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'.
1. How does it work?
Once the offer has been agreed, the Buyer and Seller both sign the agreement and are then bound by the terms within. If either party withdraw for any reason, other than what is agreed, then the other side is entitled to a compensation payment.
2. How much does it cost?
Both the buyer and the seller pay a Reservation Fee typically £250 + vat. This secures a £2,000 commitment to you both from each other. The reservation fee and commitment can vary. This amount represents the minimum fee and level of commitment.
3. How much is the compensation payment?
Whatever level of commitment that was agreed, min £2,000.
4. Who arranges this payment?
Gazeal will be responsible to make the payment to the innocent party and then recover it from the defaulting party.
5. How much deposit does the Buyer/Seller put down?
Neither the Buyer or Seller put down a deposit. Instead we ask for a Reservation Fee. (Minimum £250 + vat).
6. For such a small amount why would the Buyer be committed?
Although the amount of £250 + VAT is low, both parties are committed to a min of £2,000 if either breaks the agreement. These amounts can vary.
7. What happens if the Buyer withdraws due to a bad survey? This wouldn't be their fault?
The agreement makes provisions for various scenarios that would mean there would be no penalty for withdrawal. Such as:
- Down Valuation due to survey not re-negotiable
- Bad Title
- Chain Break Down above the Seller or Below the Buyer
- General Reasons agreed by ‘Mutual Consent’ with Seller
- Inability to get a Mortgage
8. How can the Seller withdraw without penalty?
There are numerous reasons for the Seller to withdraw without the potential liability such as:
- Incorrect information given by the Buyer as to their position.
- Agreed timescales not met by the Buyer
- Chain Break Down below the Buyer
- General reasons agreed by ‘Mutual Consent’ with the Buyer
9. How does the Agreement work in a Chain?
The agreement can be signed BUT NO PAYMENT IS TAKEN if the chain is not complete. Once complete then the Buyer can start the agreement by making their Reservation Fee payment. If at any point the chain collapses then the agreement simply ‘PAUSES’. The agreement is NOT DEPENDENT ON ALL OF THE CHAIN having a reservation agreement.
10. What happens when the agreement pauses?
Either party can extend the agreement by ‘Mutual Consent’. In the event that there is no ‘Mutual Consent’ then either party can walk away with no penalty.
11. What happens if the timescales are not met?
All pre-set timescales can be extended by ‘Mutual Consent’. In the absence of ‘Mutual Consent’ either party can walk away, without penalty, if there is no extension agreed.
If you have any other questions that are not covered here, please contact Knight Edmonds on 01622 291491.