In this temporary new world of restricted social interactions and movement, an adaptation to the way in which property transactions are conducted has had to take place. Virtual viewings are now being used by estate agents to circumvent the restriction on entering an occupied property. It is entirely possible to make an offer on and purchase a property without even setting foot through the door.

However, for buyers this does not sit well with the key doctrine for any purchase – ‘Caveat Emptor’ (Buyer Beware). Proceeding to exchange contracts to purchase a property you have not seen or had surveyed by a qualified professional surveyor on your behalf is an extremely risky course for the buyer as under the standard contract conditions of sale, for residential property, they would be accepting any physical defects in the property with little or no recourse from the seller (depending on the circumstances).

The current restrictions are not expected to last forever, so in the future there would be an opportunity to visit/survey the property. Therefore, buyers keen to take advantage of low mortgage rates and a more favourable market, and not put themselves at contractual risk, could put in an offer which is subject to a future inspection/survey prior to exchange of contracts. This offer could benefit both buyer and seller as they would be able to make progress with the legal process, which can take several weeks or months to complete, with the last stage of a survey or inspection to take place as soon as government guidance allows.

Adopting this approach would involve some upfront cost from both parties towards respective costs associated with the legal work such as searches or the purchase of management packs or conveyancing fees. However, this is no different to the usual process whereby each party could decide to withdraw before exchange of contracts even though costs had already been incurred.

Reservation Agreements

For those considering accepting or making an offer subject to an inspection, or any other proviso, having an agreement between the seller and a buyer such as a reservation agreement could provide some comfort that the costs would be covered, should on inspection either party withdraw from the transaction. Either or both parties commit a certain reservation fee or to cover the other’s reasonable legal expenses should they decide to withdraw from the “subject -to-contract” agreement prior to exchange of contracts, unless some limited exceptions apply.

It was already on the agenda of the Ministry of Housing, Communities & Local Government to pilot a reservation agreement scheme this year to try and encourage a commitment to a transaction and also try to reduce the 33% rate of withdrawal from transactions. The intention is to adopt this as standard practice when purchasing residential property in the future.

The scheme envisaged that buyers would pay a reservation fee, of up to £1000, which would be paid to the seller towards their costs should the buyer withdraw from the contract. However, there is no reason why a seller could also not agree to pay a reservation fee to incentivise buyers to commit to a purchase. Or the parties could come to their own agreement about the amount committed by each party and the risk.


If you are considering entering into a reservation agreement, ensure that you obtain legal advice before signing or committing any money. The agreement should be drafted to include the anticipated circumstances in which a party could withdraw from the sale/purchase and recover the reservation deposit/amount deposited as security for fees. Each party should be clear about the limits on these sums.

It is best to discuss and agree between you the circumstances in which either of you can withdraw without being penalised or when payment would be due, prior to instructing solicitors. This could prevent lengthy negotiations about the wording which could delay the progress of the transaction and increase the fees.

Entering into a reservation agreement cannot be used to compel the other party to exchange the contract for sale and purchase of the property. It is only a tool to show commitment and to provide financial compensation for costs incurred during the pre-contract due diligence which both buyer and seller enter in to in good faith.

Further information

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