Property exclusivity agreements

The following Property practice note provides comprehensive and up to date legal information covering:

  • Property exclusivity agreements
  • Key terms
  • Duration
  • Consideration
  • Seller’s obligations
  • Buyer's obligations
  • Termination
  • Enforcement

Property exclusivity agreements

An exclusivity agreement (lockout agreements) may be used where the buyer wants to prevent the seller from negotiating for the sale of the property with any other party for a fixed period. Its objective is to offer the buyer time to progress the transaction without running the risk of being gazumped by a rival buyer. It does not guarantee that the sale contract will be entered into. At the end of the exclusivity period, either party can walk away and the seller will be free to sell the property to a third party.

Residential developers use exclusivity agreements to give buyers a fixed exclusive period in which to exchange contracts. In return, the buyer pays a non-refundable deposit that can be forfeited if the deadline is not met.

In commercial transactions, buyers may ask for exclusivity where:

  1. there is a lot of interest in a property, to allow themselves a clear run at attempting to exchange contracts, or

  2. they need to ascertain the viability of a proposed development or arrange finance

Lockout agreements are not contracts for the sale of a property and do not create an interest in land. They are not registrable agreements and Law of Property (Miscellaneous Provisions) Act 1989, s 2 does not apply to them. This also means that they do not need to be in writing although in practice

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