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Home Buyers - What You Need to Know About the New Reservation Deposit Trial

on Tuesday, 07 January 2020.

Ever experienced someone pulling out of buying or selling your home for what seemed like a trivial reason? A new reservation deposit has been designed to stop this from happening.

What Is the Scheme All About?

Introducing 'reservation agreements', the new scheme is to be trialled early this year and will provide a financial penalty for pulling out of a sale.

The buyer and seller will sign up to a reservation agreement, with one or both parties putting cash  down at the outset. If one party pulls out of the transaction without good reason, the other party will be entitled to the reservation deposit as compensation.

Buyers wanting to purchase new-build properties are no strangers to putting down a reservation fee. However, the difference with the new trial is that the seller may also be asked to contribute towards the 'pot' of money that may eventually be needed to compensate either party.

How Will This Work Exactly?

What constitutes a 'good reason' has yet to be fully defined and is likely to require a lot more discussion. It also remains to be seen who sets the limit of the reservation - will this be the same across all transactions, or will there be scope to negotiate this?

A buyer purchasing a new-build pays their reservation fee directly to the developer. However, the involvement of the legal adviser in this part of the process remains to be clarified.

Where the 'pot' is held is another question that has yet to be formally answered. There is a  suggestion that it will be the solicitors who are required to hold the funds. However, this opens the door to many other questions on the solicitors' involvement.

Buying or selling your home? Get in touch with Lucy Giles, in our Residential Conveyancing team on 020 7665 0900, for specialist legal advice or complete the below form.    

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