Matthew Clake

Partner & Solicitor

DATE PUBLISHED: 30 Apr 2020 LAST UPDATED: 07 Jul 2023

Property Development during COVID-19

As it has been confirmed that the Covid-19 lockdown will continue for a further period of time, thoughts are now turning to how we can ensure that the property market is stimulated into positive action, once the current restrictions are lifted and come to an end.

For example, the government has already announced the extension of the Help to Buy Scheme to 2023; restricted to first time buyers of newly built homes in an attempt to give the industry a much needed boost.

Our team of specialist solicitors have put together a breakdown of legal matters affecting the property development industry and what we can do to support you during this tough time.

Preparation of Contract Packages, Exchanges & Completions

This period of social distancing during lockdown can provide the perfect opportunity for the collation of documentation, and drafting preparation, required to enable units on a development to be sold or let very quickly; either off-plan or on completion of the development, once the restrictions have been lifted. The early preparation of the contractual paperwork means that delays in the process are reduced and sales can complete significantly quicker.

In addition, we are still able to exchange and complete on units which are vacant, subject to observing the social distancing guidelines and provided the actual move is safe. Exchange can be undertaken with an additional rider providing for any delays caused by the current lockdown and beyond. This would be appropriate, for example, in a chain where parties are completing on occupied properties, in the interests of both parties and allow both Developer and Buyer the comfort of knowing the sale is secure.

Finance

The economic uncertainty we are all experiencing makes it even more essential to manage risks. Careful attention needs to be paid to the terms upon which borrowing has been provided or taken. 

For Borrowers, it is important to ensure that you are aware of and continue to comply with your obligations under finance agreements. Although Coronavirus itself will not cause a breach of an agreement, the ripple effect; causing delays and uncertain market conditions may do so. 

In addition, it is unlikely that the Covid-19 pandemic will enable developer borrowers to assert force majeure clauses. Development funding agreements can present a potential minefield which needs diligent consideration and early dialogue with lenders to find a pragmatic way forward. 

Whether it is negotiation, bridging finance or an exit loan, there are a number of lenders who are continuing to push through the current climate and provide finance.

Construction Contracts

As with the above, whilst the virus outbreak is unlikely to cause a force majeure event in terms of construction contracts, it may be that the direct results caused, such as lack of supplies and/or labour, that enable a claim for extensions of time or, in certain circumstances, suspension of the contract. 

The reliance upon specific clauses of construction contracts will depend entirely upon their drafting, and advice should be taken as soon as possible to ensure the most cost effective outcome for all parties.

On-site Construction Work

The Government has already confirmed that it wants construction of residential and commercial property development projects to continue during this period of time, and the introduction of the Construction Leadership Council’s (“CLC”) Site Operating Procedures has enabled the re-opening of construction sites (where possible); whilst maintaining compliance with social distancing guidance at paramount importance. 

Where contractors have been forced to furlough staff to survive, the CLC are also preparing a recovery plan to enable staggered return to working for furloughed staff. Redrow Homes have announced this week that their construction sites will reopen next week (with additional safety measures).

There is also the issue of supply chain management. Whilst some builders merchants are remaining open, many areas of supply have been subject to both reduced staffing and hours, or in some cases total closure. Therefore supply contracts will need to be carefully reviewed by businesses in terms of delay provisions, and potentially alternative sources obtained in order to ensure smooth and cost effective operation of building sites in this rapidly evolving situation.

Planning Advice

Local Planning Authorities have been permitted, via the emergency COVID-19 legislation, to undertake planning meetings via virtual mediums such as Zoom, in order to alleviate some of the potential delays. Now is the perfect time to take advice in relation to planning applications, our expert planning lawyer, Chris Proudley, can assist with all areas of planning law. 

Furthermore, applications can be submitted online, which we can also assist with. Local Planning Authorities are being encouraged to find other ways of undertaking site visits, such as desktop searches. That said certain assessments required to progress applications may not be feasible at the current time.

For further information or to discuss your Commercial Property needs, please get in touch with a member of our expert team on 01202 525333 or email commercialproperty@ellisjones.co.uk for more legal advice and guidance.

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When you submit this form an email will be sent to the relevant department who will contact you within 48 hours. If you require urgent advice please call 01202 525333.

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