Moving house is ranked as stressful as death and divorce. No surprise then that the twin evils of gazumping and gazundering send buyers’ and sellers’ blood pressure through the roof, whilst mugging their bank accounts. Therefore, anything that can ameliorate this pain, must be encouraged.
The government’s plan (assuming they will still be in power) is to introduce ‘reservation agreements’ between January to March 2020. Buyers and sellers alike would be committed to putting down £500 to £1000 before entering the offer process.
Underpinning this strategy is the expectation that it would reduce the time delay between offer, acceptance and exchange of contracts. Most of all, it would deter the chancers, flakes and all-round bad ouefs who contaminate the transaction process and inflict misery on the participants. The announcement was made by Matt Prior, lead official for this project at the Ministry of Housing, Communities and Local Government.
Under the present system, this failure to meet commitments, costs the housing market approximately £270million a year and it is hoped that these new-fangled reservation agreements will reduce this huge waste.
In my opinion, we should applaud any attempt to solve this problem. After all, convincing a buyer and seller to part with thruppence ha’penny is an achievement – we all know that some of these clowns won’t even part with £50, let alone £500 to £1000. I find this low hurdle entry price, very appealing.
The New Plan’s Premise
The plan operates around the principle that when buyer and seller have agreed on a deal and the conveyancing work is processed, both parties need to keep to their word and honour their pledge, otherwise they have to pay a price for the volte-face.
The prospective purchaser spends good money on structural surveys, solicitor’s fees and mortgage providers, whilst the seller is also liable for some legal fees, but is modest when compared to the buyer.
Pressure has been exerted on the government for some time to rectify this travesty. The outcome is that if either party withdraws from the transaction, without good reason they are liable for a payment (okay, a penalty) of up to £1000.
Though slightly different in their composition, the Scottish or American-based conveyancing models make a valiant attempt to crystalise a sale in far less time. The result is that you exchange an instant contract and pay a deposit, subject to the chaser obtaining finance and a structural survey, if applicable.
This is in sharp contrast to the UK system, where exchange of the contract for a land purchase only takes place once the due diligence has been carried out.
However, people being what they are, even the US system can be mischievously exploited. Underhand tactics include deliberately frustrating the process of obtaining finance in order to exit an unwanted purchase, which may have already been contracted. Or alternatively, exaggerating the results of a structural survey in order to scuttle away from a commitment.
Our cheese-munching ‘frenemies’ across the Channel have some odd laws in their stable, no doubt emanating from their archaic obsession with ‘le socialisme’. One ‘amuse bouche’ that perhaps isn’t very funny, is that if you are negotiating with one party and receive a full bid offer from another, you are obliged under law to accept the latter, even if it means jettisoning the former.
Another ‘Gallic gem’ is that if you have agreed terms with a party and they procrastinate, you can only liaise with another buyer, once the first mob have removed their grubby paws from the transaction. This is a ‘licence for abuse’ and it would explain why their conveyancing system is mired in needless, labyrinthine bureaucracy.
Glentree boasts low failure rate
We at Glentree have one of the lowest failure rates in the Industry of agreed deals. How do we do it, I hear you ask? Well, at the end of a meeting with all parties, we get buyer and seller to shake hands on the terms of the deal, which we then call ‘a moral contract’. We know all too well that there is a cooling off period until contracts are formally exchanged and it is in this hiatus, where problems can occur, which can result in the demise of a deal. This moral contract will hold anyone who has a conscience to the terms of the original deal, making it more likely that the transaction will be consummated.
Some solicitors recommend a ‘lock-out’ agreement between the parties to control the antics. However, like all things legal, these are cumbersome to negotiate, especially if there are two puffed-up banty-cocks trying to out-tough each other. Time and resources are far better spent on dealing with the contract for the sale or purchase.
Ultimately though, ‘there’s nowt so queer as folk’, especially when buying residential property. We can pebbledash you with examples of sellers and buyers who, despite all our efforts, have reneged on an agreement. When I am asked what a ‘gentleman’s word’ is worth, I respond by saying, ‘in the real world, it’s one where the agreed terms do not change by more than 10% of the price.’