Sellers include Brexit clauses in British property deals as EU vote grows closer
Commercial property investors are adding clauses into contracts giving buyers the right to get out of property deals if Britain decides to leave the EU later this month. This is an attempt to encourage growth in an area stalling due to uncertainty.
Trades in commercial property dropped by 40% in the first quarter, according to information from the Bank of England. With a lot of buyers and sellers waiting to see the results of the June 23 referendum in case the exit causes house prices to plummet.
Sellers also are taking legal precautions, seeking language in contracts to ensure that Brexit will not be considered a “material adverse change” that would annul a deal.
Since commercial property deals are usually confidential, it’s not possible to determine exactly how many of these clauses have been put in.
David Cameron and other politicians supporting the effort to remain in the EU say the market would be damaged by a vote and cause property values to plummet. Those campaigning to leave say Britain can flourish outside the European Union and the threat is being blown out of proportion.
But whether being blown out of proportion or not, it is a gamble some prospective buyers seem keen to avoid.
Brexit clauses are especially in demand among investors that are foreign. A recent survey revealed most enquiries about Brexit clauses were from foreign investors who were concerned that voting to leave could weaken the sterling, in addition to reduce desire for leasing commercial space in Britain.
But with only a few weeks now until the vote, many agents are recommending customers set prices on ice and just to reject demands for a Brexit clause.