Reservation agreements – just 28 days?
‘The average time for an agreed sale to complete has surged from 90 days to 110-115 days’. (Zoopla, House Price Index Report, Feb 2021).
The property industry understands why the time to complete a conveyancing transaction has increased dramatically in the last eight months. The SDLT ‘holiday’ announced last June was supposed to end in March but the unprecedented demand and bottleneck of transactions created as a result meant that the Chancellor has lessened the pain somewhat by staggering the deadlines to 30 June 2021 and 30 September 2021. Many would argue that the property market did not need the metaphorical jab in the arm that the rest of us are having and a further two cliff edges have been created.
So, it seems fair to say that uncertainty, stress and pressure in the conveyancing market will be with us for at least another four months. I have talked before in these articles about more information being made available to a buyer earlier in the transaction. Frankly, this is a no-brainer and many now accept that a pack containing essential information such as title and Protocol forms being given to the buyer by the seller/agent at point of sale can substantially improve a transaction.
But what of reservation agreements? There was much impetus in relation to these agreements pre-pandemic. The government researched the agreements in 2019 and even produced a draft with a view to a trial taking place in 2020. Clearly a global pandemic knocked these plans off track, but given the difficulty and uncertainty in relation to the current market, many sellers and buyers may wish to consider the benefits of a reservation agreement.
One of the myths about a reservation agreement is that it only ties the seller and buyer in for 28 days. Given the fairly dismal pre-pandemic average timeframe for a transaction of 90 days, how can a reservation agreement that only covers one third of this timeframe help seller and buyer?
The answer, of course, is that the seller and buyer do not need to tie themselves in for 28 days. This is merely a suggested timeframe. The seller and buyer can agree to commit themselves to the reservation agreement for whatever realistic timeframe applies to their particular transaction. If they engage meaningfully with their conveyancers and the mortgage broker at point of sale, sensible input from these advisers could result in the seller and buyer agreeing to tie themselves into a much longer timeframe.
The peace of mind that a reservation agreement can bring to a seller and buyer in such a volatile market is unarguable. This is particularly so for the buyer in the current market where housing stock is reportedly at very low levels.
In addition to offering up front packs, Gazeal also offers a straightforward reservation agreement. It has the benefit of specifying admirably clear conditions for withdrawal without penalty and the use of a financial guarantee, rather than the payment of a large sum on signing by the buyer, means it offers the unique benefit of tying in both seller and buyer at the outset for only modest outlay by both them.
Oh. And did I mention? If the parties are approaching the expiry of their agreed timeframe under the terms of the reservation agreement, they can simply and straightforwardly agree to extend the term of the agreement. Job done.