With demand for prime and super prime properties in London currently outstripping availability, we are seeing an increase in demand for our residential team to assist both buyer and seller clients to secure deals with the use of sealed bids and the return of requests to prepare exclusivity or ‘lock out’ agreements.
An exclusivity agreement will typically give the buyer time to undertake their due diligence on the property without competition from third parties. The buyer has the benefit of knowing that it has an agreed and clearly defined period of time when they are incurring costs, but can review the property title, have a survey or valuation done and make other appropriate investigations without the risk that the seller will contract with a third party. Typically, the terms of the exclusivity agreement will prevent the seller from issuing a contract or other papers relating to the property to a third party or indeed dealing with third parties.
The exclusivity period is often granted in return for the payment by the buyer of a “non-refundable deposit” to set off against the purchase price should the buyer proceed to complete the sale, but not otherwise. Importantly, the agreement does not bind the parties beyond the exclusivity period, at the end of which either party may walk away from the proposed transaction and it does not force either party to have to exchange contracts even if they are ready to do so within the exclusivity period.
Such agreements can potentially present more problems than they solve. The documents are often heavily negotiated, itself sometimes a costly and time-consuming practice, this is particularly the case with the circumstances in which any “non-refundable deposit” and associated costs will be repaid should the buyer decline to proceed with the purchase. In practice sums that are deposited are rarely on a fully “non-refundable" basis and a well advised buyer will ensure that there are circumstances where any deposit under an exclusivity agreement will be refunded should they decide not to proceed for one of the reasons defined in the agreement.
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