You are the Judge – gazumping


Buying a house is one of the most stressful things you can do in your life, and all sorts of things can go wrong. But once you have an agreement from a buyer or seller, is that final? Does contract law apply fully in this instance?

A great property and the law

After losing their case to establish a more direct right of way to their cottage earlier in this series, James and Hannah decided to move. Despite the difficult location, they quickly found a buyer: another couple looking for their dream country home. Contracts have been exchanged and completion is imminent.

As for where they will move to, James and Hannah have had their eye on a barn conversion just outside a picturesque market town. In addition to a loving restoration of the eighteenth century gables and the addition of the modern fixtures and fittings, its driveway is easily reached from the main road. This pleases them.

The asking price though, is £450,000 - ten thousand more than they are really prepared to spend. To their delight however, when Hannah put in an offer of £438,000 the sellers accepted it.

James and Hannah were keen to move quickly, but just before they were due to exchange contracts, the sellers had a change of heart. A similar property in the town had just sold for £465,000 and, not being desperate to move, they have withdrawn their acceptance.

Worried that they will lose the buyers for their own home, James and Hannah have completed their sale, but are now effectively homeless and living in a hotel.

The couple are very angry about this and consider their sellers to have broken their verbal contract. They are claiming their hotel bills and storage expenses from them but the sellers say that since the contract was never put in writing, they were under no obligation.

What is the answer to this situation?

The answer:

This case would be unlikely to come to court, and it is unlikely a solicitor would advise bringing such a claim. If it did, it would almost certainly be struck out. This is a classic case of gazumping, a practice permitted in English law.

In contract law it is usually the case that once an offer has been accepted, through whatever means, a binding contract is formed. However, this is not the case in transactions involving property.

Due to the amount of money involved, and the chances of fraud, all property transactions must be put in writing and comply with various formalities. This has been the case since at least the seventeenth century, and forms part of a far older tradition.

The current law is contained within the Law of Property (Miscellaneous Provisions) Act 1989.

Unfortunately for James and Hannah, the law in this area is settled and there is little they can do other than make a higher offer or seek an alternative property. It’s a tough break, but there is nothing they can do.

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