I have now attended at two seminars (via Zoom in what is now the new norm), one from a London set of chambers and the other from a Manchester set of chambers, which have discussed the problems faced by property lawyers as a result of COVID-19. The conclusion from both was:
- COVID 19 would not invoke the doctrine of frustration
- It was unlikely specific performance could come to the rescue
- Even if you could prove that the circumstances were exceptional, and persuade the court not to forfeit your deposit, the defaulting party still faced a claim for damages and, with the likely fall in property prices, the claim for damages would exceed 10% so it was all a little academic anyway
With the Government Regulations and the Law Society Guidance it seems that if the parties can comply with social distancing people can still move house. There was very sensible advice to fully explain the risks involved to the client and to fully record that advice in a file note and in writing, but as we move into the “new norm” these problems are going to continue to exist and some clients will be prepared to take that risk.
If it all goes wrong (and the contract is governed by the Fifth Edition of the Standard Conditions of Sale), then if clause 6.1 has not been amended time will not be of the essence and a notice to complete will need to be served. Then the parties will still have to face whatever underlying issue caused the completion not to take place in the first place.
If the conveyancing negotiations took place after the Government Restrictions had been imposed it is possible that the parties will have amended clause 6 to give themselves some flexibility. In this event, it is likely that those parties were very keen to proceed as they have agreed to exchange and complete during the pandemic, and even though they will have given themselves some flexibility in terms of time or making time of the essence, both parties still have to face the problem that caused the default and something serious must have happened to stop the transfer happening.
So why am I advising conveyancers to consider moving into the unusual territory of mediation in this situation? For me, rather than extensive negotiations followed by litigation with the uncertainty, significant cost and delay it will all bring while one party faces a significant damages claim (and not to mention the additional worry particularly for the client who probably already has a family member suffering from the coronavirus), it has many advantages:
- No-one is to blame and so there will be an element of goodwill between the parties and the coronavirus will be the enemy. Mediations already have an 80 to 85% chance of success so in these conditions the percentage chance should be higher.
- Speed – it can be organised within a matter of days – mediators are successfully using Zoom, Skype and the telephone.
- If litigation is to follow the Pre-Action Protocol will require the parties to consider it in any event. Why not move straight there?
- The parties will be in control of their own terms of settlement and can negotiate terms which will suit them rather than having a decision neither of them wants to impose by the judge
- In his/her role the mediator can:
- Act as a facilitator can help the parties to understand the other parties’ issues and open up the discussions and potential solutions (which might not come to the fore because the lawyers are too concerned about the contractual implications of making admissions)
- Explain to the potentially difficult party the stark reality of not finding a solution with the cost, risk, delay and uncertainty of litigation
- Bring the creativity and lateral thinking to the negotiations to find a solution to the real problems
- The cost will be a fraction of the litigation.
- It will probably enable the parties to achieve their desired goal of moving house.
- It will bring peace of mind to the parties who will already be considerably stressed.
I have to concede that not all mediations settle and there will be a small percentage that do not. However, if the mediation is organised at an early stage, little will have been wasted. The parties will have exhausted the possibilities of settling and can get down to Issues which will have been narrowed as a result of the litigation which in the long run will save time and money for them in any event.
For those conveyancers who have not used the mediation process before, they should not be concerned. It is an informal process where the mediator will guide the parties through the process, giving the clients an opportunity to fully consider the issues and settle on terms which they choose.
