We Love Exclusiveness In London, But Is it Always For The Best? Why Sellers Are Asking For Deposits
26.11.12This week I am rather delighted to have a guest blog spot from the rather marvellous Stuart Kaye, who is a Partner, Licensed Conveyancer and Head of Residential Property at DKLM Solicitors.
As well as one of the most efficient legal supremos around, Stuart knows more than a thing or two about the London market. Over to you sir…
“I am seeing rather a lot of requests for exclusivity agreements (also known as option agreements) lately, and requests for non-refundable deposits.
This can be a particularly contentious issue, for both seller and buyer and can, in many cases, cause a deal to go belly-up because parties spend so much time squabbling over the wording (or indeed its reason for being) of the agreement that one of the parties pulls out, in sheer frustration.
My personal view of such agreements is that they are a pain in the derrière, for a variety of reasons. I have had two such issues flare up recently, one has already ended in tears and the other is about to send my client into orbit! On the latter, I am half-way through a deal and now the seller has now requested a nominal sum of £1,000.00 as a holding deposit. My view is that this is ridiculous.
In the good old days (don’t I sound old!), there was such a thing as “acting in good faith”. That still applies to the vast majority of cases today. But, we are in strange times and, we are in London! London can have a strange effect on people.
It is difficult to know who pushes for such agreements to be entered into. Historically, it would be an estate agent. However, some sellers like the assurance that a buyer is serious, i.e. for a buyer to put their money where their mouth is.
I will never dismiss such an agreement, outright. However, I would always ask the question – why is such an agreement being asked for, what are the benefits of entering into it (for that particular case) why is so much (or so little) being asked as a premium and what is so special about the property, or price, to warrant the need for such an agreement in the first place!
With some “mega properties”, such agreements can be essential. For example, a large house in Kensington, featured in a glossy magazine, with buyer’s scrabbling all over it, and one VIP or famous buyer bidding, then in those exceptional circumstances I can see the need for one.
At the opposite end of the spectrum, the seller could have many offers on his/her property and is prepared to go with one buyer, but wants some certainty. However, in that situation, I don’t see why a buyer would be any more serious than any other buyer, whether there was lots of interest or not. Again, it comes back to my point of “good faith”.
A client will have to spend money, at the outset, on mortgage valuations, surveys, me… I don’t see it as fair, as to why they should shell out extra money, when they have already shown signs of good faith by getting the process started. But then again, I am rather old fashioned.”
Stuart Kaye is a Partner at DKLM LLP – to find out more about them click here…
Written by Andrew Montlake
Andrew Montlake, better known as Monty, began his journey with an Hons degree in Economics & Politics before starting in the mortgage industry in February 1994. As a main founder of Coreco in 2009, he successfully grew the brand, marketing, and communications, and was made MD in 2019 focussing on the overall vision, strategy, and culture of the company. As Coreco’s media spokesperson, Andrew can often be seen or heard on TV and radio as well as regularly commenting in the national, local, and trade press. He is the author of this acclaimed Mortgage Blog and is well-known for his social media, podcasts, and public speaking. Andrew is now proud to serve as Chairman of the Association of Mortgage Intermediaries, (AMI) as a cheerleader for the Mortgage Industry as a whole and continues to work at the coal face, writing mortgage business and advising clients.
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