In its 2017 call for evidence on the conveyancing process, the Government stated:
'Making the home buying and selling process quicker, cheaper and less stressful is a priority for this government. Over one million homes are bought and sold in England each year. Delays and complications in the process bring unnecessary financial and emotional stress to customers and may lead to people delaying their decision to move. This is not acceptable. The government is determined to bring about meaningful change to the home buying and selling process in order to make work for consumers rather than against them.
We think there are three key areas for improvement:
- a better consumer experience;
- reducing time from offer to completion; and
- reducing failed transactions.
We believe that making use of [reservation] agreements a more common part of the process will reduce the rate of failed transactions and the fear of gazumping.'
(Extract from: 'Improving the Home Buying and Selling Process', Ministry of Housing, Communities and Local Government April 2018)
A reservation agreement is designed to 'tie in' the seller and the buyer to the transaction for a period of time once a deal has been agreed. The purpose is to ensure that either party cannot withdraw without penalty prior to exchange of contracts after a lot of time and money has been spent by all parties in the chain.
The Housing Minister has indicated that a standard reservation agreement is being developed to reduce the number of failed property transactions.
There are already some reservation agreements being used by estate agents and legal firms. It is important for any seller or buyer who is presented with a reservation agreement to take specialist legal advice as to the terms of the agreement before they sign it. This may involve legal fees at an early stage in the transaction, but consumers must understand the nature of the obligations that they are taking on. To default on such an agreement could cost them a lot more in the long run.
To discuss this or any other conveyancing related matter, contact us.