Reservation agreements – Tips and Traps for Developers

  • 23 September 2025
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Balcony of Modern Building at Night in London

Tips and Traps for Developers 2025 #4

A reservation agreement or form is a short agreement usually between a developer and a prospective buyer. It ensures the buyer’s chosen property is placed “on hold” while they instruct their legal team, surveyor and other consultants the buyer may wish to seek specialist advice from before moving to exchange. 

At the point of reservation, a buyer may still walk away from the purchase. They may lose some or all of any reservation fee paid under such an agreement, but they are not legally committed to purchase the property for the agreed purchase price until exchange takes place. 

Not dissimilar from a memorandum of sale, generally a reservation agreement documents: 

  • buyer and seller’s contact details
  • property address/plot reference
  • parking/storage spaces to be included
  • purchase price
  • deposit and stage payment(s) (if applicable)  
  • agreed timeframe to exchange and estimated completion window
  • any other key/bespoke/“special” terms

In most cases, a reservation or “holding” fee will be due before contract papers are issued as consideration for the developer taking the property off the market while the contract pack is reviewed. The reservation agreement must therefore set out the terms on which this fee is held.

The reservation form should also stipulate any bespoke terms which have been agreed between the parties. Have changes to the specification been agreed? Has the developer agreed to grant a licence or consent on completion? If it is a show apartment, what items are/are not included in the sale? Is the reservation agreement confidential/subject to terms of non-disclosure?

Whilst the contract is deemed to essentially override the reservation agreement on exchange, the reservation agreement gives evidence of the parties’ intentions at the outset and may still be referred to and even relied upon in the event of a dispute. 

Although reservation fees are generally deemed to non-refundable, if the developer adheres to the Consumer Code for New Home Builders and/or has registered with a warranty provider who subscribes to the Code, the reservation fee must be returned to the buyer (less reasonable legal and administrative fees). Developers should be cognisant of this.

 

Tips

1. Developers

  • Check the template reservation form captures all the key terms of sale
  • Set out the process if the buyer decides to withdraw from the purchase – is the reservation fee non-refundable?
  • If any additional items are intended to be included in the sale (e.g. furniture), it is worth preparing by a photo inventory/schedule of inventory to attach to the reservation agreement

2. Buyers

  • Read the terms of the reservation form carefully to check the terms reflect your agreement with the developer
  • Make note of the payment terms and recoverability of the reservation fee (if any)
Traps

1. Developers

  • The Consumer Code for New Home Builders and/or registration with certain warranty providers means you may be required to return the reservation fee to the buyer in the event they decide to withdraw (less reasonable legal and administrative fees).
  • Reservation agreements can be used to evidence the parties’ intentions at the outset, so it is important they are accurate (and amended if terms change prior to exchange to ensure they are in line with the final contract) – ask your legal advisor if there are bespoke terms to be included.

2. Buyers

  • Most reservation agreements are signed before lawyers are formally instructed – it is not strictly necessary to seek legal advice before you sign but you are entitled to do so if you have any concerns or queries
  • Check with your lawyer that any “special terms” contained in the reservation agreement have been properly incorporated into the contract before moving to exchange

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Georgina Haddon
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