I have had two failed attempts to sell my property. Is there a way in which to protect me on wasted costs and to get the sale over the line?
This article was first published in CityAM, Friday 21 April 2017.
This is a tricky market and yours is not an uncommon tale. Cherie Blair also faced a similar predicament not so long ago: the seller accepted another higher offer and pulled out of the sale to Cherie.
Generally, until a buyer and seller enter into a binding contract to buy and sell a property, each party is responsible for their own costs incurred in the transaction.
The 2016 referendum vote for Brexit, the 3% stamp duty surcharge on second homes and corporate purchases, impending reductions in tax relief available on buy to let mortgages, as well as annual taxes for properties worth more than £500,000 owned in corporate structures, have all had an impact on the residential property market. As a result, it is undoubtedly taking longer to sell homes than was previously the case.
Because of the uncertain market, there is renewed interest for a buyer and seller to enter into what is known as an exclusivity agreement (also referred to as a lock out agreement). An exclusivity agreement allows the buyer a set period of time to incur expenses and negotiate the terms of the deal with the comfort the seller is not entertaining other parties or offers, but can also give some practical comfort to the seller.
An exclusivity agreement may include the following provisions:
- the buyer enjoys a fixed period of exclusivity, in other words the seller agrees not to market the property or negotiate with other interested parties during that period
- the parties agree to enter into obligations essentially to take proper steps to enable the transaction to progress and act in good faith. For example, the buyer instructs his/her solicitor to request searches and raise enquiries. The seller instructs his/her solicitor to prepare and send out the paperwork and respond to enquiries
- liability for the seller’s costs in certain circumstances, for example where the buyer does not exchange contracts for a reason other than a defect in title or adverse factor in a search result
Such an agreement does not guarantee the parties shall enter into the a contract to buy/sell a property but can be the reassuring start needed to get the deal moving smoothly to exchange. But they can take time to negotiate, and in that process distract from and delay the actual conveyancing process, so they need to be agreed and signed up quickly.