Earlier this year the Housing and Homelessness Minister, Heather Wheeler, announced that the Government will be trialling standard reservation agreements, telling conveyancers buyers shouldn’t be allowed to pull out of a transaction without consequences, “just because they’ve now decided they don’t like the avocado bathroom suite”. Under the agreements, deposits would be paid to secure a right to buy and there would be penalties imposed on parties who pull out of the conveyancing process.
It was decided that greater accountability is required as “too many people are walking on a tightrope from the moment they put in that offer”. Research has shown that even after an offer is accepted, there were still 70% of buyers and 66% of sellers who thought their sale wouldn’t go through to completion. In addition, it was shown that 50% of buyers and 70% of sellers would have been prepared to enter into a legal agreement, if they knew one existed.
At present, the risks posed with the home buying process is that so much time and money is invested into these transactions, with the conveyancing process only becoming legally binding upon exchange of contracts. Up until the date of exchange of contracts, buyers and sellers still have the option to withdraw from the transaction, causing invested time and money to be lost.
With the introduction of the new home buying reservation agreement, the Government would seek to increase buyers’ and sellers’ commitments to transactions and hopefully provide more confidence in the conveyancing process as a whole.
Shantel Dosanjh, Legal Advisor