Law: Could this be the end of gazumping?

Our Learned Friend
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GAZUMPING IS an unpopular and distressing practice. It causes great frustration for the loser. But, is it right that the Government should curb an individual's freedom to sell their own property for the highest price possible? If a sale drags on and a higher offer materialises, why should the seller be obliged to proceed with the original lower bid?

It is these sorts of difficult questions which have troubled both the Government and solicitors for years as the property market has risen and fallen. And it is not that long ago that the equally iniquitous practice of gazundering was commonplace, where the buyer would drop the price at the last minute in a depressed market, thereby forcing the seller to proceed at a lower figure or risk losing the sale altogether.

So what can be done about this? The opportunity to gazump arises in the time between the handshake and the binding exchange of contracts. The process of buying a house can take several weeks while the prospective buyer obtains a mortgage, searches are undertaken, a survey is commissioned, information about the property is assembled, enquiries are raised and the problems of associated chains of transactions are all worked out. It is perhaps inevitable that in the midst of this complex and drawn-out process somebody will start to have second thoughts.

The Law Society has therefore launched TransAction 2000. This requires sellers to prepare a "seller's pack" containing information about the property - such as a draft contract and a local authority search - before they put their home on the market. The idea is that a lot of the information which is collected days and weeks after the property has been put up for sale will be available for scrutiny by the buyer almost as soon as the property is on the market.

The seller would be required to use certain set forms explaining in plain English the obligations, covenants and title matters which affect the property that is to be sold.

Local authority and other searches would be required from the seller which would give the buyer the essential information needed to proceed to purchase. Copies of title deeds would be made ready at the start and the contract which the buyer would be expected to enter into would be available on day one at the offices of the seller's solicitor.

All these steps are designed to enable the buyer to make an immediate decision to proceed if they are ready to do so, and for the seller to be in a position to proceed without delay. Assuming an equal willingness on both sides to proceed quickly, this measure should help keep the opportunity to gazump to an absolute minimum.

And what about the mortgage loan? Solicitors have no control over how quickly a lender will approve a mortgage offer. However, there does seem room for improvement in turn-round times for making financial checks, standardising loan procedures and arriving at the formal offer which a buyer will need before he proceeds.

Sellers' surveys are a more problematic area. The seller's pack, proposed by the Law Society, does not provide for a seller's survey. It is for others to judge whether or not this idea will find favour with the selling and buying public.

There will be a very obvious shift of costs on to the seller, who currently does not have to carry out such a survey. Lenders will have to accept and rely on the seller's survey, and buyers will have to trust a survey commissioned not by them, but by the person who is selling the house to them. The Government Homebuying Review will be going out to consultation shortly.

I hope that the seller's pack which the Law Society has devised will be supported and perhaps even given some statutory compulsion by the Government. Instead of outlawing the practice of gazumping, the Government should consider outlawing the circumstances in which gazumping thrives.

Now is perhaps the time for the Government to consider making it compulsory for sellers to compile the information needed by buyers before they put their homes on the market.

Who knows, by doing this it might even mean the end of gazumping.

The writer is a partner at Fieldings Porter, Bolton and Chairman of the Law Society's Conveyancing & Land Law Committee