It's not on, CHAPS!

The Bank of England (BoE) said those whose house moves were delayed last Monday or subsequently by a temporary shut-down of the CHAPS electronic money-moving service should approach their own bank for help in covering additional bills.

Although CHAPS, the Clearing House Automated Payment System, operated as normal on Tuesday it is thought there were some hiccups' with those moving house, following a nine-hour suspension of the system on Monday.

It is thought that the Monday problem may have led some agents into delaying deals that were to complete early this week and may have caused a small number of movers to incur additional costs, such as those for removal firms which were delayed.

Bank of England governor Mark Carney has launched an Investigation into the glitch'.

Well that's all right then, hiccups' and glitches' are not major issues. I think the BoE were very lucky this incident occurred on a relatively quiet Monday. If it had been a bank holiday Friday, or any Friday come to that, the fallout would have been many times worse than it appears to have been.

It seems that most issues were dealt with in an orderly and practical way, with agents, conveyancers, lenders and others, working together.

However, the situation was fraught with risk. Conveyancer A instructs their bank to send money off to complete at 10.00 am, the first transaction in a chain of say five. Conveyancer B doesn't receive it as the system fails. That, in theory, could be it until the system was fixed at about 4.30 pm. No more money transferred, no moves taking place but buyer A turns up at their seller's property in a removal van. Meanwhile, everyone else in the chain is packing their vans until word gets out about the problem and a possible solution.

It looks like most conveyancers relied on undertakings that money had been sent, or would be sent and that mortgages would be paid off and buyers were allowed into properties under licence', relying on the relevant provisions in the contract (Standard Conditions of Sale 5th edition).

The consent of lenders should, and may have been obtained. Both the lenders lending to buy and still having mortgages on properties no longer occupied by their own borrower.

But, what if!

What if the system was down for 24 hours or more, what if a bogus firm was involved and money never arrived. People would have to move out, people would have to find alternative accommodation and claims for compensation would be flying around like the murmurations taking place at the moment in our skies (those spectacular starling displays).

One of the Bold Legal Group members (Carey Jacobs, a partner Palmers Solicitors, Basildon) explained why they chose not to effect legal completion:

Effecting legal completion if the money never actually arrived (whatever undertaking was given to do so) would have been a spectacular own goal - especially in the light of the various property fraudsters who affect our professional lives these days.

The time delay between legal completion on the purchase and mortgage redemption by our seller would have breached our duties to the advancing lender.

By dealing with early occupation by way of licence, we got the chains physically moving, but did not have to effect legal completion until the monies were in place. All of our clients were advised about the risks of allowing (and taking) early occupation, and all chains agreed to waive the requirement to pay licence fees for early occupation which are provided for in the SCS.

Since we've had various banking system problems now three times in the last year, to my recollection, I thought this might be useful for when (probably not if') it happens again!

One final thing - we have changed our approach to the usual hold to order (and return monies on demand) undertakings to make it clear that if there are problems with the banking system, our undertaking is to be interpreted so that it obliges us to return monies on the next business day where there are no such problems.

I think we all got off lightly, especially the Bank of England! Must go, just developed a bout of severe hiccups!

*Rob Hailstone is Founder of the Bold Legal Group

rh@boldgroup.co.uk www.boldgroup.co.uk