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Reservation Agreements

It’s often said that moving home is one of the most stressful things you can do and often a big part of this is the anxiety people can feel about the uncertainty of everything. Buyers are concerned a homeowner may gazump them with another offer or have a change of heart about moving and sellers worry their buyer will get cold feet and back out. In either case both parties can have wasted months and are left with thousands of pounds of wasted costs.

At AKS we’re able to offer reservation agreements to offer peace of mind to both sellers and buyers by reducing the risk of someone changing their mind at the last minute and pulling out.

The reservation agreements are?UK Government and Law Society approved?and completely fair to both sellers & buyers. Legally locking in buyer and seller when the sale is agreed - right at the start, minimising the risk of the sale falling through before exchange of contracts.

Our Reservation Agreements mean there is no need for large holding deposits just a small setup fee to guarantee a meaningful financial commitment by each party to the other, this fee pays the legal cost to set this up. This is designed for the benefit of both parties and AKS do not earn any commission at all from the setup fees.

This commits both parties as neither side can withdraw without losing money, (unless there is a sizeable physical defect on the survey, defective title, chain failure or finance failure, to name a few). All the details are provided at the earliest opportunity, before anyone commits.?If the sale falls through due to no fault of either side ie chain breaks, mortgage problems, seriously bad survey... the seller and buyer will receive a full refund. This will only happen as long as no claim has been made.

This stops most cases of buyer or seller changing their mind for one reason or another just before exchange of contracts.

Offering more certainty to the process is good for everyone. We don't want a seller dropping a buyer for a better offer from someone else and we don't want a buyer swapping to a different property just before a moving date - With a reservation agreement both sides show they are committed to the property transaction and prepared to pay compensation if they pull out of the deal.

Reservation Agreement FAQs

Reservation agreements are here to help you to secure your deal and provide you peace of mind. It's important however that all parties involved know exactly what it is they're signing up for. That's why we've put together this Reservation Agreement FAQ guide in partnership with our legal support team 'Gazeal'.

What is a Reservation Agreement?

A Reservation Agreement is an agreement between the Buyer and Seller. The Buyer reserves the right to purchase the property and the Seller agrees not to sell to another party. If either breaks the agreement they agree to pay the other party a compensation amount. This protects the Buyer from being gazumped and the Seller from gazundering. More importantly the sale proceeds with both Seller and Buyer committed to each other subject to contract.

How long is the agreement for?

The term of the agreement is set by both parties prior to the start of the agreement and can be any time up to six months. It helps keep both parties working towards an agreed timeline. Seller and Buyer should exchange contracts before the expiry date, if either party is not ready to exchange they must provide a reason why. The agreement term can be extended by mutual consent if one party is delayed and there is no charge for any extensions.

What scenarios do not carry a compensation payout?

• If the property is down-valued due to a survey or urgent repairs identified and they cannot be renegotiated.
• If the chain breaks above the seller or below the buyer.
• If the property has a bad title confirmed by the conveyancer.
• If the buyer is unable to secure the finance.
• Agreed timelines not met and neither party wishes to continue (subject to reasonable proof).

 

Special Conditions can be added to the agreement to cover specific areas of concern for individual cases, they will have to be agreed by both parties.

In events where the sale cannot continue through no fault of either party, any fee paid will be refunded in full.

How much does it cost?

Neither party have to pay the compensation amount upfront, instead Gazeal provide a guarantee to pay the compensation in the event that the agreement is broken. The fee for this guarantee starts from as little as £600 including vat. This guarantees a compensation payment to the innocent party of £2,000. Gazeal can guarantee amounts up to £100,000 if required.

Who pays the initial fee?

This is decided before the Reservation Agreement is produced. This can be paid by any party or alternatively split equally between them.

Is this a deposit?

No, this is a fee for arranging a pre- exchange agreement and the certainty of compensation if the sale falls through unreasonably. This does not replace the need for a formal deposit that is required from the Buyer at the time of exchange of contracts. In cases where the Seller agrees to offer to refund this fee on completion of the sale the Buyer will be repaid any fee for this agreement.