Government to introduce ‘Reservation Agreement’ pilot
The Government is set to push ahead with plans to introduce a ‘reservation agreement’ system to help reduce the number of housing transactions that collapse each year.
The Ministry of Housing, Communities and Local Government began the second stage of research into the agreements after the Government confirmed the 10-month trial into the programme in the summer.
Under the current rules, an offer can be withdrawn up until contracts are exchanged on a property, which leaves many transactions exposed to a significant risk of falling through.
Each year, more than one-third of property sales in England and Wales fall through before contracts are exchanged, which has caused the Government to act.
The introduction of a legally binding agreement following the acceptance of an offer could mitigate the risk of a sale collapsing. It could also prevent gazumping and gazundering, which can cause complications and disagreements between the buying and selling parties during the property transaction.
As a part of the Government’s Call for Evidence on ‘How to Improve the Home Buying and Selling Process’, a number of initiatives are being researched, with a ‘reservation agreement’ forming a part of this, as well as more information upfront, such as through a seller’s pack.
Guy Gittins, Managing Director at Chestertons, said: “Fall-throughs are costly, frustrating and prevent people (from) getting on with their lives. We, therefore, support the move to try and reduce fall-throughs and increase both buyers’ and sellers’ confidence in the process by introducing a binding reservation agreement.
“Property transactions fall through far too frequently and this is due to a wide range of factors, including changes in personal or financial circumstances, changes of heart and disagreements over specific terms of the deal.”
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