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.