Is a lock-out agreement worth having when selling your home?
We do often get many clients who are unsure or want to know what is a lock-out agreement?
Lock-out agreements are often drawn up when negotiations for a property sale start and are designed to ensure properties can’t be sold under potential buyers’ noses whilst they are still in talks. These deals are also known as exclusivity agreements and can be used for commercial and residential property deals. So does that help you in understanding what is a lock-out agreement?
People ask for lock-out agreements to be drawn up for many reasons. There is no law in England or Wales that stipulates sellers have to withdraw the property from the market once an offer has been made. Many buyers have seen sellers start contract races once offers have been made, though the Law Society has introduced rules for solicitors which means they cannot send out second contracts without the first would-be purchase given notice. However, this does not mean sellers cannot keep properties on the market and decide to work with someone else who may come in with a higher offer.
When a lock-out agreement is made, sellers and buyers can proceed with the deal without other would-be buyers jeopardising the deal. This means the buyer can focus on surveys, mortgages and other concerns without worrying about the deal falling apart due to offers from other sellers. If a sale hasn’t been finalised by the end of the agreed time, the deal will come to an end and the seller will be able to talk to other potential buyers.
Quick and simple to arrange
The document is not a complex one, and will normally feature around three to four pages. The agreement will usually last for around a month and the buyer will normally have to pay a non-returnable deposit that covers seller’s expenses should they back out of a deal. This means lock-out agreements can be of benefit to buyers and sellers. Lock-out agreements are not as common as you might expect them to be, with so many sellers being reluctant to close themselves off to higher offers. Many buyers do not require lock-out agreements where there are many other similar properties to choose from, but they may ask for one to be drawn up if they think they are likely to face tough competition. Lock-out agreements usually take an hour or two to draw up.
Some sellers have been negatively impacted by lock-out agreements, especially when would-be buyers have simply let the lock-out period lapse then refuse to sign contracts. Some sellers have taken offence to being asked to sign lock-out agreements as they regard this as a sign that the buyer does not trust them. Sellers are likely to want to keep the exclusivity period as short as they can as they will not want to lock other potential buyers out for longer than necessary. The buyer must show signs of making progress with things like surveys and arranging mortgages during the period or the seller may have the right to end the agreement early.
At HS Lawyers, we can help if you have been asked to enter into a lock-out agreement and require more advice. Our team of conveyancing solicitors based in (west Bromwich) Birmingham, wolverhampton and Peterborough are readily available to guide on on lock-out agreements or any matters related to either buying or selling your property. Our property law experts and licensed conveyancers are experienced in dealing with commercial or residential property matters. If you need to discuss any legal matters related to your property or to learn more about lock-out agreements, give us a call today or visit one of our offices.