Clare and Steven George-Hilley thought they had found their dream family home — a sprawling four-bedroom townhouse.
So when the seller asked them to sign an exclusivity agreement they obliged, although they had to hand over a £25,000 ‘holding fee’.
It meant the South London property would be reserved for four months. If the sale was finalised by then, the deposit would be safe.
Delay cost family dear: Clare and Steven George-Hilley with their children thought they’d found their dream home – but ended up losing £25,000
To buyers with no intention of pulling out, this might seem reasonable. But ten months after signing the contract, delays to the transaction left the family with no home — and £25,000 out of pocket.
They struck the deal at the peak of the 2021 home-buying frenzy when gazumping was rife. Still legal in England and Wales, this is when a property sale is hijacked by a higher bidder.
It has led to a surge in estate agents asking buyers to sign exclusivity agreements, which also, in principle, should protect the seller from gazundering — where buyers reduce their offer at the last moment.
And the Government is considering plans to require all buyers and sellers to sign similar contracts that could leave both vulnerable to losing vast sums of cash if they pull out.
In Clare and Steven’s case, the sale fell apart due to a slight delay on their side, prompting the seller to seek a better offer.
When they asked for their deposit back, the seller’s lawyer said: ‘While our clients are sympathetic, they decline to return the non-refundable deposit.’
As the couple had already sold their home, they had to spend Christmas in rented accommodation.
Clare, 37, who runs a PR firm with her husband, says: ‘We were desperate to secure our new home.
‘After we were told the sellers had accepted a higher offer, we assumed our deposit would be returned. We were gobsmacked when told they would be keeping it. We were suddenly homeless and out of pocket.’
The sellers were under no obligation to return the fee because the contract clearly stated the terms and conditions, specifying it was non-refundable, as is required by the Property Ombudsman’s code of conduct.
As the couple had missed the deadline due to a delay with the sale of their property, they were held liable when the transaction fell through.
The George-Hilleys are calling for exclusivity agreements to be outlawed, branding the deals ‘legalised theft’. But some experts say it is high time the whole market was overhauled.
An estimated 300,000 property transactions in England and Wales collapse each year. More than 56,500 home sales fell through in the first two months of 2021 alone, many down to gazumping. And when sales collapse, both sides can lose vast sums in legal and surveyor fees.
Jack Shukie, of Think estate agents on Merseyside, says: ‘The system in England is broken because people can pull out whenever they want.’
An estimated 300,000 property transactions in England and Wales collapse each year. More than 56,500 sales fell through in the first two months of 2021 alone, many down to gazumping
The problem is less common in Scotland as estate agents are prohibited from acting for anyone who tries to gazump another buyer. It is also usual to put down a holding fee when buying a new-build property.
Housing Minister Christopher Pincher last month said his department was looking at rolling out voluntary agreements more widely.
He said: ‘Buyers and sellers would make a legal commitment to proceed with the sale once an offer has been accepted and may include a financial commitment.’
New firm Gazeal draws up the agreements for 1,000-plus estate agents. Fees start at £2,000 but can rise to £100,000 on some properties.
Unlike in the George-Hilleys’ contract, the full holding fee is not charged upfront. However, both parties agree to pay a penalty if they pull out.
Co-founder Bryan Mansell, says: ‘It makes sure there is a meaningful commitment on the property chain.’ He adds that only 2 per cent of their transactions have ever fallen through.
Buyers and sellers do not have to pay the fee in some cases, such as if they lose their job or cannot get a mortgage.
A spokesman for the Homeowners Alliance (HOA), which wants holding deposits to become standard, says: ‘While we are pleased to see reservation [or holding] agreements being used, we are disappointed that in the current market they only protect the seller.
The HOA believes £1,000 is a reasonable penalty, for either party, if they break the terms of the contract. But mortgage broker Emma Jones, of Alder Rose Mortgage Services in Cheshire, adds: ‘I’d be very wary about putting down a holding fee.
‘You are effectively betting against your purchase.’
Lawyers acting for Cantell and Co., which oversaw the George-Hilleys’ transaction, say: ‘We do not pay or receive referral fees and always advise our clients to obtain independent advice.’
Record £13m equity release every day
By BEN WILKINSON and SAMANTH PARTINGTON
Draw-down cash: Susan Wilcox
Older homeowners could be forced to cash in on the £1 trillion house price boom to ease the cost-of-living crisis as inflation hits a 30-year high.
They pulled a record £13 million a day out of property last year as the pandemic sent prices spiralling.
In all, £4.8 billion was unlocked — with the average lump sum worth £125,000.
Susan Wilcox, 73, is one of those who turned to equity release.
Her new-build house in Aylesbury, Buckinghamshire, had risen in value by 35pc since she bought it in April 2014. The £66,000 increase could prove a lifeline.
Divorced, she has no private pension, and redundancy in May 2020 from her payroll manager job left her living on her monthly state pension of £915.
So in 2021, Susan took £70,000 out of her house with SWR Equity Release. She used £28,000 to clear her credit and store cards, pay fees and boost her savings. The rest is there for emergencies, rising bills or treats such as a holiday.
She says: ‘My only option to boost my income was to release money I had tied up in this building. I may have to dip into it if my energy bills or food costs double this year, but I’ll try not to.’
Equity release allows homeowners aged 55 and over to take tax-free cash out of the value of their homes. But the loans — repaid when the borrower dies or goes into care — have compound interest charges that can quickly eat away at the value of your home.
They can also come with heavy exit charges. Stuart Powell, of broker Ocean Mortgages, says there is ‘panic’ among older homeowners. Many are taking more than initially planned through equity release to cope with living costs.
The lowest equity release rate is 2.75 per cent, up from 2.25 per cent last year. The average rate is 4.10 per cent — which would turn a £125,000 loan into £231,000 over 15 years.
Andrew Morris, of broker Age Partnership, says equity release is used to clear mortgages by homeowners needing more disposable income.
But Baroness Ros Altmann, a campaigner for the elderly, says: ‘The fear is people… do not recognise how insidious the roll-up of interest is.’
Jim Boyd, Equity Release Council chief executive, says: ‘Property wealth will remain an important part of the picture for funding retirement in the years ahead.’
