PROPERTY / Premises, premises: Caroline McGhie asks whether honour in house dealing is dead

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The Independent Culture
NO WONDER people throw up their hands in despair and cry 'Never again' every time they move house. From the moment an offer is made and accepted, large quantities of trust and money are involved. And in the crucial time-lag between the moment the offer is made and contracts are exchanged on a sale, the buyer can turn the screw on the price or the vendor can return the torment by receiving the attentions of other buyers.

But in the wake of the Tim Pitt case, in which a buyer successfully sued a vendor who gazumped him, there are now high hopes that a way has been found to eliminate some of the horse-trading that goes on. Newspapers have hailed it as a victory, making it impossible for a seller to accept a higher offer from a latecomer and leave the original buyer with steep solicitor's and surveyor's bills, but no house. The case, however, does not really outlaw gazumping at all.

Mr Pitt, who had his heart set on a thatched Suffolk cottage at pounds 200,000, had asked for a 'lock-out' period of 14 days, during which time the vendors undertook not to consider any other offers. Meanwhile he undertook to exchange contracts before the time was up. In the event, it all went badly wrong because the vendor took five weeks to send the contracts through, and eventually sold to another buyer at pounds 210,000.

Instead of allowing his anger to subside and then turning his mind to another house, as the rest of us might have done, Mr Pitt sued. His case eventually went to the Court of Appeal, which found in his favour. The lock-out agreement held up in court, where he was awarded damages and costs. Now, everyone is seeing lock-out agreements as the way to eliminate all the uncertainty that comes before exchange of contracts.

Nabarro Nathanson, one of the country's largest law firms, has immediately drawn up two different forms of lock-out for house-buyers to use. But as Derek Sendrove, a partner in the firm, says: 'Although the Court of Appeal's decision was very welcome, it does not mean automatic relief from gazumping. Buyers and sellers can both benefit from this ruling, but to do this it is essential that they have a correctly drafted agreement in place.' But how many people are willing to tie themselves to such tight schedules and imply a lack of trust in so doing?

Gazundering - the nasty habit that buyers have developed of dropping the sale price on the day of exchange of contracts - has presented a far larger problem to estate agents during the last few years of slump than gazumping (a practice that tends to flourish in a rising market only). As Trevor Abrahmsohn, of Glentree Estates, says: 'The best way to try and stop gazumping, or the gazundering of the past four years, is for the two parties to strike up a relationship and conscience - a common moral bond - from which only a cad, in these circumstances, would renege.'

It doesn't always come easily to the reserved English character, but Abrahmsohn now has a policy of getting buyer and seller together and talking them through their agreement, much as a priest takes a couple through their marriage vows.

'You need to agree a time framework that they will work to. You need to ask the vendor whether he feels bound not to accept another offer, and you need to ask the buyer whether he agrees that the survey report is not to be used as a negotiating tool.' The rest is down to honour.

But even honour has its price. He reckons it is worth only about 5 per cent of the purchase value of any property. 'It can keep people on the right track, but if anything more than 5 per cent of the purchase price of the property is at stake then people will sell their souls to the Devil,' he said. One of the commonest practices during the slump has been to use any defects shown up in the survey to squeeze the agreed price down as the date of exchange of contracts approaches.

The only way to enforce a code of behaviour during the run-up to exchange, according to Abrahmsohn, would be to impose financial penalties on those who backed out or tried to tamper with the agreed price.

Part of the trouble is that so many things can go wrong with a sale in these days of repossessions, caution and recession economics. The building societies, burnt by the carefree lending of the Eighties, make copious checks on borrowers which take time - and the valuers they send to examine the properties they lend on are more wary than valuers have ever been.

Then the structural surveyors step in, also covering their backs against possible losses, with doom-laden reports cataloguing every flake of peeling paint they can find, and valuing the property at less than the agreed price. Andrew Grice, of Winkworth estate agents in Ealing, points out that surveyors tend to get their guide to valuation by ringing rival agents, who may be deliberately negative if they are envious. 'The mortgage valuations are all based on hearsay, not on fact.'

Then the solicitors arrive on the scene, shielded by receptionists and secretaries, moving at the pace of second-class post, vanishing to spend mornings in court at pivotal moments.

Maybe there is no legislation that can rule against the darker side of human nature showing itself at these times. Dowell Conning, head of Allen & Harris and Gribble Booth & Taylor in the West Country, remembers: 'There was a little old lady who was selling her house and moving into an old people's home. A rather nice couple made an offer which she accepted, and she had them to tea and grew to like them,' he said. 'Then another couple, without horns or tails, came along and made a higher offer, which I was bound to report to her.

'The old lady and the first couple became very distressed, and she decided to stick with the first couple. After the property had been sold, the first couple came in to see me and told me to sell the property to the second couple at the price they had offered. The first couple made an instant profit.'

Mr Conning is now something of a cynic. 'The perfect world doesn't exist. Come the day, everyone does terrible things. Clergymen do it too. People are greedy, bad-tempered, nasty, vicious, caring, kind, considerate. They will always be all these things. Because of this, the fall-through rate of sales in this country, which is always kept secret, must be at least 50 per cent.'

So he is doubtful that there is any justice to be had from a different system. 'There is a point at which everyone agrees. It is called exchange of contracts. The time-lag between making an offer and exchanging provides a cooling-off period, it allows surveys to be done and the mortgage to be obtained. It works quite well, really.'-