No Lockout Agreement

Such a scenario can lead to a difficult situation for the seller and buyer. The seller could, for example, try to increase the selling price. In addition, the seller is naturally required not to make higher offers during the prohibition period, but there is no agreement to sell to the buyer at the end of the lockout contract. The seller could simply let the deadline pass, refuse to sign the contract, and then sell it to a later buyer at a higher price. Consequences of the violation of the lockout obligation by the landowner In a buyer`s market, it may be advantageous for the buyer not to enter into such an agreement, unless the property has certain characteristics that the buyer needs that is missing in other real estate. The seller may insist that a non-refundable down payment be paid by the buyer in return for the lockout contract. This would not only compensate the seller for the sterilization of the site for a short period of time, but also, depending on the amount, induce the buyer to sue. The other major concern is the extent of the remedies available – it is very unlikely that an injunction will be granted to a buyer to prevent the seller from selling to a third party, so the only possibility to remedy the situation under the agreement is to be reimbursement of wasted costs and, in limited cases, payment of additional damages. A landowner should carefully consider whether an incentive to accept a lockout is sufficient to compensate him for the waiting time.

For example, if a landowner breaches the obligations by accepting a much more attractive offer from a third party during the prohibition period, the potential buyer is entitled to claim damages. This means that a handshake agreement is non-binding and has no effect if a party tries to keep a promise. It is tempting to view the use of a lockout agreement as an appropriate way to keep the parties to their word until the mechanics of the promotion process catch up and conclude a formal exchange. Of course, the seller will want the exclusivity period to be as short as possible, because he does not want to be prevented from negotiating with another interested party longer than necessary. A seller should ensure that in the meantime, he is still able to manage his property. This may include the granting of a lease agreement or a transfer licence, so this should be expressly authorized in the agreement. As above, the seller should ensure that the buyer must go ahead in negotiating and modifying the documents and possibly conduct an investigation. Whether you should apply for a lockout agreement depends on the buyer-seller ratio and the dominant real estate market. First, a buyer can obtain an injunction to prevent the seller from negotiating with another interested party. However, the courts have repeatedly stated that only a short-term injunction will be obtained (to reflect the very nature of the lockout agreement).

Any omission would prevent the seller from negotiating with a third party during a prohibited period, but would still not require the seller to accept a subsequent transaction with the original buyer. The recent case of Gribbon -v- Lutton [2001] EWCA CW1956 shows the risk that a seller will not have a written agreement. – In this case, there was no written lockout agreement, and there were controversies as to the extent to which a verbal lockout agreement was reached by the parties. If the seller wishes to apply for a non-refundable down payment at the end of the blackout period if a buyer does not progress, it is important that the seller be able to present some form of consideration from his share for the payment of the non-refundable down payment.