"Exclusivity Agreement" - Your Thoughts?

themag

Hello all,

I have recently put in an offer on a flat in North London which has been accepted by the seller who is selling privately (not via an agent). The seller is insisting on an "exclusivity agreement" whereby for a small percentage of the purchase price (amounting to around 1K) he will not conduct any other viewings or provide conveyancing documentation to any other interested party. I personally think this is bloody cheeky considering he has already accepted our offer and so should not be actively soliciting other offers anyway. My solicitor also thinks this is highly irregular.... So far I am playing ball and have requested the T & Cs of the agreement for review by my solicitor.
I'd be interested in getting people's thoughts on this

Cheers

MJMum

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benood

Tell him his fortune, what a twit, I would be very concerned that this is just his way of earning a bit of extra income and he has no intention of actually selling in the end.

courtjester

Sounds the wrong way round - normally it should work:

buyer
I offer 100000 for your house

vendor
I accept - lets get the solicitors in

buyer
hang on, I want to make it a condition that you don't carry on marketing to anybody else, giving me exclusive rights to your house even though that means that you can't sell to anyone else, but I can still pull out and waste your time and money anytime I like without any consequence or liability to you. Pretty neat huh?

vendor
that sounds reasonable, but what's in it for me?

buyer
nothing, I want everything to be to my advantage and anyway you should consider yourself lucky I am taking this heap off your hands

vendor
mmm - OK, tell you what if you give me something in return for the possible risk that you might not proceed with the sale as agreed, I will give you exclusivity

buyer
how about a £1k non-refundable deposit that comes off the final price - that shows I'm serious and definitely intend to proceed - you don't show anybody else around which gives me re-assurance that I am not wasting money on surveys, solicitors fees etc. (it's like an insurance policy and also gives me certainty that I have secured the house so I can plan ahead).

If I (the buyer) do have to pull out, you keep the money in return for the lost marketing opportunities and delay in selling to someone else and messing up all your arrangements and plans for moving to your next home. However, if you (the vendor) pull out for any reason, I get the full amount of the deposit back, plus a contribution to my costs incurred.

vendor
that gives us both something - let's get the solicitors to draw up the agreement for signing and they will hold your deposit.

*****

Because a lot of people ask for properties to be taken off the market post-offer acceptance and agents encourage this practice for their own ends, exclusivity has become regarded as a 'right' - it's not. Such arrangements are entirely one-sided in favour of the buyer. The problem is that the law in England & Wales offers no binding obligations until contracts are exchanged, which can leave vendors in a very inequitable situation should their buyer pull out without consequence after many weeks or months of 'exclusive' positioning for nothing in return.

There's nothing irregular about it (it's just not common enough). A written agreement backed by a non-refundable deposit confirms the commitment from BOTH sides and makes compensation enforceable. It must be drawn up by the solicitors involved.

Obviously, as the suggestion has come from the vendor (which is unusual) rather than you the buyer which is the normal starting point, you are free to confirm your offer but decline to give a pre-contract deposit. You appreciate that the vendor is also legally free to continue to market the property and deal with other buyers shoudl they wish to - your offer and their acceptance of that offer is not binding on either side until contracts are exchanged.

Providing the terms are fair it's a good thing for both sides - the deposit would be held in the client account by the solicitor (it must not be paid to the vendor) and you couldn't lose it unless YOU pull out of the sale, that is the point. You can set the terms on which the deposit is lost or re-paid by negotiation.

Is it any different from the process of reserving a new home with a builder by putting down a deposit?

[Deleted User]

buyer
how about a £1k non-refundable deposit that comes off the final price - that shows I'm serious and definitely intend to proceed - you don't show anybody else around which gives me re-assurance that I am not wasting money on surveys, solicitors fees etc. (it's like an insurance policy and also gives me certainty that I have secured the house so I can plan ahead).

Would a Buyer really commit to that before before having the survey done?

theGrinch

you would make it conditional that it surveys up to agreed price. my only concern with holding deposits (I come across them often in larger developer deals) is you need to have a contract drawn up, which slows everything down.

devils_advocate

Tell him, that for an amount equal and opposite to the amount he's aski nng you for, you'll agree not to make any offers on any other flats.

Seems fair to me.

Tiger_greeneyes

I agree with devils advocate.

He's taking the mickey. The more I think about it, the more unreasonable it seems to me.

I've never heard of this, despite having been an estate agent for many years - and working for a major London based property company. I've also bought and sold eleven properties of my own.

What if the survey came back having been down-valued or had structural problems and you have to withdraw because you can't get the mortgage? He ends up £1k better off, that's what.

My own feeling is that he either wants to sell - or he doesn't. If he does want to sell, just get on with it! I certainly wouldn't be parting with any cash except for solicitors or surveyors fees.

courtjester

The contract terms can include reference to the deposit being refundable under certain agreed conditions - such as major unreconcilable faults highlighted in the survey. The fact of the deposit doesn't alter the normal negotiation that may occur on value or works required - it simply means that the buyer must have a valid reason to pull out after having been given exclusive rights to buy the property.

Otherwise, the buyer is expecting the seller to take the property off the market for nothing in return should the buyer change their mind months down the line.

All commercial contracts require consideration on both sides to be enforceable. A one-sided contract isn't. This is simply applying the same principle. Buyers insisting on exclusivity are getting things all their own way for no commitment.

The reason agents encourage exclusivity deals is because it helps them to secure the sale, any sale (for them) as agents tend to forget who they are acting for. This is normally what's best for the buyer, not what's best for the vendor and it's the vendor picking up the agent's bill.

Generali

I reckon it's reasonable if both parties commit to it, subject to survey and financing.

themag

All, thanks for your responses. I agree that provided the terms and conditions are acceptable to both parties then it can be used as a tool for mutual advantage.

However I recieved a copy of the document today and it quite firmly protects the buyer and leaves the seller exposed. For example the buyer is within his rights to withdraw from the sale if if he is "unwilling or unable" to complete following the exclusivity period of 35 days, at which point we could have shelled out a lot of money for legal fees, surveys etc. The other thing that makes me suspicous is that he is not issuing this document via his solicitor but as a private individual, which means there's no way I'm entering into this (on top of the other issues above)