Covid-19 Beware – bank payment delays

A word of warning regarding delays and other problems with bank payments which can arise from the impact of Covid-19 – both in the UK and globally.

The issue

We are increasingly encountering issues arising due to payments to and from major banks being delayed as a direct result of Covid-19.

The delays are often due to staffing issues with staff in processing centres being made to work from home which is less efficient.  Some banks with overseas processing centres have had to send entire teams home in order to comply with local lockdown measures without any remote working facility available to continue operations.

Even where payments have been made by CHAPS and in good time, often banks are unable to process payments until days later.

This is of particular relevance for property transactions where clients may be faced with having to pay interest and be liable for other losses – which can be substantial – where completion of transactions is delayed. Failure to complete within ten working days of a contractual completion date can result in the deposit paid on exchange being forfeit.

It is also important to be aware of the potential impact delays may have on lenders providing redemption statements for loans.  These are required not just so that a borrower can see the amount needed to be paid to a lender immediately on completion of a transaction, but also for the borrower’s solicitor to provide the necessary undertaking to pay sufficient funds from the proceeds of sale to the lender so that the charge securing the loan may be redeemed.  A solicitor acting for a buyer would advise his client against completing until that undertaking is provided.  This delay might mean that on the day of completion the seller is not ready and able to complete.

Whilst issues resulting from these days has been particularly prevalent within property transactions, other areas are affected as well.  Borrowers faced with debt action who need to pay sums by a deadline in order to avoid court proceedings or satisfy court orders, are also vulnerable.

What can you do?

• It is important to check directly with your bank to ensure that they still have a fully operational payments team where adjustments have already been made to ensure that their working practices comply with lockdown restrictions imposed by the country in which they are based.
• Consider making payments 2 weeks ahead of transaction or litigation deadlines to allow for any delays and difficulties that are likely to be encountered during this unprecedented time.
• Ensure you retain all proof of payment instructions to banks.
• Speak to your solicitor as soon as you become aware of a possible delay. Failure to complete a transaction on the day of completion or failure to meet a deadline in litigation proceedings is enormously stressful and costly.   Action can be taken to forewarn the other parties of the delay and hopefully come to some arrangement to accommodate that.

If you have any queries about this topic, please contact Rosie McCormick Paice or any member of the Residential Property team.

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