The Government has stated that it wishes to trial reservation agreements this year and it is developing a standard reservation agreement to reduce the number of failed property transactions.
The Government is commissioning ‘behavioural insight’ research to help establish the parameters of the agreement. Matt Prior, a civil servant at the Ministry of Housing, Communities and Local Government has said that ‘Buyers and sellers should have financial skin in the game to reinforce the agreement . But how much will that be? How much should they pay to get out of the agreement? We want to work closely with conveyancers to iron out some of the practical issues to encourage people to adopt this’.
Clearly such an agreement will need to be both fair to buyer and seller and there will have to be clear guidelines on the definition of what would constitute ‘reasonable cause’ that would allow the buyer to withdraw without penalty and what would be considered to be a trivial reason that would incur a withdrawal fee.