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Government ‘evaluating reservation agreements’ as tool to stop gazumping

Housing minister Chris Pincher says voluntary reservation agreements would only be successful if backed by estate agents.

Nigel Lewis

reservation agreements

The government has revealed that its plans to introduce voluntary reservation agreements into the property sales process are progressing with ministers ‘evaluating their effectiveness next year’.

Reservation agreements have been on the table for several years now and were backed by housing ministry representative Matt Prior at a Propertymark conference in 2019, but since then ministers have gone quiet on the idea having promised a pilot in 2020.

Now housing minister Chris Pincher has once again brought them into the limelight during a parliamentary discussion with Labour MP Dan Carden, who asked what the government was doing to protect buyers from gazumping.

Stop gazumping

Pincher replied that the government was keen to stamp out the practice of vendors accepting higher offices after accepting an initial offer from another party.

Preventing gazumping is part of the government’s overall plan to improve the home buying and selling process, a policy initiative headed-up by Prior.

“To mitigate this risk, we have been exploring the adoption of voluntary reservation agreements,” said Pincher.

“Buyers and sellers would make a legal commitment to proceed with the sale once an offer has been accepted and may include a financial commitment which would be surrendered to the other side if the party withdraws without good reason such as gazumping.”

He went on to say that in order to be widely taken up, reservation agreements need to be attractive to buyers and sellers and promoted by estate agents and legal representatives.

“Following behavioural insight research, work is now continuing to develop the agreements to make them an effective tool in improving the efficiency of home buying and selling.”

Read more about reservation agreements.

December 22, 2021

3 comments

  1. This is classic, the property market is be-calmed, just as it was in 1989 following 2M completions in the previous year, due to a certain chancellor ‘messing’ with property taxation (MIRAS) – sounds familiar? I do not think that the government should worry too much about gazumping, which in fact is controlled by the vendor, who can choose to stay with buyer A or jump to buyer B or C – prior to a legal exchange of contracts, they are the prime mover in the deal. The agent and all other stakeholders have to bend to the thoughts and decision making process of the vendor, agency is a service industry, we do not own the asset we are selling, we merely facilitate the ‘deal’ being paid usually on a results fee paid basis. Agreements pre-contract, of a voluntary nature – if not legally binding – are going to get zero traction.

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