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Property Settlements during the COVID-19 Lockdown, Alert Level 3 & beyond

If you’re caught in the middle of a property settlement while the COVID-19 lockdown and subsequent lower alert levels are in place, here’s what you need to know.

Every property settlement is different

Firstly, every property settlement scenario is different with its own unique circumstances. While we can give general advice and guidance, there’s no substitute for discussing your situation with an experienced property lawyer. We’re still here to help you throughout the lockdown and subsequent alert levels, so please feel free to get in touch with us for assistance.

Are all settlements on hold during lockdown?

We’ve been asked whether all property settlements are on hold during lockdown. This is not the case. Property settlements can still legally go ahead, but while Alert Level 4 lockdown is in place, the vendor will not be able to move out or the purchaser move in. That’s because the government has stated that people must stay in the same place they were at the start of the lockdown. Moving house is not allowed during Level 4 lockdown.

What settlements can go ahead during lockdown?

There are some circumstances where it makes sense for the settlement to go ahead as planned. The lockdown restrictions are specifically about the movement of people to prevent the spread of the COVID-19 virus. So if a settlement can go ahead without the movement of people, then it may make sense to proceed.

For example a tenanted property, where the tenant is not moving out. There’s no reason why the settlement can’t proceed as planned, because no-one needs to move in or out.

Sale and purchase of bare land could be another scenario where the settlement could go ahead without the movement of people.

There may also be an option where the settlement goes ahead, but the vendor remains in the property as a tenant after the settlement, until the lockdown is lifted.

Whether the settlement can proceed is very much about individual circumstances though. The purchaser may still be awaiting the sale of their home in order to settle, in which case they wouldn’t be able to proceed until after the lockdown.

What if settlement can’t go ahead during lockdown?

If both parties can agree, a deferral of the settlement date is a sensible option. The New Zealand Law Society has suggested a deferral of 10 working days after the lockdown is lifted, but other timelines are perfectly acceptable. It’s about finding what works best for both parties, and that means communication and cooperation are key. Your lawyer should communicate openly with you and with the other party to find the best fit agreement for everyone. That means there may be some need to compromise, but a mutual agreement is always preferable to a disagreement that could end up in a costly court battle.

‘Forced’ settlement on a vacant property

A common dispute occurs when the property is vacant, so the vendor does not need to move out, but the purchaser will not be able to move in (or move out of their current home) while in lockdown.

In this case, the vendor has a contractual right to insist on settlement. But there are potential issues with this, for example a pre-settlement inspection can’t go ahead, handover of keys may not be possible, and the purchaser cannot ‘take possession’ in a sense because they are unable to move in.

This scenario could well end up in a costly court battle, which could be avoided by both parties being reasonable, flexible and compromising. The main thing to remember is that these are extraordinary times, and a little kindness goes a long way. A good property lawyer who discusses your options, and communicates clearly with both you and the other party, will give you the best chance of a mutually acceptable settlement.

Will I be able to settle at Alert Level 3 and below?

The latest information from the government says that yes, property settlements can proceed in Alert Level 3, and people will be able to move homes, including travel between regions.

However, this does not mean that things will be entirely back to normal at Level 3. Physical distancing requirements and certain other rules will still apply, so there are still issues that need to be taken into consideration for any settlement to proceed.

Guidance is continually being updated on this, and at Henderson Reeves we are staying abreast of all developments as they happen. The best thing to do if you are unsure about whether your settlement can proceed is to contact us. Our property lawyers will be happy to advise you based on the latest information.

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