Buyers could be fined if they pull out of a house purchase under Labour plans

Buyers could have to pay a penalty if they pull out of a house purchase after a certain stage, under sweeping property purchase reforms being planned by Labour.

At the moment, a buyer or seller can abandon a transaction without serious consequences right up until contracts are exchanged, which can be as little as a week before the purchase completes.

According to the property website Zoopla, about one in four home sales currently falls through .

It said the time between making an offer on a property and the exchange is now 134 days - which is 50 per cent longer than in 2019.

Transactions collapse for a number of reasons, from the buyer finding another property or not being able to secure a big enough mortgage, to the seller accepting a higher offer from someone else, a practice known as gazumping.

If a sale collapses at a late stage, both parties will still be obliged to pay the majority of their legal fees which can run into the thousands.

They will also have shelled out for other services such as surveys and removals, which may not be fully refunded.

Locked in: Home buyers could be forced to pay a penalty if they walk away from a purchase under Labour proposals

The Ministry of Housing, Communities and Local Government said it would enforce 'earlier binding agreements' which would 'stop parties walking away months into negotiations without a legitimate reason'.

These binding conditional contracts could financially commit a buyer to purchasing a home as early as the stage of having an offer accepted.

Such contracts would set out terms for both parties which, if broken, would incur a financial penalty to be paid to the other party.

Labour intends for them to be implemented by the end of the current parliament in summer 2029.

It said it would work with the property industry to decide the size of the penalties and establish a process for resolving disputes that arise.

Property expert Phil Spencer said of the plans: 'I've seen first-hand the emotional and financial toll that a failed transaction can take.

'Anything that helps buyers and sellers move with greater confidence and fewer obstacles is to be applauded.'

The Government previously launched a consultation aimed at understanding the measures needed to improve the home buying and selling process, which closed in December.

However, MHCLG said further consultation was needed before its full package of measures for the house buying process would be brought in.

It will consult on mandatory qualifications for estate agents in 2027, as well as publishing a 'code of practice' later this year.

It is possible that this could lead to estate agents becoming a regulated industry, similar to financial advisors or accountants. Industry experts said this could stop the practice of over-valuing homes in order to win sellers' business, as well as conditional selling.

Bob Singh, founder at Uxbridge-based Chess Mortgages, said: 'Estate agents are the only unregulated players in the purchase process. It’s about time regulation came in to stop the overvaluations we see and the insistence to use their in-house advisers or legal services.

'Estate agents need to be regulated and their regulator needs to be able to impose large fines.'

Return of property 'sales packs'

Labour also plans to cut delays in the buying process by forcing sellers to provide more information about their property upfront, a topic which it will also publish 'guidance' on later this year.

In 2007, the previous Labour government put in place a requirement for home sellers to provide a 'home information pack' including the terms of sale, evidence of title, copies of any planning documents, local searches, energy efficiency documents and other items.

However, these were scrapped by the Conservative-Lib Dem coalition in 2010.

Now, Labour will mandate that sellers and estate agents must provide detailed 'sales packs' to prospective buyers, which will need to include information on the property's condition, whether the seller is part of a chain and information about the service charge and other costs if it is leasehold.

Steve Reed: The housing minister said the changes would make buying a home 'faster, fairer, and more secure.'

Henry Jordan, Nationwide’s group director of mortgages, said: 'Speeding up homebuying isn’t just about convenience - it’s about helping more people complete their purchases with less frustration and fewer surprises along the way.

'Giving buyers key information upfront, at the point a property is listed, has the potential to transform the process – reducing unnecessary delays and giving people greater confidence to move quickly.'

But there are also concerns that the extra work involved in creating the packs could drive up costs for sellers.

Property lawyer David Smith, a partner at Bishop & Sewell, said: 'Most buyers simply do not look at the detail of a property they like and leave it to their conveyancer.

'It will take a major change in behaviour for sales pack…