One of the most frustrating things about moving house is the fact that until Contracts are exchanged, an offer can be withdrawn leaving buyers and sellers with significant bills to pay and nothing to show for it.
It is estimated that up to a third of all sales in England and Wales fall through every year. Many fall throughs occur because people simply change their mind about moving.
In response to these shortcomings, the Government is planning to trial a new legally binding Reservation Agreement. Parties will be required to put down a reservation deposit as a sign of their commitment when they agree to buy a property. The sum in question is likely to be up to £2,000. If a buyer subsequently pulls out without justifiable cause then they will lose that deposit which will be paid to the seller as compensation for the expenses incurred.
As always with initiatives of this sort the devil is in the detail. Who decides what justifies a buyer withdrawing from a purchase? What is a “good” fall through and what is a “bad” one? Who collects and holds the money and authorises its release? Whilst there are many details to be worked through the scheme does address the vexed question of costly fall throughs and would give reassurance that once an offer is accepted the transaction will proceed to completion. It will filter out timewasters from the home buying process and will compensate parties who are let down at the last minute.
The idea is not new. The Law Society who represent solicitors in England and Wales has been keen to promote a package of reforms to the home buying process for many years acknowledging that the system needs to be cheaper, quicker and less stressful.
The success of a Reservation Agreement depends very much on local solicitors being supportive and advising their clients at an early stage of the transaction so the Agreement can be signed quickly and progress made towards an exchange of Contracts.
The Reservation Agreement is a start but there is much more to do in order to make the home buying process fit for purpose in 2020. Are you buying or selling a property and need legal advice? Don’t hesitate to contact our experienced residential team today.