How useful are Exclusivity Agreements?

In commercial and residential property transactions, particularly where prime properties are in short supply, exclusivity agreements also known as lock-out agreements can be an attractive option when they are used in anticipation of a sale and purchase agreement.

Call our property experts for a free, no-obligation quote on obtaining an exclusivity agreement on 0207 703 5034 or fill out the contact form.

What is an exclusivity agreement?

It is a preliminary agreement entered into between the buyer and seller at the beginning of a transaction for the sale and purchase of a property. This will usually cover a timetable for the supply of title documentation by the seller, a timetable for the buyer to raise enquiries and an obligation on both parties to instruct their lawyers.

The intention of the agreement is to allow a buyer to proceed with searches, investigations and due diligence without interruption from other interested buyers. It prevents a seller from negotiating with any other party during a fixed period, known as the exclusivity period.

At the end of the fixed period, if the buyer cannot exchange contracts then the agreement comes to an end and the seller is free to negotiate with other buyers. Usually, the buyer is required to pay a non-refundable deposit to cover the seller’s expenses if the buyer does not go ahead.

 

Is an exclusivity agreement binding?

If the seller breaches the agreement by selling the property to someone else during the exclusivity period the buyer will be able to recover damages to cover wasted costs, for example legal fees or surveyor’s fees.

Until a sale contract is exchanged, a seller will still be able to sell the property to anyone else at the end of the exclusivity period as there is no legal obligation to continue to deal with the buyer.

In many ways an exclusivity agreement creates a “gentlemen’s agreement”.

 

Is it worth having such an agreement in place?

Exclusivity agreements provide a potential buyer with some breathing space to carry out their conveyancing as it allows a short period of protection within which a buyer can proceed with its due diligence. If, however, a potential buyer is looking for longer-term protection while it decides if it wants to proceed then this type of agreement probably is not the answer.

Call our property experts for a free, no-obligation quote on obtaining an exclusivity agreement on 0207 703 5034 or fill out the contact form.

 

Contact One Of Our Property Solicitors Today

If you need any advice on buying or selling a property, please call one of our property experts for a free, no-obligation quote on on 0207 703 5034 or fill out the contact form

 

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