Hunters’ Residential Property department is a leading team of property lawyers based in central London. The team handles all legal matters relating to the sale and purchase of freehold and leasehold property in England and Wales, and are well accustomed to liaison with lawyers in Scotland in relation to land transactions. The residential property team also advise on the myriad legal issues that arise out of the ownership or management of residential property.
Q I have exchanged a Contract to Sell / Buy a residential property. Has the Brexit vote result changed the terms of my Contract?
Q How do I know which commentary to read and rely upon?
A Do treat all commentary carefully. For example, selling agents have good reason to talk up the market; whereas buying agents have every reason to say that good property, correctly priced, is very scarce. Reliable data can be obtained from HM Land Registry which (broadly) records all of the transactions that have actually completed; and the prices that were actually paid.
For your interest, some selected Land Registry data states that:
The average price of a detached house in London in July 2015 was £787,783; and in April 2016 (latest available date) was £854,209
The average price of flat / maisonette in London in July 2015 was £385,416; and in April 2016 (latest available date) was £413,963
The volume of transactions in London (all properties) in July 2015 was 10,076; but in February 2016 (latest figure) was 6,926.
Q Are property values going to collapse?
A The majority of commentators think that residential property asking prices will decline as a result of the Brexit vote. However, that majority view seems to be based on the “uncertainty” principle rather than on any inherent down-valuation of residential property as a result of the vote. For those sellers who have a need or desire to sell this year, it is important to consider or revisit your agents’ advice on the price that you are asking buyers to pay.
Some buyers have withdrawn from buying a property in the last 10 days, because they feel that the same amount of money will enable them to buy something larger in a few weeks’ / months’ time. These buyers tend to be from Europe or the Rest of the World – and expect to benefit from any drop in the value of sterling against the Euro / RoW currency.
Q Are property values going to rise? If so, when?
A It is very hard to find a commentator who thinks asking prices will rise as a result of the Brexit vote outcome. But feel free to ask a selling agent or a buying agent (or other investment advisor) that question!
Q Is the volume of residential property transactions going to decline?
A The majority view seems to be “yes”. Again this is based on the “uncertainty” angle. At the moment the political and economic future of England & Wales is uncertain; and uncertainty tends to make people behave cautiously. Which tends to mean that many property transactions will be “put on hold” until the situations become clearer.
It is worth remembering that the events of 2008 did not lead to the anticipated collapse in property values (in contrast they kept rising); but the volume of transactions certainly declined after 2008. Borrowing money became harder; Lending money became harder. Volumes were starting to pick up. The Brexit vote might have a similar effect to the 2008 events: uncertainty, caution, decline in transaction volumes.
Q Is a decline in property values an all-round “bad thing”? Are there any opportunities?
A Presumably the lettings market (particularly at Investor level) will enjoy a surge in demand. Investors holding cash deposits (earning zilch in bank interest) may invest in property where they can achieve high yields instead.
If you own a flat with a short lease (and if you think the valuation of your property has just declined because, say, European or RoW buyers are shying away from your locale since the Brexit vote) then now might be the time to obtain a valuation for a lease extension. The main legal element of that process is triggered by the service of a Notice of Claim. The legal process can take months or years thereafter; but the valuation date will remain as the date when you served your Notice of Claim. And the current open market value of your leasehold property is a critical element of that valuation.
Q Some months ago I exchanged a Contract to buy a property “off plan”. I think the value will / has collapse(d). Can I walk away?
A The answer will lie in the Contract – but it is very rare to find a “Brexit Clause” in a residential context; so the answer is very likely to be No. (Brexit clauses are marginally less rare in Commercial Property contracts.) However, if you are about to exchange a contract to buy a residential property “off plan” now is the right time to contemplate the future political and economic uncertainty very carefully and ask yourself what our property market (and property values) will look like in a few years’ time … when that property has been built.
James Vernor-Miles – Partner
James specialises in Property and Landed Estates work and also has extensive experience in acting for Charity Trustees and Commercial Property clients, for whom he advises regularly in connection with the sale, lease, purchase and development of land. He advises a number of charities on matters other than property.
Contact James here.
This information is based on the law in force as at 26 July 2016. Although we endeavour to ensure that the content is accurate and up to date as at that date, it is designed to provide general guidance only and is not intended to be comprehensive or to constitute professional advice. Specific advice should always be sought, and you should only rely on advice which is given, by reference to particular facts and circumstances.
If you have any further questions, please do not hesitate to contact our Solicitors, who will be able to assist you further.