Government clamps down on gazumpers with pounds 1,000 bond

Click to follow
The Independent Online
Gazumping in the housing market is to be deterred by the Government with plans for a bond, probably of pounds 1,000, with which sellers would be forced to compensate buyers who had lost out.

The move coincides with increasing concern about overheating of the market, and the measures will be discussed at a key ministerial meeting on Wednesday.

Under the proposal the bond, or cost guarantee, would be lodged with solicitors and would be used to cover the costs of those who suffer from gazumping. These would usually include the price of surveys and lawyers' fees which often run into several hundreds of pounds.

The size of the bond could be a percentage of the purchase price, or a set figure such as pounds 1,000. Although that would only be a small proportion of the purchase price of a home in the South, the guarantee would still act as a deterrent to gazumpers. If the purchase proceeded normally the money would be refunded.

Ministers believe they might be able to speed the measure through without legislation if they can gain the agreement of estate agents to make the bonds best practice. In those circumstances they could be made early in the process of purchase as part of the standard paperwork.

If that proves impossible they may try to legislate next year. But they are anxious to move quickly because of fears that the boom in the housing market will continue into the autumn, producing a repeat of conditions in the late Eighties when gazumping was rife.

Cost guarantees have emerged as the favoured option after more detailed examination of earlier proposals to import Scottish practice into England and Wales. North of the border, bids for houses are binding. But ministers believe that the Scottish system has disadvantages, including the fact that many homebuyers spend large sums of money on surveys before they get a bid accepted.

Bridging loans are also more common in Scotland and ministers are wary of encouraging greater use of them in the rest of the UK.

In Labour's election manifesto, the party warned that the problems of gazumping had "reappeared" and promised to consult on the best way of tackling the problems of gazumping "in the interest of responsible home buyers and sellers".

Comments