Lock-Out/Exclusivity Agreements

Lock-out and Exclusivity Agreements – are they worth the paper they are written on? Kathryn Wood, Associate in the residential development team, gives us her thoughts.

Kathryn, can you first tell us what Lock-out and Exclusivity Agreements are – and is there a difference?

There is no difference – they are just different terms used for the same thing.

They are agreements usually entered into at the early stages of negotiations, under which a seller will agree that he will not sell the property to anyone else for a given period (say eight or ten weeks). That gives the buyer a period of exclusivity, typically to carry out ground investigations or deal with other such things.

That sounds useful – is it?

In practice it can be. In legal terms however they are of limited use. The main problem is that the seller will be free to sell the property to someone else at the end of that period as there is no legal obligation to continue to deal with the buyer at all.

In many ways, this creates little more than a “gentlemen’s agreement”.

Does the buyer have no redress?

That depends upon the terms of the agreement. For example, it may say that the seller has to answer the buyer’s enquiries. If he is simply obstructive, he might be in breach of contract.

Where does that then leave the buyer?

Not much better off. At most he is likely to be able to sue for any immediate loss – perhaps wasted costs. He will not be able to sue for the loss of opportunity to buy the site (or for any profit that he might have anticipated making), simply because the seller had no obligation to go through with a sale in the first place.

So, in short, are such agreements worth the paper they are written on?

They can create some breathing space and give the parties a loose commitment to themselves. In strictly legal terms however they do not really count for much.

Our team

Rosemary Edwards

Partner

Head of Residential Development

Direct Line +44 (0)113 297 7724

Tim Halstead

Partner

Residential Development

Direct Line +44 (0)113 297 7720

Kathryn Wood

Associate

Residential Development

Direct Line +44 (0)113 297 8937

Lucy Welch

Solicitor

Residential Development

Direct Line +44 (0)113 297 8059

Amy Lees

Solicitor

Residential Development

Direct Line +44 (0)113 297 8939

Emma Speight

Solicitor

Residential Development

Direct Line +44 (0)113 288 2812