Since buying a home is the biggest financial transaction of most people's lives, there are good reasons for this. It provides protection for the inexperienced, and removes areas of doubt that might otherwise lead to ruinously wasteful litigation. Until now, however, the price of this protection has been to leave buyers open to gazumping - with the only alternative a radical change in English law to make offers and their acceptance binding, as in Scotland.
That is why the Court of Appeal's decision in the Tim Pitt case is so welcome. The case was brought by a Suffolk commodity broker who was promised a 'lock-out' period, in which the seller of the house he wanted to buy would send him a draft contract and give him two weeks to exchange before considering any other offer. The seller, a big financial institution whose name should now be mud, broke its word. It took five weeks to send the contract, and told Mr Pitt a week later that it was accepting another offer pounds 10,000 higher than his own. The Court agreed that Mr Pitt should be paid damages.
Buyers will not benefit from the Pitt precedent automatically. They will have to demand a written agreement from sellers, who will be much more careful about what they commit to fax or paper. They should also remember that after the agreed deadline, the seller will still be able to accept a higher offer. An agreement that commits the seller to exchange contracts with the buyer is called a 'lock-in', and is unlikely to stand up in court.
Whether or not lock-out agreements become common, the Pitt case is certain to make sellers less cavalier in their treatment of buyers. It may also prompt all concerned to look again at the underlying reason for gazumping - the delay between the making of an offer and the exchange of contracts. That problem is more easily tackled at source than by the sort of litigation engaged in by Mr Pitt. There is nothing to stop a seller from having a survey carried out, land registry searches done, and answers ready prepared to the standard solicitors' questions. Doing so will allow contracts to be exchanged more quickly. Because of the certainty it brings, it may also make the house more attractive to buyers.Reuse content