Following the Quebec government’s announcement to close all non-essential businesses and services from March 25 to April 13, 2020(essential services list), we have identified and analyzed the potential effects this will have on the real estate market.
Construction sites
For some time, construction unions had been calling for the closure of construction sites to protect workers. Employers’ associations, on the other hand, saw this as an extreme measure.
Since the March 23 announcement, all construction sites in Quebec have been forced to comply with the Quebec government’s orders, and have been suspended.
However, the Association des constructeurs de routes et grands travaux du Québec has asked the government to provide “a mechanism for emergency interventions on public infrastructure” [1], such as work on roads, viaducts, sewers and aqueducts, or even renovations, to prevent a building from being exposed to the elements.
The government has therefore authorized certain emergency work to ensure public safety. Companies in the following sectors have been designated as priority services and activities:
- Construction firms for emergency repairs or safety purposes
- Electricians and plumbers, and other trades for emergency services
- Rental equipment
Éric Boisjoli, General Manager of the FTQ-Construction, and Michel Trépanier, President of the Conseil provincial des métiers de la construction (CPMC-International), consider that the government’s decision will enable “management and labour to talk to each other so that, when work resumes, measures have been discussed to stop endangering workers’ lives” [2]. In other words, the intention is for workers to be able to continue working on sites during the pandemic, while having acceptable and improved health guidelines when work resumes.
The interruption of construction work will of course result in a delay in real estate projects, which will be considered a case of force majeure. Developers will have no choice but to redouble their efforts to reduce these delays in condominium delivery.
In addition, the situation will become even more delicate in terms of access and delivery of building materials, as well as the rising costs of materials and subcontractor services. This will force developers to review their budgets and schedules in order to minimize damage.
The financing granted will be affected by the increase in these budgets. Financial institutions will need to assess the effects of this increase with borrowers, so as to be able to continue work despite cost changes.
In an interview, Andrew Lutfy, owner of Carbonleo, put forward the idea of offering alternative solutions to contractors to reduce delays, such as reducing the time it takes to obtain permits from the city [3]. Will the government be open to this possibility?
As for commercial buildings, they may be hit even harder by a drop in business. Indeed, depending on the government’s announcements, the suspension of rent payments could be an option. In addition, the health emergency teleworking procedures implemented by companies will certainly have an impact on demand for commercial premises. This will push companies to evolve towards a more technological structure, and lead them to question the need to rent commercial space for their activities.
Residential real estate transactions
Although visits to properties for sale are prohibited, notary services are considered essential by the government. What’s more, the Quebec Land Register remains open for publication. Real estate transactions can therefore continue to take place.
However, due to the stoppage of construction sites, many families who have sold their property are experiencing great uncertainty as they look for solutions to relocate. To prevent “certain buyers and sellers from taking risks that run counter to government directives, by meeting anyway to carry out a visit or a transaction”, the Organisme d’autoréglementation du courtage immobilier du Québec (the “OACIQ“) has asked that real estate brokerage be added to the list of essential services. This would allow real estate visits and inspections.
In the meantime, even if visits or property inspections are postponed, brokers can still conclude a transaction with the technological tools at their disposal. Sellers also have the opportunity to give more details about properties, and even prioritize virtual visits.
According to some professionals, demand is likely to remain stable, given the reduction in interest rates and the low level of properties available on the market. Not to mention the fact that potential buyers will have plenty of free time to store for properties on the Internet.
It should be noted that telecommuting and e-commerce are permitted at all times for all businesses. In fact, we are one of the companies that was able to quickly implement telecommuting so that we could continue to offer our services and legal advice.
By Mance Ménard St-Pierre
[1]“Site closures: think emergency work, say contractors ” https://www.lesaffaires.com/
[2] ” Fini l’angoisse sur les chantiers de construction “, Denis VILLENEUVE, Le Quotidien, https://www.lavoixdelest.ca/
[3] ” A catastrophe of biblical proportions”, Marie-Claude LORTIE, CHRONIQUE, https://www.lapresse.ca