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In the February 2010 Issue of Property Investor News
Opinion: Lockouts
Since spring last year, when the prime London residential market began to emerge from the dark days of late 2008, cash rich buyers found themselves faced with a shortage of supply of desirable residential property, and we began to see the return of sealed bids and the revival of 'lock-out' agreements. Lock-out agreements have always been popular with estate agents, particularly where a property has attracted healthy interest, but they are regarded with scepticism by lawyers.
Lock-out agreements are not contracts for the sale of land and need not be made in writing, although they must contain all the usual contractual elements i.e. an offer, an acceptance, consideration, and there must also be an intention to create legal relations.
In residential property, lock-out agreements are seen as a way for a prospective buyer to 'buy time' to enable the completion of pre-contract due diligence, usually by paying a non-refundable deposit to a seller in order to obtain a period of exclusivity during which time other potential buyers are 'locked-out'. Buyers need to be clear that by entering into a lock-out agreement they are not binding the seller to sell the property to them. This is a common misconception and explains why many buyers entering into lock-out agreements do so with unrealistic expectations of what the agreement can achieve for them.
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