As anticipated, the Government’s attention is now turning away from a sole focus on the health crisis to wider and more varied issues, and the residential property industry is coming into sharper focus. On top of the guidance regarding moving home, released on 13 May 2020, the Government has also issued a cautionary note suggesting how contracting parties should behave in these unprecedented times, requiring "responsible contractual behaviour in the performance and enforcement of contracts impacted by the Covid-19 emergency". The guidance applies to all types of contracts in the UK but arguably has a particular resonance for the property industry.
The note contains recommendations for contracts where performance is materially impacted by Covid-19. Whilst the guidance is non-statutory for the time being, the Government is strongly encouraging it is strictly adhered to, both for the benefit of the contracting parties and for the long-term benefit of the UK economy.
Unsurprisingly, the guidance has been drafted widely and includes a call for "responsible and fair contractual behaviour," recommending that contracting parties are reasonable and proportionate in responding to performance issues and enforcing contracts, "acting in a spirit of cooperation and aiming to achieve practical, just and equitable contractual outcomes having regard to the impact on the other party".
Highlights
In particular, the Government urges parties to behave fairly and responsibly in respect of the following:
- requesting and allowing relief for impaired performance (including in respect of the time for delivery and completion) and requests for extensions of time
- requesting and making payment under the contract
- claiming technical breach of contract (and enforcing events of default and termination provisions)
- giving notices under the contract.
What next?
On an immediately practical level, it is worth noting that both parties are expected to remain flexible and understanding of "impaired performance" and delays in completion; the guidance does not expressly side with a particular party, simply insisting on the cooperation of both.
Ultimately, the guidance is (for the time being) advisory only. However, the close of the note sees a commitment by the Government to "continue to review behaviours in contracting", suggesting that it could precede formal legislation should the guidance be ignored. The implicit warning is there: behave reasonably and responsibly, we will be monitoring.
Communication, more than ever, will undoubtedly be key. Whilst the updated guidance on home moving may go a small way towards assisting parties in navigating this new landscape, the scope of what might constitute a "material" Covid-19 impact will no doubt remain uncertain for the time being and the prudent approach must surely be to err on the side of caution. We would welcome discussions with anyone who is unsure and/or concerned about this new guidance – as the introduction identifies "the Covid-19 emergency requires all of us to work together" in order to protect our economy.
In summary, the Government is strongly encouraging all individuals, businesses (including funders) and public authorities to act responsibly and fairly in the national interest in performing and enforcing their contracts, to support the response to Covid-19 and to protect jobs and the economy.
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