Although some sectors have already been hit particularly hard, there are many property issues relating to Covid-19 that do not discriminate. No matter what interest you hold in a property or properties, if you have any important dates coming up within the next 6 months then you should be looking at these now.
Property owners and their professional advisers are still adapting to the new landscape and the ‘occasional’ vagaries of working from home. Public bodies are redeploying their resources to critical functions. Construction companies are considering whether to down tools.
These will no doubt have an impact on obligations and deadlines within existing leases and residential and commercial property contracts.
What could be affected?
Whilst it is impossible to produce an exhaustive list, some of the key provisions which could be affected include:
- Break dates in leases
- Contracting out documentation for business leases
- Lease termination dates
- Rent review notices
- Completion dates and notices to complete
- Trigger dates in development or collaboration agreements
Some of these dates may be affected or even become impossible to achieve through no fault of either party. Take, for example, a development agreement which is conditional on planning permission being granted within a certain timeframe. If planning officers in local authorities are re-deployed to other departments, the prospects of obtaining planning permission within what had seemed a reasonable timeframe become unattainable. The same applies if construction has to commence by a certain date and builders cannot access site due to safety restrictions.
You must comply with your contract
Whilst the Coronavirus Bill places restrictions on some acts relating to property contracts, most have been untouched. The usual “contract is king” mantra applies. By this, we mean that you must comply with deadlines and obligations inserted into contracts or risk being in breach, leaving yourself open to claims for damages, costs or even termination of the contract.
Whilst we expect the majority of property owners to co-operate during these uncertain times in order to keep the economy as stable as possible and preserve the viability of businesses, there is the prospect that parties will not agree extensions or variations in all instances. Without further Government intervention, which may be necessary if the UK construction industry comes to a halt and/or all planning applications are suspended, the parties need to know what their options are.
Without the co-operation of all parties, the legal avenues available are often limited. We have advised clients regarding the correction or rectification of contracts, but most contracts contain prescribed dates whereby certain actions have to occur, so appear clear and immune to attack. We have also advised on frustration, where Covid-19 may be seen as an unforeseen, supervening event which discharges the parties from their obligations. However, most parties do not want their contracts to be discharged in their entirety, they merely wish for extensions of time or temporary relaxations. Although we have already seen, in contracts exchanged this month, the insertion of a Covid-19 or pandemic clause, the chances of a lease or property contract having a clause which deals effectively with this pandemic are slim.
What should you do?
Consider two main actions above all others:
- Co-operate with the other party to the contract
This sounds simple, but the most effective way that property owners can work through the issues that the whole of the real estate market is experiencing is by being collaborative. This means working together to identify provisions within contracts which should be varied or discharged and then getting this agreement formalised promptly. It also means simple steps like agreeing to accept notices by email or agreeing not to take advantage of any insubstantial missed dates which have occurred through no fault of either party. Whilst the Government intervention has not covered all bases from a real estate perspective, if a party has made all efforts to fulfil the terms of a contract but has been unable to comply because of this unprecedented pandemic, then we would hope that a Court would take a sympathetic approach if ever a dispute arose.
The earlier you identify and seek to deal with the key dates and the key provisions which are imminent, the better. It makes dialogue with the other party easier. It shows that you have been proactive in dealing with this situation. It gives parties a longer time to negotiate and agree necessary variations. It means you will have more time to take steps in order to comply, if possible. It gives you more time to contact third parties who may be affected. It also ensures that notices and the like can be sent in good time.
If you need further advice on this topic, please get in touch with your normal Real Estate contact at Mills & Reeve LLP or please contact Richard New.
Visit the Mills & Reeve Coronavirus hub here.