Kiteleys Solicitors

Kiteleys Solicitors. 7 St. Stephen's Court, 15-17 St. Stephen's Road, Bournemouth, Dorset. BH2 6LA. Telephone 01425 278866.
Kiteleys Solicitors is the trading style of Kiteleys Solicitors Limited registered in England and Wales, registered number 03113721. VAT Registration No: 658 8813 79.
This firm is authorised and regulated by the Solicitors Regulation Authority. A list of directors is available for inspection at our registered office.

‘Lock-Out’ or Exclusivity Agreements

  • Call us now on 01425 278866
    • Kiteleys Canford Cliffs 01202 708634
    • Kiteleys Highcliffe 01425 278866
    • Kiteleys Southampton 02380 909091
    • Kiteleys Wimborne 01202 849242
    • Kiteleys Ferndown 01202 875646
    • Kiteleys West Moors 01202 863933
    • Kiteleys Boscombe 01202 393506

Law stated as at 1st July 2013

What is a lock-out agreement?
This is a preliminary agreement which parties can enter into at the beginning of negotiations for the sale and purchase of a property (commercial or residential). It is sometimes called an exclusivity agreement. The intention is to give buyers a “clear field” for a specific period to make their arrangements without the fear that other buyers may beat them to exchange of contracts.

Why have one?
Many buyers of properties believe that once an offer for the property has been made the seller will withdraw the property from the market giving the buyers the opportunity to exchange contracts within a reasonable time. Unfortunately in England and Wales there is no law to this effect (as opposed to other countries including Scotland). In the recent buoyant property market buyers have found to their cost that sellers have proceeded with other buyers at higher prices or have started a contract race. The law of England does not prevent this. The Law Society has imposed professional rules on Solicitors so that they do not permit a client to send out a second contract without the first purchaser being given notice but this does not stop a seller keeping the property on the market and proceeding with someone else who may make a higher offer.

What does a lock-out agreement do?
It gives the parties a breathing space to enable them to proceed with the sale and purchase without interruption from other interested parties. This will enable the buyer to deal with searches, survey and any mortgage offer required. If at the end of the stipulated time the buyer cannot exchange contracts then the agreement is at an end and the seller is free to negotiate with other buyers.

What form does the agreement take?
It can be a relatively simple document consisting of three to four pages setting out the intentions of the parties. It lasts for a fixed period (e.g. one month) and normally the buyer is required to pay a non-returnable deposit to cover the seller’s expenses if the buyer does not proceed.

Why are they are not more common?
In a buoyant market there is reluctance by sellers and their agents to bind themselves at such an early stage because they wish to be free to sell at a higher price or to another buyer who may be in a better position to proceed (e.g. no sale or mortgage to arrange). In the majority of cases where clients of ours have asked for a lock-out agreement the sellers have been advised not to agree to this. In a falling market of course the purchaser may not need a lock-out agreement because he may have a wide choice of properties to purchase, but if the purchaser thinks there is competition for a particular property, this could still be worthwhile.

How much does a lock-out agreement cost?
Assuming that the buyer is happy with the draft provided, an agreement will usually take around an hour or two to draft. You will need to contact your solicitor to obtain further details of our hourly rates of charge for this type of work.

Conclusion
The important thing to do is to make clear to your seller at the earliest stage that you will be expecting a lock-out agreement if your offer is accepted and it is sensible to give the reasons why. If this is negotiated correctly at the beginning then we could produce a lock-out agreement immediately and there is no reason why this should not be signed within a few days thus giving you the “breathing space” you may need to make your survey and financial arrangements without the fear that someone else may purchase the property.

DISCLAIMER :
Nothing in this guide constitutes specific legal advice on a particular matter and should be used for general reference only. It is no substitute for legal advice from a qualified professional.

  • Daniel Stanton

    Daniel Stanton
    Associate Solicitor

  • George Crofts

    George Crofts
    Solicitor

  • Roger Turner

    Roger Turner
    Consultant Solicitor

prev next

Talk to one of our solicitors

At Kiteleys we are always happy to help. We believe that the law should be easily accessible, so if you have any questions for our Commercial Property solicitors, please don’t hesitate to get in touch.
Call us on 01425 278866 or enquire online.

by

Kiteleys Solicitors. 40 Haven Road, Canford Cliffs, Poole, Dorset. BH13 7LP. Telephone 01425 278866.
Kiteleys Solicitors is the trading style of Kiteleys Solicitors Limited registered in England and Wales, registered number 03113721. VAT Registration No: 658 8813 79.
This firm is authorised and regulated by the Solicitors Regulation Authority. A list of directors is available for inspection at our registered office.