Law: Unexpected Changes and the Impact of COVID-19

A closer look at lockdown reveals some distinct patterns of behaviour. Week one saw the business world in shock. Paralysis set in. Spending was put on hold, projects ground to a halt and  uncertainty was rife. By the end of week two, there were indications that the initial shock had been replaced by some sort of a plan, even if there was still no idea when it would all end.

Week three brought signs that the wheels were beginning to turn again. The switch to online working had been accomplished, and plans that had been shelved in week one were being dusted off again, alongside some inspired new thinking. After four weeks, I sensed that most businesses had a much clearer idea of where they stood and what the future held – good or bad.

The shrewd ones among us will be those who take on board the lessons from that period of temporary paralysis and make sure we’re not caught out by the unforeseeable again.

What’s changed in law?

When it comes to shrewd advice, someone I recommend to my clients is Simon Robinson of Baldwin & Robinson Solicitors. Speaking to Simon recently, I was interested to learn how things have changed in the world of law during the pandemic.

In his business, they needed to make swift changes to systems and procedures in order to deal with the impact of COVID-19. A good example with this would be the speed with which they were able to adapt IT systems for home working. Simon went on to explain that the process for conveyancing had dramatically changed because of COVID-19.

In conveyancing you normally have an exchange date and a completion in the future. However, this became unworkable, and there were so many ‘what ifs and unknowns’. The Government and governing body advised, "Do not exchange anything; but if you must proceed, only do so if you can complete your purchase on the same day". This effectively restricted property transactions to those with a short chain, and in most cases, vacant properties.

Banks looked at changing LTV limits and insisted that surveyors didn't carry out desktop valuations. This threw everyone out. Searches, which are an essential part of the conveyancing, had to stop due to social distancing. Viewings couldn't take place.

Working Online: Fortunately, you do not need a lot of human interaction to transact a business sale. They adapted to meeting clients on Zoom, with transactions proceeding as normal. That’s not the case for conveyancing though. The commercial side adapted more quickly and easily to the crisis than the residential property side of the business. Some of these changes will need to continue as things return to the new normal.

New commercial opportunities

While private property sales have stalled, business sales have continued to keep Simon busy. Indeed, there are some interesting opportunities arising from new government financial support packages triggered by the impact of COVID-19.

One of Simon's clients is buying a fish and chip shop, and the government has encouraged him to proceed. There is a financial incentive, and the business can still bring in money from delivery sales. Government grants are being given out at the time of writing.

So despite all the terrible news surrounding the food and hospitality sector, there are encouraging support packages that are worth looking out for. As the Government and Local Authorities try to reboot the economy, keep your ear to the ground for more financial incentives aimed at stimulating business activity.

Protecting yourself from the Impact of COVID-19

There is a difference, of course, between risk and carelessness, and this is where a seasoned lawyer proves invaluable. Whatever the circumstances, you don’t want to leave yourself exposed.

Unfortunately, there have been cases where third party liability insurance policies have not been paying out, simply because Coronavirus wasn’t amongst the covered infections listed on the policy. A good lawyer is needed to spot potential pitfalls, such as this, across your contracts and agreements. We use this as an analogy here, because your insurance broker should be looking out for these things too.

"This crisis, and the impact of COVID-19, has shown that you need everything to be air-tight," said Simon. It's too easy to be overtaken by risks buried in fine print, when the proverbial hits the fan. In the case of third party liability insurance, you have to ask whether it’s worth the paper it’s written on. This could mean putting additional things in place, over and above insurance cover in order to protect your business.

Your lawyer should make sure you’re protected by the terms of contract; for example, if the other party tried to use Coronavirus as an excuse to drive the price down.

That is not necessarily a good thing – as the reason these contracts are so long is because there is a caveat to cover almost every eventuality. Rather than leaning on caveats, I think lawyers should be clear about what they think is fine for their client and what they don’t. You cannot be too risk averse, as clients want deals to go through with minimal interference.”

Rainy day fund

This brings me back to my opening point regarding the impact of COVID-19. There is always risk in business. Nothing would get done if individuals sat around waiting for a risk-free environment, but you can and should mitigate risk with sound financial and legal advice. You don’t need a crystal ball to see the next crisis coming – you just need to plan for the unexpected.

Simon concluded with a few words after my own heart and in keeping with advice I regularly give.

"The businesses that come out of this intact will be those that had the foresight to build a rainy day fund into their cash flow. It is good practice to keep three months of costs in reserve. We’ve always been careful to do that as a business, and we’re glad of it now. Financial prudence looks good to lenders too.”

The UK business community’s appetite for risk will be a key factor in how we recover economically from COVID-19. When that time comes, and before you face other challenges in future, make sure there’s a safety net in place.