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The Government has announced plans to trial reservation agreements this year, in a bid to prevent the rate of failed transactions due to a lack of buyer’s commitment. Reservation agreements are a contractually binding commitment to complete the transaction, and are entered into between buyers and sellers when an offer is accepted, and are currently commonly used in high value or new build transactions in the UK.
It is estimated that 300,000 property transactions fail each year, due largely to buyers pulling out of transactions and costing sellers a total of £400 million. A survey commissioned by Home Owners Alliance and carried out by YouGov in 2018 found that 20% of sellers have experienced a sale collapse, with half incurring costs averaging over £2,500. The survey also found that 65% of sellers supported the introduction of a non-refundable deposit as a sign that both parties are committed to the transaction.
Speaking at the Council for Licensed Conveyancers’ annual conference on 23 January 2019, housing minister Heather Wheeler advised that the Government is developing standard reservation agreements to ensure that both buyer and seller secure their interest in proceeding with property transactions, and introduce consequences to buyers who pull out of transactions.
As the reservation agreement is a legally binding contract, entering into one should also encourage both parties to instruct a solicitor in the early stages of the transaction and expedite the process of collating the required information and arranging the necessary funds to complete the transaction.
The Government is to first commission behavioural insight research to help establish the parameters for the reservation agreements before its trial introduction later in the year.
At Myerson, we pride ourselves on providing a bespoke, high-quality service that is tailored to fit your needs. We do not deal in bulk residential property or use automated systems to manage your affairs and importantly our premium service ensures that you deal with the same solicitor throughout your transaction. We are accredited by the Law Society’s Conveyancing Quality Scheme which provides complete assurance that your affairs and transactions are in safe hands.