“COVID CLAUSE” WHEN BUYING A HOME IN SPAIN

Key points 

• Clause included in sale and purchase documents protecting buyers and sellers in case a coronavirus event prevents either party from effectively transferring the property. 

• The clause regulates that the parties will not be in breach of obligations because of a coronavirus event.

•  Starting to be contemplated in residential sale and purchase agreements.

Shortly after the lockdown in Spain began, the so called “Covid clauses” in residential sale and purchase documents began to be contemplated. A Covid clause offers parties the ability to sign sale and purchase documents while ensuring they are not at fault and in breach of contract, with all of the associated costs, if they are unable to effectively transfer the property should the transaction be affected by coronavirus restraints.  

Covid clauses enable transactions to continue and not fall away where a coronavirus event delays completion. Examples of these coronavirus events could be the following:

-      the buyer or seller is ill or self-quarantining;

-      the government introduces recommended or mandatory measures to reduce transmission;

-      there is disruption to the post or sending money electronically;

-      the buyer or seller cannot properly execute documents e.g. if no Notary is available;

-      the buyer cannot carry out standard pre-completion searches;

-      a lender withdraws their offer to finance the purchase; or

-      there are delays elsewhere in the chain.

To date these clauses have tended to be quite widely drafted, reflecting the widespread disruption across the property market. Broadly speaking, an industry standard Covid clause will provide the following:

-      the term of the parties' right to serve a notice to notarize will freeze while a coronavirus event prevents completion; and

-      a party will not be in breach of its obligations because of a delay caused by a coronavirus event.

These clauses may not work if you absolutely have to complete the transfer of ownership on a certain date and will not cover every eventuality in what is a fast moving and complex crisis, but they do provide a basic layer of protection for both parties who may otherwise be wary about transacting in the current scenario.

For further information on property related matters do not hesitate to contact us by emailing info@carlanderlaw.com.