding providers during the course of the transaction and update their solicitor where appropriate.
In a number of cases, transactions may well be able to proceed as originally planned, providing that appropriate measures are taken in order to follow advice on social distancing. This might mean taking extra precautions whilst moving equipment or on the handover of keys as well as ensuring premises are properly cleaned and disinfected before and after the change-over of occupiers. In the case of agricultural property which includes a dwelling, the transaction could still proceed but provision could be made for the current residents to remain in occupation as an assured short hold tenant, for example. Farm dispersal sales ought to be postponed until social distancing restrictions have been lifted, but again, this can be provided for in the contract.
If the parties agree that they would rather delay completion until such time as the coronavirus restrictions are lifted, parties could agree to extend the completion date to a date to be agreed in the future. Even where contracts have already been exchanged, the parties could seek to agree a formal variation to the terms of their agreement, to include these sorts of provisions now.
What will happen, however, if provisions cannot be agreed and a party no longer wishes to complete as scheduled?
A force majeure provision is intended to alter or even remove the liability of a party where they are unable to fulfil their obligations under a contract because of an unavoidable event which is beyond their control. The Commercial Property Standard Conditions (which are incorporated into most commercial and agricultural property contracts) do not include a force majeure provision and such clauses are not implied by English Law. There is a real risk, therefore, that the party who cannot complete on the agreed completion date will be in breach of contract.
Breach of contract
If a party is unable to complete then the non-defaulting party may serve a Notice to Complete on the other, which requires completion to occur within, usually, 10 days of the date of the Notice. If completion still does not occur, then the consequences can be expensive to the defaulting party. Interest would be payable on the purchase price by way of compensation. Where a deposit was paid by the buyer on exchange, this will also be at risk if the buyer is the defaulting party. The non-defaulting party may also seek to recover other costs which have been incurred as a result of the breach, for example mortgage interest or wasted professional costs.
As is often the case in commercial and agricultural property transactions, communication between the parties is going to be absolutely key . Parties should be encouraged to negotiate in good faith to find a sensible way through these unprecedented times. Butcher & Barlow are specialists at negotiating complex property transactions and would be happy to assist clients in working through these issues, wherever possible.
Although is accordance with Government guidelines, our offices remain closed, the Commercial Property and Agriculture Teams remain available for advice and guidance on any existing or new matter and please do not hesitate to get in touch via firstname.lastname@example.org or email your legal adviser directly. Rebecca can be contacted at email@example.com or 07760 661756
To view Butcher & Barlow’s own working practices, please visit www.butcher-barlow.co.uk/news.