There was quite a lot I wanted to write about today – the world of conveyancing is forever changing and no two days are the same. But then something came across my desk late on Friday afternoon which I believe deserves a mention.
A lovely young couple are clients of mine who have agreed to buy a house, and the estate agent wants them to sign a reservation agreement and pay a non-refundable deposit of £10,000.00. But the clients have not mentioned it to me.
They are being very organised – they appointed me some time ago, ready for me to act when they found a house to buy. I had acted for them in the past and they just knew that they wanted to come back to me. The property they have made an offer on is in a small village; they knew the location where they wanted to live.
They have an agreement in principle from a mortgage lender – they had appointed a mortgage broker to be ready when they found a house to buy.
They are doing all of the right things to make themselves attractive buyers.
It was the mortgage broker who called me to tell me that he was getting the application ready to submit now that the couple had found a property to buy. He was concerned to find they had signed a reservation agreement with the estate agent and were just about to pay a reservation fee.
I called the clients, who did not think there was anything odd about the agreement. The estate agent had told them it was standard practice, especially when there was a lot of interest in a property.
They had been told that it was what the government was going to make mandatory for all sales and that the estate agents were just being ahead of the changes by doing it now.
Clients are trusting: if an estate agent says it is the way that properties are now sold, who are they to argue when it is the house of their dreams?
Cue my call to the clients. I asked them about it and they told me they had been told that the reservation agreement was standard practice.
It sounded to me as if the estate agents had played on their desire to live in this particular village – and the client did say that she felt a little pressured by it. The estate agent had told her that there would be no issue and it was unlikely that they would lose the fee.
I am not opposed to reservation agreements in principle, but they need to be fair on both parties.
I accept it is difficult to spend three months thinking about moving and planning what furniture goes where in a new home, only to have a person in the chain decide not to proceed – not even your own buyer or seller, but someone who just happens to be in the same chain of transactions.
But the reservation agreement I was sent did not provide for this happening. If the chain falls apart, my clients lose a substantial amount of money.
By all means, let us look at the idea of reservation agreements. But let them be fair on all parties, with a set level of information provided when the property is marketed so the potential buyer knows exactly what is involved and can take the appropriate advice.
This column is written by a real high street conveyancer who wishes to remain anonymous. Read more in Today’s Conveyancer every week.
6 responses
The contents of that agreement should be disclosed and the agent quized about it. If we aren’t careful others will begin employing the same tactic.
Also, borderline conditional selling?
Reservation agreements do not translate beyond new-build purchases. They are wholly unsuitable for standard residential transactions involving chains. Buyers face significant financial risk if they commit early in a chain, and any problems can be magnified across multiple linked transactions.
The English and Welsh property system has evolved over centuries, creating layers of legal, contractual, and regulatory complexity. Imposing early-binding mechanisms outside the new-build context would disregard these complexities, exposing buyers and conveyancers to potentially severe financial and legal consequences.
As this article demonstrates, reservation agreements are vulnerable to abuse and undue influence from unscrupulous actors.
Until there is wider reform of property law, reservation agreements should be approached with the utmost caution.
Speed and haste must not come at the expense of transferring risk onto buyers.
As this article was written by an experienced conveyancer, it is to be hoped that he was able to resolve the problem satisfactorily?
And how much of the fee does the agent take if the sale doesn’t proceed?
Seen far too many ‘modern auction’ agreements where the seller is effectively left with a nominal sum after the agent takes their fee; whether or not the sale proceeds
Reservation agreements in residential transactions need to be banned.