The English housing market, often likened to a high-stakes game, is notorious for its lack of commitment until the very final stages of a transaction. This legal vacuum has long allowed for the controversial practices of gazumping and gazundering, where sellers accept higher offers or buyers reduce their offers at the eleventh hour, even after significant costs have been incurred by the opposing party. These actions, while perfectly legal, are widely detested for the stress and financial loss they inflict on those involved.
Gazumping occurs when a seller, having accepted an offer, subsequently agrees to sell to another buyer for a higher price, often after the initial buyer has invested thousands of pounds in surveys, legal fees, and mortgage valuations. Conversely, gazundering sees a buyer reduce their agreed offer just before contracts are exchanged, leaving the seller in a difficult position, particularly if removal vans are already booked. Both scenarios contribute to a high rate of failed property transactions and wasted expenditure.
In response to widespread frustration, the government is reportedly considering reforms aimed at making property transactions binding much earlier in the process. This approach seeks to emulate systems found in Scotland and the United States, where a greater degree of commitment is established by both parties at an earlier stage. The intended outcome is to reduce the number of collapsed deals, minimise wasted costs for buyers and sellers, and bring greater stability and predictability to the market.
However, the devil lies in the detail of such reforms. Critics argue that while the concept of earlier commitment is appealing, the fundamental need for contingencies like satisfactory surveys and secure mortgage finance cannot be overlooked. Buyers typically cannot, and should not, commit fully before understanding the structural integrity of a property or if their lender values the property significantly lower than the agreed price. Any system that ignores these crucial elements risks creating new avenues for disputes or sophisticated ways to withdraw from a deal.
For instance, if a buyer is contractually bound early, but a survey later reveals significant structural issues, or their mortgage lender down-values the property, an escape clause would still be necessary. Without such provisions, buyers could find themselves in untenable financial situations. An alternative, potentially simpler solution suggested is to legally mandate that if either party withdraws from a transaction without a valid, pre-defined reason, they should be liable to cover the other side's abortive costs, such as survey fees, legal expenses, and mortgage application charges. This would introduce a financial disincentive for opportunistic withdrawals.