Prepare for change with reservation agreements on the horizon – Conveyancing Association

Prepare for change with reservation agreements on the horizon – Conveyancing Association

The Ministry for Housing, Communities & Local Government’s (MHCLG) ongoing project on improving the home-buying process is of great interest to those working in the mortgage and housing market.

 

Clearly this chimes with the work of the CA and we spend a great deal of time and effort feeding into this matter.

There are a number of strands to this but the crux of the matter is making the whole process more transparent, delivering greater certainty, and cutting the significant number of transactions which are aborted every year.

These waste considerable sums of money, time and resource.

Leaving aside leasehold, what are the ‘quick wins’ which could be achieved that might make the process tighter and less stressful in the short-term?

Mortgage brokers will know only too well how painful the process can be.

Let’s be frank, we can move from the sublime to the ridiculous depending on the case, and often there can be no rhyme or reason why one transaction takes four to five months, while others go through much quicker.

 

Reservation agreements

One of the potential solutions which the government appears to be actively pursuing is the introduction of reservation agreements.

Advisers, and their clients who have purchased new-build properties, will be most familiar with these as they are a key part of this type of transaction.

I must say that the CA takes something of a neutral stance when it comes to reservation agreements and, for transparency, there are a number of conveyancing firms who are not supportive of them and do not believe they add much to the process.

However, the government does appear to see some benefit in an agreement which binds both seller and purchaser, and which provides financial recompense to one party should the other pull out for no good reason.

Having such an agreement might well bring down the number that fall through.

 

Prepare for change

To understand the potential uses of reservation agreements and whether consumer behaviour might change, or need changing, the MHCLG is commissioning behavioural insight research, which will include a trial – due to take place before the end of the year.

As part of the Home Buying & Selling Group, the CA will be working with the researchers to help them understand the issues around these agreements, what they might be able to achieve and how they might be introduced.

The CA and MHCLG recognise that reservation agreements will not be the silver bullet, although they may encourage greater uptake of upfront information.

And I do not believe anyone could sensibly argue that having all information required for the conveyance available at the point of sale would not speed up the process, create greater certainty and reduce fall throughs.

In that sense, the notion of a ‘quick win’ for cutting down on failed transactions by use of reservation agreements might seem a misnomer, because it’s unlikely that we’ll see any legislative changes until 2020.

However, the market should prepare itself for change in this area because there does appear to be cross-party support for action.

Regardless of the government, there is political will to deliver a better house purchase process for all, and as long as the industry’s voice is heard and heeded, that can only be a good thing.

 

Beth Rudolf, director of delivery at the Conveyancing Association (CA)

SOURCE: mortgagesolutions

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