How many ways to stump a gazumper?

The Government wants to make house buying and selling less of a trauma. William Raynor looks at the options

According to some reports, complaints about gazumping have risen 15-fold in the past year. Pessimists have argued that in London and the south-east, where the imbalance between demand and supply is greatest, there may be no effective means of dealing with it.

In a consultation paper it published on the subject before the election, the Labour Party set out options ranging from wholesale adoption of binding contracts at offer stage, as under the Scottish system, to schemes guaranteeing that any party withdrawing from a sale would have to reimburse the other's costs.

In government it has evidently been persuaded that gazumping should be looked at not in isolation but in the context of the system as a whole. Hence last month's announcement that, under the auspices of a ministerial "task group", a steering group of experts was being formed to oversee a study tracking more than 1,000 purchases from initial particulars to completion, in order to identify the reasons for "delays and other problems which cause distress and misery to home buyers and sellers . . . and to make what can be the most important purchase of someone's life an easier, simpler process".

Among the experts appointed to the steering group are representatives of the Law Society, the Royal Institute of Chartered Surveyors (RICS), the Council of Mortgage Lenders (CML) and Hugh Dunsmore-Hardy, the chief executive of the National Association of Estate Agents (NAEA).

Though anxious not to pre-empt any of the conclusions of the study, due to wind up in June next year, Mr Dunsmore-Hardy says: "We have to be open about what we find consumers actually want. But as the implication now seems to be that most would like a system that is quicker and provides more certainty, perhaps we have to look at whether it is right to perpetuate the principle of caveat emptor, or whether we should put more emphasis on that of caveat vendor, which would mean sellers taking more responsibility for ensuring that everything is declared up-front. The whole issue is that in England and Wales we seem to regard the point of offer as the starting, as opposed to the finishing, post."

Yet, although comparative studies conducted by the association suggest that other systems may have features worth adopting (see panel), the power of IT may be what proves decisive.

This month the NAEA launched an Internet web site designed to provide surfing punters with instant access to the particulars of properties on the books of subscribing members. Among the many claims made for this service, called PropertyLive, were that in speeding up the process of buying and selling, it would reduce the scope for gazumping.

"We're in the middle of a period of change," he says, "in which the biggest impact will be on transaction time, because of the Internet and its ability to transmit information from the Land Registry, Ordnance Survey, Valuation Office and local authorities, all of which is being databased and should become accessible, so that estate agents and solicitors can provide it to potential buyers."

There again, speed may not always be what buyers or sellers need, or want, or be regarded as critical by other participants in the chain. Michael Coogan, of the Council of Mortgage Lenders, notes that going too fast in the realm of precautionary checks and credit references could attract the risk of fraud.

Generally, however, he, too, is in favour of sellers doing more before they put their properties on the market, and buyers assisting by finding how much they can borrow and getting their finance agreed in principle before making specific offers.

He said: "It's a personal-attitude problem, though, about which you cannot really legislate. If everyone wants it, conveyancing can be done in 24 hours, and it'll be interesting to see from the government's review what buyers and sellers regard as ideal."

Neil Gower, of the Law Society, argues, however, that while "the sort of chain which exists may move at the pace of the slowest link, getting away from it may mean more sellers need bridging loans or temporary accommodation. The solution is not simple, but we'll be happy to work with whatever system the public wants."

Some time ago, to encourage "stress-free moving" and perhaps dispel some of the suspicion about its members' supposedly arcane and time-wasting practices, the Law Society introduced a scheme called Trans- action. Similarly, the RICS has combined with Justice, a voluntary body of lawyers, to draw up an "Anti-gazumping and Gazundering Agreement".

The main feature of this is a cost guarantee and, in setting an agreed period, it becomes in essence a "lock-out" agreement, of the sort that, with the approval of the Court of Appeal after a test case in 1993, can protect the buyer for a few weeks at least.

As Jeremy Leaf, a chartered surveyor, estate agent, and spokesman on the subject for RICS, concedes, arguments over what is reasonable and what is not make the RICS scheme and lock-outs in general inherently problematic. He believes the Scottish system is also problematic for this reason - and wasteful in that potential buyers would have to commission multiple surveys at their own expense.

As Michael Chambers, director of the policy unit at RICS, confirms: "We've not found a lot of enthusiasm down here for the Scottish system. We've not found a lot of enthusiasm for any fundamental change."

DON'T HIKE MY HACIENDA: THE OVERSEAS APPROACH

"ONCE an offer has been made in most other countries people don't end up with a long period of uncertainty about whether they've actually bought or sold," says Ian Tonge, chairman of the international sub-committee of the National Association of Estate Agents.

In most European countries, sales are subject to a promissory contract often booked by a monetary deposit. When the contract has been signed by the buyer and seller and the date agreed for the balance to be handed over, subject to paperwork being in order and conditions met, both parties then go to the notary who acts for both sides, witnesses the transaction and transfers the details to the land registry. Implicitly, this means preparing as much as possible, and taking due precautions, before the offer is made.

The system varies: in Portugal, for instance, estate agents are licensed by the government, carry professional indemnity insurance, and have to obtain copies of documents crucial to the sale. Vendors can forfeit 20 per cent of the final price if they withdraw or try to gazump.

In New Zealand, estate agents and lawyers have agreed a stardard form of contract between buyers and sellers with standard clauses to cover special circumstances. When signed by both parties this amounts to a simultaneous contract to buy and sell. So, says Hugh Dunsmore-Hardy, chief executive of the NAEA, "the climate for gazumping is removed".

Although, under the traditional system of "sale by private treaty", gazumping can theoretically happen in Scotland, it seldom does. For the vendor, seeking sealed bids by a given closing date, the advantage is comparative certainty; the chosen bidder is legally committed. For bidders who fail, the disadvantage is wasted survey and legal fees. "In fact," says Michael Samuel, chairman of the Glasgow Solicitors Property Centre, "they usually get what they want first or second time."