The ‘G’ word is the dirtiest word associated with property purchases south of Hadrian’s Wall.
We all know that it doesn’t really seem to be as much of a problem in Scotland and yet most people probably don’t know why. As a firm of solicitor/estate agents, the rules and reasons that mostly prevent it happening in Scotland are enough to tie us in knots most of the time. Trying to explain this to clients prior to their property going on the market with us is therefore likely to cause some kind of nervous breakdown in all parties. And yet, when the rules do have to kick in, it can be quite counter-intuitive and surprising for our selling clients.
As an attempt to try and explain what on earth this all means then and the effect it can have on you as a property seller, I thought I’d try to put down a brief summary of what this is all about.
What is Gazumping?
Quite simply, gazumping is when you, as a property buyer, think that you have bought a property and then the property seller goes and accepts an offer from somebody else.
Why Is It Such a Bad Thing From the Buyer’s Point of View?
To take an extreme example: you as a property buyer have purchased a property to move in to, sold your own home, packed up everything from your existing house and loaded it into a removal van only to find out when you are on your way to pick up keys that the property seller has had an offer from somebody else that s/he prefers and has pulled out of the deal with you. You have a van full of furniture and nowhere to go. Is this (a) upsetting as you had set your heart on moving in to your dream home, (b) inconvenient as you have nowhere to live, (c) expensive as you have paid for a survey of the property and solicitor fees to get things this far, or (d) all of the above?
The answer is of course (d).
What’s the Problem If You’re a Property Seller Though?
Other than perhaps some karma, probably not a huge amount. You’ve managed to get a deal that you prefer when selling your property.
Why Does This Seem to be a Problem That Only Affects People South of the Border?
This is when things get a bit complicated so I’ll try to keep it as simple as possible.
There is no reason, really, why gazumping should not be every bit as big a problem for property buyers in Scotland as it is in England and Wales.
The reason why it happens less often in Scotland is because, in many cities in Scotland (particularly Edinburgh and Aberdeen) properties are marketed and sold predominantly by solicitor/estate agents (e.g. members of the ESPC or Edinburgh Solicitors’ Property Centre) rather than by non-solicitor estate agents (e.g. Foxtons or Countrywide). Solicitors are bound by the rules of the Law Society of Scotland, even in their estate agency work, whereas non-solicitor estate agents are unregulated. The Law Society of Scotland, in an attempt to ensure that the Scottish property market was not blighted by the problems of gazumping that exist south of the border, binds all solicitor firms to follow Anti-Gazumping rules.
What do these Law Society anti-gazumping rules say?
They state that, once a solicitor/estate agent has agreed to accept an offer from a property buyer then that solicitor/estate agent cannot then accept an offer from another buyer.
Does this not mean though that you, as a property seller, are prevented from accepting a better offer from another buyer?
The answer is ‘no’! The law of course does not prevent you, as a seller, from agreeing to sell something to someone and then changing your mind as long as there is no contract in place. In Scotland, there is no contract until the missives (the contract to sell/buy property) are concluded and this usually takes several days, if not weeks, after a sale is verbally agreed. So you, as a property seller, are free within reason to do what you want.
So why can’t your solicitor/estate agent accept a better offer from another buyer if the law doesn’t stop you from doing so?
Quite simply, as a result of the rules of the Law Society of Scotland, the governing body for solicitors in Scotland. It’s a disciplinary offence for a solicitor firm to act in that way. Therefore, if you wish to accept an offer after initially accepting an offer from someone else, your solicitor is bound by Law Society rules to withdraw from acting on your behalf in the sale of the property. You can, however, instruct another solicitor to act on your behalf and any better, subsequent offer can be sent to them by the new buyer’s solicitor.
But does this not prevent you from having the solicitor you really want acting on your behalf in the sale? Surely you didn’t agree to this?
In my opinion, that’s a very fair stance to take. The reality is that it’s a trade-off. Gazumping is not illegal in Scotland. It’s simply not commonplace because there is a real disincentive on solicitor/estate agents from encouraging gazumping. The reality therefore is that, as a solicitor/estate agency firm in Scotland, it’s very uncommon to come across an instance where you have to withdraw from acting in these kind of circumstances. Where it does happen though, one could argue that it’s a small price to pay for a property marketplace where you, as a buyer, can have a very high level of faith that, once your offer has been accepted, you can start making preparations to move house.
It should be stressed that, unless they sign up to a voluntary code of conduct, non-solicitor estate agents are not bound by the same rules and that there is nothing in law that prevents gazumping. It is perhaps less likely to happen in Scotland simply because the binding contract (the ‘missives’) are usually concluded much sooner after the verbal agreement to sell the property has been reached than it is in England and Wales. At that point, once missives are concluded, gazumping would be a breach of contract by the seller.
As someone who is in England and thinking of moving to Scotland, I have an observation and a question.
I think you paint an unlikely picture of what might happen in England. I cannot see someone loading up their furniture van and going to pick up the keys without contracts having been exchanged.
The delays in England do try the patience of people though, but these delays are usually not to do with the legalities associated with the transaction. It is usually because there is a chain of properties, and person B will not sell to person A until he has secured the property he wishes to buy from person C – and so on up the chain.
But even where transactions are ‘chain-free’ – perhaps because the house is empty following a death, or because the sellers are moving abroad, it can still take several weeks before all the searches and checks have been made and the parties can exchange contracts and make the transaction binding.
Completion is usually two weeks or less following exchange of contracts but the period up to exchange is a tense one, and understandably so for people who have disengaged their feelings from the property in which they are living, and attached them to the property they hope to buy.
So given that I may be buying in Scotland, I am very interested to know why it is that the missives are able to be concluded so quickly?
That’s a very interesting point David and I completely note your point about how unlikely it is that someone will literally have their removal van filled-up before they find out that the transaction has not completed.
That said, the position where you are still a week shy of settlement and don’t know whether you are actually moving (either in OR out!) is still very far from ideal. Except in rare circumstances, this really shouldn’t happen in Scotland. I will confess that I don’t really understand the residential conveyancing system in England so I can’t say why it would take so long down there, even in a chain free situation.
Home Reports in Scotland were intended to speed things up a bit. The seller has to complete a Property Questionnaire as part of the Home Report. This gives not only the buyer’s solicitor but also their own solicitor some forewarning as to what issues they might expect during the conveyancing process: windows that have been changed without the correct certificates being obtained, changes to the layout without the correct paperwork etc.
The seller’s solicitor should really be asking the seller to provide this paperwork during the marketing process so that they have the documents in place that the buyer’s solicitor will undoubtedly want to see.
In much of Scotland, Land Registration has been in place for several years so properties that have been transferred from one person to another in that time will now be Land Registered, getting rid of many of the delays that can be created by incomplete or unclear Title Deeds or uncertain boundaries which were previously described in very ‘fruity’ language on pieces of faded parchment.
We also use standard missives (contracts). There’s now a standard missive/contract that many solicitors in the Central Belt of Scotland use so, as a solicitor on either side, you’re used to seeing most of the terms in question and they shouldn’t cause too much to-ing and fro-ing or negotiating. For years now groups of influential conveyancing solicitors in the major cities of Scotland have got together to agree style missives. So even if you’re not using the Glasgow/Edinburgh combined clauses, it’s probably the Aberdeen one for example that most solicitors in that territory should be familiar with, having agreed as a group that clauses drafted in this way are relatively reasonable and shouldn’t really need much tweaking in most circumstances.
For those reasons, unless there’s a boundary dispute, serious difficulty getting in touch with the client or getting paperwork from them e.g. regarding windows or damp-proofing, it really shouldn’t take too long to tie-up the missives/contract. In many cases, there’s no reason that this shouldn’t be done in a week or two.
I really don’t like to criticise my profession unduly and yet one of the most frustrating parts of being a solicitor/estate agents is dealing with many of my fellow lawyers. My personal experience of this is that many solicitors still operate like they did 30 years ago, relying on exchange of letters and being incredibly difficult to get a hold of on the phone, often taking several days to respond and prompting continual chasing on my part. All of this prevents quick agreement on the principal terms of the contract.
In many cases, if you had a 15 minute phone conversation or quick exchange of emails near the beginning of the missives between the solicitors to flush out a few of the main issues plus a couple of calls/emails to your client to get their instructions on these points then much of the to-ing and fro-ing could be completely got rid of.
There is a culture of last-minute that has led to me seeing, after I’ve repeatedly chased the buyer’s solicitor throughout the process, that other solicitor having to bring me paperwork by car on the day of settlement just to allow the transaction to complete.
As I say though, most of these delays, in my experience, are not caused by legal process but by sloppy case management. Very often most of your time as a conveyancing solicitor is spent just chasing the solicitor on the other side. Meantime, most often, their client is operating in a complete information vacuum and actually ends up convinced that the other side (buyer or seller) is dragging their heels and perhaps trying to do a deal with someone else. All of this just causes worry for the property seller and buyer who can’t understand why things are being delayed and haven’t had the process explained to them in any kind of way.
I hope that this maybe provides a bit of an answer to your question.