Boodle Hatfield Property Insights, June 2023 - Flipbook - Page 6
Boodle Hatfield
Property Insights
Exclusivity Agreements ...........
With demand for prime and super prime properties
in London currently out stripping availability, we are
seeing an increase in demand for our residential
team to assist both buyer and seller clients to
secure deals with the use of sealed bids and the
return of requests to prepare exclusivity or ‘lock
out’ agreements.
An exclusivity agreement will typically give the
buyer time to undertake their due diligence on the
property without competition from third parties.
The buyer has the benefit of knowing that it has
an agreed and clearly defined period of time
when they are incurring costs, but can review the
property title, have a survey or valuation done and
make other appropriate investigations without the
risk that the seller will contract with a third party.
Typically, the terms of the exclusivity agreement
will prevent the seller from issuing a contract or
other papers relating to the property to a third party
or indeed dealing with third parties.
The exclusivity period is often granted in return
for the payment by the buyer of a “non-refundable
deposit” to set off against the purchase price
should the buyer proceed to complete the sale, but
not otherwise. Importantly, the agreement does
not bind the parties beyond the exclusivity period,
at the end of which either party may walk away
from the proposed transaction and it does not
force either party to have to exchange contracts
even if they are ready to do so within the exclusivity
period.
A well drafted exclusivity agreement will set out
to serve the interests of both parties and ensure
that so far as is possible the parties work together
in good faith, seemingly giving buyers comfort
and peace of mind in a hectic market. However,
such agreements can potentially present more
problems than they solve. The documents are
often heavily negotiated, itself sometimes a costly
and time-consuming practice, this is particularly
the case with the circumstances in which any
“non-refundable deposit” and associated costs
will be repaid should the buyer decline to proceed
with the purchase. In practice sums that are
deposited are rarely on a fully “non-refundable
basis and a well advised buyer will ensure that
there are circumstances where any deposit under
an exclusivity agreement will be refunded should
they decide not to proceed for one of the reasons
defined in the agreement.
Saskia Arthur, Residential Property Partner
This document is intended to provide a first point of reference for current developments in aspects of the law. It should not be
relied on as a substitute for professional advice. If advice on a particular circumstance is required please contact your Boodle
Hatfield lawyer.
Andrew Wilmot-Smith
Partner and Head of Property
+44 (0)20 7079 8138
awilmotsmith@boodlehatfield.com
Boodle Hatfield LLP
240 Blackfriars Road, London, SE1 8NW, DX 53 Chancery Lane
+44 (0)20 7629 7411 | bh@boodlehatfield.com | www.boodlehatfield.com
© Boodle Hatfield LLP 2023. Boodle Hatfield is not authorised under the Financial Services and Markets Act 2000 but we are able in certain
circumstances to offer a limited range of investment services under the supervision of and regulation by the Solicitors Regulation Authority. We
can provide these investment services if they are an incidental part of the professional services we have been engaged to provide.
