PICTURE CREDIT: Descrier (descrier.co.uk)
Nothing is certain about a potential Brexit except uncertainty. Despite apocalyptic warnings from both the Leave and Remain camps, no one can be sure what shape Britain (or even bananas, if some euromyths are to be believed) will take once the votes are in. One thing you can count on is uncertainty is bad for any market. Investors tend to snap their purses shut until an outcome is clear.
With a number of investors adopting a ‘wait and see’ approach when it comes to their real estate decisions, developers are increasing offering one advantage to potential investors unavailable to UK voters: a cooling off period.
“A Brexit Clause, which operates like a standard break clause, gives the buyer an express option to terminate a contract, without losing its deposit, during an agreed period after 23rd June, subject to the outcome of the referendum,” explained Richard Pearce, a Solicitor with Bolt Burdon.
“Given the uncertainty as to whether parties would be able to use an exit from the EU as grounds for terminating a contract to purchase property, for example by relying on a ‘force majeure’ or ‘material adverse change’ clause, some cautious buyers are seeking express rights to terminate their contracts if the result of the referendum is a decision to leave the EU. Brexit Clauses can also set out the procedure for how the relevant contract should be terminated in the event of a vote to leave,” Pearce added.
Many property investment companies and developers are advertising this option. “In the event that the UK exits the EU then you have the option to change your mind on your purchase. No questions, no hassle,” promised Aspen Woolf, a property investment company, in a recent statement. In the event that the UK exits from the EU, Aspen Woolf is offering investors seven working days from the 24th of June to change their minds and receive a full refund.
Similarly, Galliard Homes is offering buyers a Brexit clause on its Skyline development in Slough, scheduled for completion in 2018. “All buyers exchanging contracts during the three-day sales release will automatically have 10 working days from the Brexit vote announcement on the 24th June to notify Galliard of their intent to rescind contracts,” it states.
Many potential buyers fear that a Brexit would harm property prices, meaning that any investment made before the EU referendum could shrink in value overnight if Britain opts to leave the EU. Meanwhile, foreign investors from regions such as the GCC (Gulf Cooperation Council) are gearing up to go bargain hunting if Britain votes Brexit and the sterling weakens as a result.
The so-called ‘Brexit clause’ is one way of easing nervous investors through the next two weeks. It is possibly the only guarantee available in the uncertainty surrounding the referendum.