House policy: taking sides on gazumping and the law

Labour's plans to curb gazumping are laudable, but unworkable. That's the view taken by many estate agents. Under Labour's proposals for a costs guarantee system, either party going back on the deal would have to reimburse the other's costs. However, there are so many legitimate reasons for backing out before contracts are signed, that the system could end up creating as many victims as it saves.

As Jonathan Harington of agents Knight Frank points out, you could have your offer on a house accepted and then find your mortgage surveyor says it's not worth the money. If you couldn't afford to make up the difference yourself, you would be forced to pull out. You would then have to pay the other side's costs. Would this be fair?

"There has to be an escape clause for instances like this. It is terribly unfair if the vendors change their minds about selling, leaving you pounds 3,000 out of pocket for survey and legal fees, but suppose you pulled out on the advice of your lawyer because of a problem with the title deeds? Should you be penalised? "Gazumping is an appalling way to behave, but this plan won't make the slightest difference to the sellers. They may have to compensate the buyer, but the extra they receive from the higher offer would cover that. It may soften the blow for the buyer, but he still loses the home he wanted to buy."

Buyers should still have the right to withdraw, say agents, because their reasons may be compelling. A death in the family, divorce, losing one's job, being relocated, or a sudden change of financial situation - any of these could result in the collapse of an agreement. "I don't believe you can legislate against gazumping," says Harington.

Robin Petherick of Strutt & Parker agrees. "I can't see how it is possible to eradicate it, or legislate against it effectively, although we thoroughly disapprove of it. What would happen if this plan goes ahead is that an offer would be made subject to everything under the sun. There are just too many loopholes that would be used by buyers and sellers."

The much-vaunted Scottish system has also been debased. Where once there was a clean offer, now, says Knight Frank's Colin Strang Steel in Edinburgh, it comes with 40 conditions attached.

"The to-ing and fro-ing can go on for months. During that time either party can withdraw, though it is usually the purchaser who does so."

The Labour plan may have limited use as a deterrent to buyers withdrawing, especially fantasists who have no intention of carrying through their offer, says Harington.

"The only solution is to get the contracts signed as quickly as possible, giving no chance for gazumping," he says. "My view is that the lock-out agreement is the best weapon. It provides for a period of time in which the vendor must take the property off the market and is not able to offer it to others. This gives protection over the time limit concerned. Of course there is nothing to stop a vendor delaying exchange of contracts until the end of the term and then accepting a higher offer."

The Labour plan, says Harington, is a fine principle, but it's shot through with holes. "It sounds wonderful stuff. I hope it's not just intended to attract votes."

Rosalind Russell