A leading law firm has called on the government to ban estate agents and vendors from asking buyers to sign ‘exclusivity deals’, which are often accompanied with requests for substantial cash ‘holding deposits’ to back them up.
The comments by Donal Blaney of Griffin Law follow a story in a national newspaper highlighting a SW London couple with young children who put down a £25,000 cash deposit to ‘hold’ their dream four-bedroom house, only for the deal to fall apart and their holding deposit to be lost.
Griffin Law says the ‘exclusivity deal’, which was arranged via the vendor’s estate agent, a local firm in Richmond, is part of a surge in estate agents and vendors using contractual arrangements, a trend sparked by the super-heated housing market last year and fast-rising house prices.
The couple involved, Clare and Steven George-Hilley, say problems with the purchase mean that, ten months down the line they have lost their £25,000 deposit and the property, and that they entered into the arrangement partly to prevent them being gazumped as asking prices soared in Richmond.
The vendor has refused to return the deposit, despite being sent a ‘heartfelt’ letter by the couple, the Daily Mail reports.
“There’s a reason estate agents are loathed even more than politicians. Exclusivity agreements are the preserve of opportunists who prey on inexperienced or otherwise vulnerable buyers who are often desperate to move home,” says Blaney.
“All too often they are a ruse to make a quick buck. It’s high time they were outlawed and avaricious estate agents held to account for the misery they wreak”.
In the past TPO has made it clear it would prefer agents do not support or offer this kind of ‘lock out’ agreement. Its guidance states that unless requested by a property developer, the estate agent should not generally facilitate pre-contract deposits.
But if they do, the ombudsman has said agents must take into account specific instructions from sellers. Before a deposit is taken, the circumstances under which the deposit is to be held, refunded, forfeited or used towards the purchase, must be clearly stated in writing, agreed by the relevant parties and a copy of the agreement provided to those parties.
In December the government revealed that its plans to introduce voluntary reservation agreements into the property sales process are progressing with ministers ‘evaluating their effectiveness’.