Lock-out agreements & exclusivity: 6 'key' drafting points

Lock-out agreements & exclusivity: 6 'key' drafting points
Access our Precedent:  Exclusivity Agreement - Property

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In an ever more competitive property market, exclusivity or “lock-out” agreements are coming back to the fore.

This blog post highlights a few of the ‘key’ points (pun intended) to keep in mind when drafting or negotiating these agreements.

If you regularly act on the sale and purchase of real estate - be it residential or commercial - there’s a good chance that you’ve recently been asked (or soon will be) for advice on an exclusivity or “lock-out” agreement.

While such agreements don’t guarantee that a sale contract will be entered into, they can at least provide buyers with a fixed period of exclusivity. The aim is to allow buyers time to negotiate (and incur expenses such as searches and surveys) without fear that the seller is continuing to talk to other interested parties.

In most cases, an exclusivity agreement should be a relatively short and relatively uncontroversial document (subscribers and users on a free trial can view our precedent here). Nevertheless, it never hurts to have a checklist handy so here are six points to keep in mind when drafting or negotiating a lock-out agreement.

1. “Lock-ins” are for the pub – not sale and purchase transactions…

A lock-out agreement is fundamentally a negative agreement. The sellers agrees not to negotiate with third parties. The Court of Appeal has confirmed that such agreements are enforceable. By contrast, it is not possible to bind parties to a 'lock-in' agreement that compels them to agree terms. An agreement to negotiate, like an agreement to agree, is unenforceable because it lacks the necessary certainty and the courts cannot decide whether it has been observed.

The agreement can (and should) however still contain

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About the author:

Melissa Moore is a dual qualified in England and Wales and South African lawyer and has 14 years’ experience in property practice in England. She has worked in local government and been a partner at a regional law firm and most recently an associate director at Berwin Leighton Paisner which she joined in 2005. Melissa has wide experience in all areas of property law and specializes in commercial real estate development. She has experience in a number of sectors including hotel, leisure, offices, investment, industrial, motorway service stations and funding. She has worked on large scale strategic developments and government funding initiatives, town centre regeneration schemes and private mixed use developments both for public sector and private developers and investment funds. In 2013 she was ranked by Legal 500 as recommended for local government work.