Covid-19: Buying and selling Jersey property
17 April 2020
As Jersey followed the United Kingdom into lockdown, the Government of Jersey and the courts have moved quickly to put in place new procedures and guidance which aim to facilitate the continuing operation of the island's property market whilst ensuring compliance with the social distancing measures necessary to combat Covid-19.
There are two principal ways in which property is bought or sold in Jersey:
- by contract, passed before the Royal Court (freehold/flying freehold/leases for a term of over nine years); and
- by the purchase of a share/shares in a company which owns property (share transfer).
In Jersey, it is the purchaser's responsibility to investigate the title to the property which they are acquiring. Title investigation includes a detailed review of the contracts that have been passed at the Royal Court and lodged at the Jersey Public Registry. Access to these documents is possible online, so the new measures do not prevent either the investigation of title or the drafting of the relevant contracts.
It is normal procedure in Jersey for a specialist conveyancer to attend the site of the property to ensure that the position on the ground accords with the title documents. The introduction of social distancing cast uncertainty on the ability of conveyancers to carry out physical site visits. However, provided that social distancing is maintained, conveyancers are able to visit the property to finalise their title investigations and we do not expect there to be any disruption caused as a result.
Lenders require a satisfactory valuation to be provided in advance of completion which (depending on the nature and value of the property) would normally include a site visit. However, many banks are now accepting "desktop" valuations in which data on the property itself, surrounding properties and comparable properties in the market place is analysed remotely.
Given the uncertainty of the times, it is no surprise that banks have become a little more conservative and are pulling back from some transactions. The high street lenders are generally a little more risk-averse but a lot of purchasers are securing funding from alternative lenders instead.
|Transaction||Normal procedure||Effect of Covid-19|
|Transfer of property by contract at the Royal Court (individuals)||
Where the parties to a contract are individuals, they are either required to attend the court in person or instruct a lawyer to appear on their behalf by power of attorney.
Powers of attorney can only be effectively created where they are witnessed by a lawyer.Powers of attorney can only be effectively created where they are witnessed by a lawyer.
The Royal Court has continued to allow contracts to be passed. However, parties to that contract are not permitted to attend court in person.
Parties therefore need to authorise their lawyer to attend court on their behalf by way of a power of attorney.
Helpfully, the Judicial Greffier's office have confirmed that a power of attorney can be validly witnessed if the lawyer witnesses the client's execution via a video link.
|Transfer of property by contract at the Royal Court (corporate entity)||
Where a party to a contract is a company or other corporate structure, an authorised person must attend the Royal Court to pass the contract on the corporation's behalf.
The authorised person is normally the party's lawyer, although the corporation can authorise any person to appear
Regardless of the identity of the authorised person, their authorisation to pass the relevant contract at court should be documented by way of a resolution of the directors.
The new measures introduced by the court mean that a corporation can continue to transact property but the authorised person must be the corporation's lawyer.
The board minutes are generally dealt with electronically and do not need to be witnessed.
|Share transfer||Share transfer property can be transacted without the need to attend court or enter into a power of attorney.||No change|
|Securing a mortgage on property||
There are many different ways of arranging finance. However, lenders tend to insist that they have a registered hypothec (charge) over property as security for the repayment of the loan.
The execution of the loan documents will usually need to be witnessed by a lawyer, in the presence of the borrower (or guarantor).
A hypothec is registered by delivering the hypothec (and stamp duty receipt), signed by the borrower and the lender (or by their lawyers), to the Judicial Greffier's office before 4pm on a Friday.
Many lenders are allowing the loan documents to be witnessed by video call in order for social distancing to be maintained. We can then arrange for collection of the loan documents from your home and delivery to the bank's lawyers.
The lender's lawyers can attend to registration of the hypothec in the usual way.
A property transaction normally necessitates the signature of a series of documents (sometimes in the physical presence of a witness or a lawyer). However, given the increasingly strict limitations being placed on social interaction and movement, there has been a systematic relaxation of the traditional signing requirements:
- A large proportion of the documents may be signed in counterpart (meaning that each party signs a separate copy) which is easier to facilitate when so many offices are closed.
Although Jersey law has permitted electronic signature as a method of creating a binding contract since 2001, the market place has continued to operate on "wet ink" documents.
- However, standard procedure has been relaxed to allow electronic signature wherever possible.
- As mentioned above, documents which require a witness as a matter of law are now generally permitted to be witnessed via video conference, which avoids several practical difficulties.
Once completion has taken place, the purchaser will generally be entitled to occupy their new property. However, social distancing measures and guidance from the Government of Jersey mean that removal firms will be difficult to secure and parties may have to make their own arrangements. Regardless of whether a removal firm is used or not, social distancing should always be maintained.
It may be that a move into or out of a property is not possible whilst Covid-19 restrictions remain in place. Nevertheless, parties may be minded to continue to completion nonetheless.
One option available to the parties (particularly on new build developments), may be to sign a conditional contract and put in place a short term tenancy agreement to permit the purchasers to move in and pay a market rent until the purchase itself can be completed. The deal could be structured to net off the rent from the purchase price at completion.
The property sector has adapted quickly to the challenges posed by Covid-19. Whilst there is some inevitable disruption, the indications are that such disruption will be short term and transactions are continuing to complete without substantial hindrance.
Jersey's property market was showing few signs of destabilisation up until Covid-19 in spite of the uncertainty caused by Brexit. Covid-19 appears to be dampening activity and pricing slightly but projections are that normal service will resume as soon as social distancing measures are lifted. In the meantime, however, a slightly less active market place presents a real opportunity for buyers, especially those without the need to secure bank finance.
Author - Hannah Robinson, Associate