A buyer has been told to pay £35,000 in a case relating to the enforcement of a reservation agreement after a judgement found they were considered to have pulled out of the transaction unreasonably.
The case was brought by reservation agreement guarantee service Gazeal, who secured the compensation laid out in their reservation agreement after going through their internal arbitration process, overseen an independent Judge and King’s Counsel.
Gazeal describes itself as a ‘unique reservation process (providing) a commitment to the terms agreed by the buyer and the seller, that Gazeal guarantees.’ It has been backed by TV property personality Phil Spencer. Both sides agree to a series of commitments in the agreement with penalties in the event one side or the other withdraws. There are, says the Gazeal website, provisions for withdrawal for no penalty, which in the case of buyers include
- Down Valuation due to survey not re-negotiable.
- Bad Title.
- Chain Break Down above the Seller or Below the Buyer.
- General Reasons agreed by ‘Mutual Consent’ with Seller Inability to get a Mortgage
In the event of a breach the party who has breached the agreement must pay. Should they fail to pay, Gazeal say they recover the monies through the courts.
Describing the case as ‘landmark’ Gazeal CEO Bryan Mansell says
“Adjudication is rare. It has only happened 16 times in more than 2,000 cases, and to date all parties have accepted that it is fair. But now, for the first time, the process has been tested in the courts, (and) affirmed as being legally binding on both parties, and the defaulting party has been ordered to pay the debt owed to us as a result of it honouring the guarantee it gave to both parties.”
“This result will give agents confidence in our process. We have been very careful to design our service to be the independent, honest broker, in a sale, bringing clarity and fairness where previously there was none. Agents can have confidence that when they start our process, their sellers and buyers are getting the protection they need.”
Executive Chairman of Gazeal, Duncan Samuel LLB (Hons) adds
“It is very satisfying, and a great validation of the work that the team has put in to create a fair, balanced and transparent reservation process and adjudication procedure in which both parties to a sale, and the agent, can have confidence.”
One Response
Never come across this and I hope I don’t. I would be surprised if £35,000 amounted to the reservation agreement fee however, I would imagine that £35,000 includes costs for taking it this far.
Looking at the written submissions made by Gazeal Limited to the UK Parliament, they say “The Commitment is completely mutual, and the wording of the Reservation Agreement is standard and fair to both Parties, with appropriate consumer protections. It does not have to be negotiated and does not require the input of lawyers (though they are welcome to get legal advice if they wish”
The comment about the input of lawyers is interesting. Should a party (especially the buyer) seek legal advice, how many Conveyancers would recommend such an agreement? How many Conveyancers would explain that we are not qualified to provide advice? Surely, if there is a danger of a party being sued for £35k, legal advice is a must?
I’m actually in favour of reservation agreements; if developers can do it monitored by NHQC, we can bring it in to the second hand sector as well. I do think that those with a reservation agreement would have a higher chance of success than those without. It might mean we work on matters with a higher chance of success and so the shredding pile of abortive does get less.
If there was genuine accountability to clients from agents in terms of these agreements and initial amounts paid, then perhaps we would get a bit more honesty as to the state of chains at the outset. After all, an agent won’t want to foot the bill for a lost sale if they got their information wrong or didn’t do their due diligence. The fee for this kind of work can come out of the sizeable agent’s commission.