With the property market hotting up, the first stories about gazumping are beginning to appear. A report called Preparation Nation, by Scottish Widows Bank, says one person in eight claims to have been gazumped. Mark McAndrew, partner at Strutt & Parker, is surprised by such a high figure. He believes that if estate agents do the marketing properly and draw out all potential bids, then there should be no need for gazumping. However, he concedes that, where demand exceeds supply, underbidders can be tempted to reopen negotiations.
Ewen Cameron, partner at property solicitors Maples Teesdale, explains that if an offer has been accepted from Party A, and the seller then decides to accept a higher offer from Party B, the Law Society requires the vendor’s solicitor to tell both parties what is going on if contracts have been issued to both parties. Should an unscrupulous vendor instruct a solicitor not to do so, that solicitor should refuse to continue to act.
There are things a purchaser can do to minimise the risk but there are no guarantees they will work. One answer is to sign an ‘exclusivity agreement’ which gives the purchaser a certain amount of time to exchange contracts at a given price. While this period runs, the vendor should not show others round the property or negotiate with them. However, there is little the putative purchaser can do if the vendor breaches the agreement. Mr Cameron would not recommend that anyone litigates over a broken exclusivity agreement.
The best way to beat the opposition is by a rapid exchange of contracts that are conditional on a number of matters a satisfactory local authority search, and survey, to name but two. This will involve a more complex contract than usual, as it needs to define the basis on which the purchaser can subsequently withdraw, or try to lower the price.