Following the Quebec government’s announcement to close all non-essential businesses and services from March 25 to April 13, 2020, (list of essential services) we have identified and analyzed some potential impacts on the real estate sector.
Construction unions have been calling for this measure for some time now in order to protect workers. For their part, employers’ associations in the construction industry considered the request as an extreme measure.
Since the March 23rd announcement, all construction sites in the province of Quebec have been forced to comply with orders from the Quebec government and have shut down.
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 infrastructures”, to prevent work on roads, viaducts, sewers and aqueducts or even renovations on a building from being exposed to the weather.
The Government has responded, by authorizing some emergency work to ensure public safety. Corporations in the following sectors have been designated as priority services and activities:
- construction firms, for emergency dispatching or security purposes
- electricians, plumbers and other trades for emergency services
- rental equipment
The executive director of FTQ-Construction, Éric Boisjoli, and the president of the Conseil provincial des métiers de la construction (CPMC-International), Michel Trépanier, consider that the Government’s decision will allow “the employers’ associations and unions to discuss the sanitary measures needed to stop endangering the lives of workers” . In other words, the intention is that workers can continue to work on construction sites during the pandemic, while having acceptable and improved health guidelines for when construction work resumes.
The interruption of construction work will cause delays to real estate projects, which will be assimilated to a case of “force majeure”. Developers will have no choice but to redouble their efforts to reduce delays in delivery of condominium units.
The situation will become even more delicate, in regards to access and delivery of construction materials, as well as the rising costs of materials and subcontractor services. This will force developers to review their budgets and timelines to minimize the damage.
It can be expected that the construction financings already granted will be affected by the increase in these budgets. Financial institutions will have to assess the effects of this increase with borrowers so that they can continue the work despite the cost changes.
In an interview, Andrew Lutfy, the owner of Carbonleo, has put forward the idea of allowing alternative solutions to contractors in the construction field in order to minimize delays, such as reducing the time to obtain permits from the City . Will the government be open to these measures?
As for commercial buildings, they may be more affected by a drop in activity. Indeed, according to Government announcements, suspending the payment of rents could be an option. In addition, the emergency telework health procedures implemented by corporations will certainly have an impact on the demand for commercial premises. This will push corporations to evolve towards a more technological structure and lead them to question the need to rent commercial space as part of their activities.
Real estate transactions
Although visits to properties for sale are prohibited, notarial services are considered essential by the government. In addition, the Land register of Quebec remains open for publications. Real estate transactions can therefore continue to take place.
However, following the interruption of construction sites, several families who have sold their property live in great uncertainty regarding their relocation. To prevent that “some buyers and sellers will take risks against government directives, by meeting in person for a visit or transaction”, the Organisme d’autoréglementation du courtage immobilier du Québec (the ” OACIQ ”) has requested that real estate brokerage be added to the list of essential services. This would allow visits or inspections of buildings.
In the meantime, although visits or building inspections are postponed, brokers can still conclude real estate transactions using technological tools available to them. Sellers also have the possibility of giving more detailed information on properties or prioritizing virtual tours.
According to some real estate professionals, demand is likely to remain stable given the reduction interest rates and the low level of properties available on the market. Not to mention that potential buyers will have plenty of free time to shop for properties on Internet.
However, it should be noted that all businesses can always engage in teleworking and e‑commerce. We are one of the corporations that have been able to quickly implement telework, in order to continue offering legal services and advice.
By Mance Ménard St-Pierre