The Ministry for Housing Communities and Local Government (MHCLG) is working with the industry to develop a short Reservation Agreement which could be tested in behavioural insight research and, if successful, piloted by the property industry.

The Home Buying and Selling Group (HBSG) set up a working group, chaired by Beth Rudolf, director of delivery at the Conveyancing Association. The group developed standard wording for a Reservation Agreement between the buyer and seller that would be acceptable for all the required legal entities.

To view the Reservation Agreement, contact [email protected]

How will the Reservation Agreement work?The initial recommendation from the HBSG working group is that the agreement will be conditional upon the information available at the point of acceptance of offer and the buyer and seller’s circumstances. There will be an upfront online information questionnaire for sellers.

Both parties will be expected to pay a commitment deposit which they may lose if they breach the terms of the agreement. Any deposit monies paid will be protected by an arbitration process.

Will Reservation Agreements be successful?The industry and consumers appear to be split on whether Reservation Agreements will be successful.

They are though, already successfully used with existing homes sales and purchase by some agents and in the new homes industry. Those that use them believe they improve the process and save consumers time and money.

Two companies, Gazeal and Honesty Box, are providing upfront legal packs which include a legally binding agreement. This means buyers can’t ‘walk away’, nor can purchasers ‘gazunder’ the buyer later in the home buying and selling process.

There are still questions to be answered as to whether the agreements can work. For example, should they be voluntary or compulsory? Some worry it may prevent sellers from putting properties on the market, while others feel it could add more complexity to the process.

However, the HBSG working group is confident that if the government’s initial research suggests a trial of the Reservation Agreement is worthwhile, then industry will be ready and able to play its part in any pilot to find out how they would work in practice.

Comment

Joe Arnold, managing director of Arnold & Baldwin Chartered Surveyors and a participant of HBSG, commented: “There remain a number of questions to be answered, such as whether Reservation Agreements should be voluntary or compulsory, but work is continuing to ensure the right approach is eventually implemented.

“One thing for sure is that, if Reservation Agreements are successful and aborted property sales are reduced and transactions times speeded up, this would substantially improve the home buying and selling process for everyone involved.”

If you are interested in participating in a future pilot or for more information about the Reservation agreement contact the working group chair, Beth Rudolf [email protected]