Law of the land

Trowers & Hamlins talks buying, planning, contracts and force majeure amid the coronavirus crisis.

International law firm Trowers & Hamlins, with many affordable housing providers among its clients, is seeing developers still looking to exchange contracts on properties but, in the teeth of the crisis, offering longer completion dates.

With many year-ends or quarter-ends this week, there are exchanges of contracts to get over the line where possible. However with off-plan sales and no indication of when properties will be finished in the wake of the lockdown, Trowers is anticipating flexibility on completion dates and the offer of conditions, especially given the time frame for mortgage offers and the likelihood of changes in valuations, including possible acceptance by lenders of virtual valuations, as well as purchasers’ financial circumstances changing given the threat of job losses.

Sara Bailey

“We are still seeing developers looking for sites with land being secured and JV deals going ahead. Land buyers remain active, while housing associations have ongoing obligations around repairs and maintenance and health and safety where it is possible and safe to carry on work within guidelines and restrictions,” says Sara Bailey, head of real estate at Trowers.

Although delays in planning applications are inevitable, statutory timeframes remain the same with a commitment to ensure the planning system continues to function. Local Authorities may be unable to physically send out consultation letters, affix site notices and carry out site visits during the lockdown, but some councils are putting consultation procedures in place.

It is likely that many councils will look to hold remote meetings, but developers should be wary of making any amendments to schemes where applications have already been submitted and consulted on, but not yet determined as material changes could trigger re-consultation.

“Another issue developers may want to explore with their relevant authority is whether they have facilities to receive consultation responses by post. If not, this could open up potential grounds for judicial review if responses are received, but not considered prior to determination of the application,” says Jacqueline Backhaus, partner at Trowers.

While many developers and contractors have closed sites, it is not yet mandatory, although probably only a matter of time before enforced closures, except in relation to emergency work.

There is also the issue of Force Majeure, with parties reviewing contractual terms to see where the risk lies for delays and if work can be suspended or terminated.

Whether an epidemic is a Force Majeure is open to contractual interpretation. Trowers would expect a judge or adjudicator to have sympathy with a contractor under such circumstances.

“The burden of proving force majeure and that it has caused delays, or the works to be suspended, will fall on the contractor as the party seeking to rely on it,” says Helen Stuart of Trowers.

“If the government notifies mandatory restrictions on movements which causes delays to works then this would fall under the Relevant Event of a change of law, which would be more clear cut. This would not constitute a Relevant Matter, so the contractor would not be entitled to loss and expense.”

Trowers advises with live projects that contractual provisions are carefully checked and legal advice sought if unclear and to ensure all the contractual processes, especially any notification requirements, are followed.

“We would recommend seeking to agree a commercial solution to give certainty and share the risk. This would hopefully ensure project teams remain viable and relationships and projects can be maintained and re-started as soon as this crisis is over,” said Stuart.

In terms of future projects you need to expressly provide for COVID-19 and its possible effects under the contract. You should avoid blanket wording and try to identify the precise risks that the contractor is seeking to address.

Many SMEs in the sector and its supply chain will once again be hardest hit, making continuing payments to them crucial where feasible, as sites are mothballed and with no time frame as to when they will be up and running again.

Adrian Carter

Trowers managing partner Adrian Carter, head of banking and finance, said companies were looking, where practical, to keep business ticking over and looking at extending their credit facilities, while housebuilders and housing associations are urged to look at projects on a scheme-by-scheme basis in terms of options open to them and how contracts going forward are drafted, not to mention knowing their potential liabilities around site closures or keeping them open.

Going forward Carter sees a potential sea change in where and how we work and the impact on commercial office space, as well as a re-mapping of insurance cover and the possibility and cost of wider cover to take in the implications of a pandemic of such force and unfathomable consequences.

Trowers & Hamlins continues to monitor closely the situation and is following all relevant government and WHO advice to ensure they are ready to adapt to the latest guidance. The firm are posting new information daily on their website: www.trowers.com