Legacies in Lockdown. A spotlight on property issues.

During lockdown we are acclimatizing to working from home and adjusting to new virtual ways of working. In a technological age many businesses can function effectively online, but the property sector, which ordinarily operates by way of viewings with agents, surveyors' inspections, and movers has effectively been forced into hibernation. The impact of Covid-19 from both a practical and economic stance has already had a significant impact on charities' legacy income, as property prices drop and stock prices drop. Legacy Foresight has predicted that legacy income could fall between 3-9% in 2020, although hasten to add that given the current uncertain climate these outcomes could vary quite significantly.

How is legacy income affected?

As numerous fundraising activities have been postponed for social distancing reasons, legacy income generated from property sales is more vital than ever for a charity's income flow and future survival. In this time of crisis charities are among those looking for assurance from both the government, and the property sector, in how to safeguard and deal with the shifting housing market.

The Government's advice on 26 March stated that "there is no need to pull out of transactions that have already been agreed". However, on the ground legacy teams are seeing a freeze on sales across the board and a delay in legacy realisation. Some charities are also experiencing buyers trying their luck by negotiating quick sales at a huge loss. Donna Brown, Legacy Manager at Alzheimer's Society said, "all my properties have come to a standstill as agents can’t get in to show potential buyers around. I've had to adjust my pipeline figures and put all property matters on a 6-week review".

The management of probate properties is also proving to be a challenge with many clearance companies initially downing tools due to confusion over social distancing, and the safety of both employees and clients. After some pressure from the industry the government have now classified 'waste operators' as key workers and it is recommended that clearance companies can enter vacant properties 72 hours apart, being the current opinion on how long the virus might be able to survive on surfaces.

Nevertheless, it’s not all doom and gloom and in recent days we've seen the property sector trying to adapt to keep the market afloat. It's encouraging to hear Zoopla's Director of Research, Richard Donnell say, " We expect demand to pick up again once physical restrictions are eased and don’t expect any big movement in house prices during the coronavirus lockdown".

An update on the implementation of Confirmation of Payee Published 20 03 2020 Making sure that people are protected from Authorised Push Payment (APP) scams is very important – particularly right now. With people and businesses having to adapt their ways of working in light of the Covid-19 pandemic, we wanted to provide an update on the implementation of Confirmation of Payee (CoP).

https://www.psr.org.uk/psr-publications/news-announcements/psr-update-on-implementation-of-CoP

Key considerations when administering an estate:

So, during these uncertain times what practises should charities adopt to ensure they're protecting what is usually their most valuable legacy asset? Points that you should consider include:

• Sales of vacant properties. These are still, in our experience, progressing well and the lockdown restrictions do not greatly impact these transactions. This trend may decline as the effect of the difficulty in arranging valuations comes down the pipeline, but for now with many probate sales, it is business as usual.
• Try virtual viewings. Speak to your agent. Many are trying to be more inventive in the ways they are doing viewings, including virtual tours, and they are there to work for you.
• Reducing prices. Don’t be in a hurry to agree price reductions. The buyers may seek to make you feel that they have an upper hand due to the difficulties in arranging viewings but remember that the buyer is in the same boat if they have to look elsewhere.
• Consider delay clauses. It is widely advised to consider allowing 'delay' clauses in property sale contracts to give a buyer comfort that they will not be penalised (or lose their deposit) if they are unable to complete on time due to valid Covid-related reasons. These are now becoming quite widely used and can be a means to secure an exchange of contracts where a cautious buyer would otherwise hold off.
• Seek an addendum. If properties prices are reduced, you should seek an addendum option to any S.119 Reports you have obtained. RICS have also issued 5 suggested caveats in the current property market which many valuers may adopt in their reports and which will inevitably reduce certainty. This can be found here.
• Where possession is required. Charities should seek to adopt a reasonable approach and a caring tone to correspondence as part of administration of an estate where possession is required. This approach remains key during the current crisis and additional concessions may also prove desirable. In addition to the approach we would all naturally adopt, until 30 September the Coronavirus Act (the 'Act') extended all notice periods for both s.8 (rent arrears etc) and section 21 (non-fault) notices to 3 months in order to protect occupiers.  A new court Practice Direction also stayed all possession claims until 26 June 2020.  It is worth considering a strategy now to ensure timely and appropriately received action in due course.
• Claims against trespassers. Thankfully the unintended consequence of the new Act and Practice Direction which resulted in possession claim against trespassers also being stayed, has now been amended. Whilst, this means possession claim against trespassers can now proceed, it is anticipated they will still take more time than usual. As such, it is more important than ever to ensure that vacant properties are secure and, where possible, under a watchful eye such as that of a neighbouring property owner.

Get in touch

Our Legacy team can advise you on a range of legacy income matters including property, probate, contentious probate and legacy administration and are happy to speak to you about any challenges you are facing. Please get in touch one of our team members below or visit our Legacies page to find out more.