The English housing market has always been a curious national sport: part Monopoly, part Russian roulette, and part hostage negotiation. Unlike almost every other serious financial transaction, buying a house in England remains gloriously uncommitted until there is an exchange of contracts, a bit like proposing marriage, booking the church, ordering the flowers, and then discovering at the altar that your fiancée has accepted a better offer from a hedge fund manager from Surrey!
Residential property markets best-known villains
This charming legal vacuum has produced two of the market’s best-known villains: gazumping and gazundering.
Gazumping is when the seller accepts your offer, shakes your hand, smiles warmly, then duplicitously agrees to sell to someone else for a paltry £50,000 more (on a multi-million Pound purchase) after you’ve spent £5,000 on surveys, lawyers, and a dose of industrial strength Prozac.
Gazundering is its equally grubby cousin: when the buyer waits until moving vans are parked outside and then deigns to say, “Terribly sorry old chap, but I’m knocking £30,000 off the price because the wallpaper feels emotionally unstable.”
Both are legal. Both are loathed. Both are as British as apologising while stabbing someone in the ribs, whilst they look the other way.
Government to intervene
Now the Government, in its infinite wisdom, has decided to intervene by proposing reforms to outlaw both practices, in pursuit of a system more akin to Scotland and the United States, where transactions become binding much earlier.
On paper, this sounds splendid. Certainty! Stability! Predictability! Three concepts almost entirely absent from the workings of the British housing market since the Norman Conquest.
The logic is simple enough. If buyer and seller commit earlier, fewer deals collapse, less money is wasted, and estate agents have fewer opportunities to use the phrase ‘best and final’ like medieval auctioneers.
And waste there is …
Every year, billions vanish into the black hole of abortive conveyancing: surveys, mortgage valuations, legal fees, searches, and enough photocopying to clear a small forest. Buyers often spend months chasing a property only to discover they were merely ‘warm-up’ entertainment, whilst the seller courted richer suitors.
Scotland, by contrast, has long treated property transactions like adults treat promises. Once missives are concluded, the deal is effectively binding. In America, earnest-money deposits and escrow systems mean people put real skin in the game, rather than just a Rightmove alert and a prayer.
So why not copy them?
Because, as ever, England likes to borrow ideas only after removing the bits that make them work.
The problem is the great holy trinity of property escape clauses: survey, finance, and cold feet.
No buyer can sensibly commit fully before knowing whether the house is built on solid ground, riddled with subsidence, or held together by damp and Victorian optimism. Nor can they proceed if the bank suddenly values the ‘dream home’ at £100,000 less than agreed between the parties, leaving a gap in your finances.
These contingencies are not technicalities. They are the entire point.
Which means any ‘instant contract’ system will still be riddled with legal exits large enough to drive a removal lorry through.
Don’t like the deal anymore? Suddenly the survey ‘raises concerns?
Found another house? Mysteriously the lender has ‘issues’?
Fancy a cheaper price? Welcome to strategic outrage over the roof timbers.
In short, the Government may be outlawing bad behaviour while simultaneously creating more sophisticated bad behaviour.
A very British solution
The better answer may be far simpler: if either party pulls out without proper cause, they pay the other side’s abortive costs. Radical, I know. Imagine that!
If the seller accepts a better offer after stringing you along for ten weeks, they reimburse your survey, legal fees, and mortgage costs. It should be the law.
If the buyer decides at the last moment that they’d rather move to Portugal, they should do the same.
Not a punitive system, just basic accountability
It is astonishing that in commercial deals break clauses, penalty provisions and indemnities are standard practice, yet in residential property, which is usually the biggest transaction of most people’s lives, the legal framework still resembles a pub bet.
Critics will say this creates disputes over what counts as ‘proper cause.’ Quite right. But at least those arguments would happen after someone had written a cheque. That tends to focus the mind.
Absurd system
The Government’s instinct is correct: the present system is absurd, wasteful, and often cruel to the most vulnerable. But pretending England can become Scotland overnight simply by changing a few forms is like putting a kilt on a Labrador and calling it ‘constitutional reform.’
I nurse understandable fears about the clumsy ‘dead hand’ of the government housing ministry trying to introduce legislation into an over regulated market where invariably, ‘the cure is worse than the curse.’
The idiocy of the Renters Rights Bill is a classic example, which is already disenfranchising the vulnerable renters by creating a shortage of demand as the Buy-to-Let landlords exit the marketplace, pushing up rental values in their wake.
Glentree, on the other hand, for the last thirty years, have been trying to deal with the shortcomings of the system, using the following measures:
+ We insist that the seller’s solicitor prepares a fully researched sales pack ahead of a disposal so that when a deal has been agreed a lot of the preparatory grunt work, which can often take months to assemble, has been done, saving time for the conveyancing process and creating less opportunity for an abortive sale.
+ Invariably, we get both seller and buyer to agree a fixed ‘fidelity period’ during which time the purchaser has exclusive rights to buy the property, without the interference of a mischievous second buyer. If the buyer pulls out, we get them to agree to pay the vendors abortive costs.
+ We have mastered the art of ‘legitimising gazumping’, otherwise referred to as ‘seal bids’, which involves getting competitive bids for the property to be submitted by various potential buyers, via an informal tender with a fixed time and date. The best terms usually win the pole position, and everyone feels that they have been given a chance to participate in this quasi auction. This can be very gratifying for the seller and for the buyer if the deal is consummated.
The real solution lies in assuming that some deals will prove abortive, but where they do, the culprit should pay when the reasons are frivolous.
As Newton so eloquently put it, “every action is met by an equal and opposite reaction.”
Because in property, as in life, freedom is fine, but freedom without consequence, is how you end up with estate agents! QED.
Trevor Abrahmsohn is founder and director of Glentree International in north London.
Read the orginal article: https://propertyindustryeye.com/will-andy-burnham-finally-kill-off-gazumping-and-gazundering-the-devils-in-the-detail/
