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Professional practice: offers for property

1 January 04

Professional Practice Committee advice on "gazumping" offers and offers submitted by non-solicitor businesses

by Bruce Ritchie

“Gazumping”

As mentioned in the October Journal (see page 49), the Professional Practice Committee have recently looked again at the Closing Date Guidelines and agreed that they remain valid. The Society regularly receives calls for guidance where solicitors selling a property have indicated acceptance of an offer and then a higher offer is received. The Committee agreed that when solicitors communicate acceptance of an offer they are not giving their word that the offer will be accepted – they are communicating their clients’ instructions. They agreed that solicitors acting for purchasers should be encouraged to make it clear to their clients that even if a qualified acceptance is issued, the seller is not contractually bound until missives are concluded, and it is possible that some other interested party will try and outbid the purchaser. The original Closing Date Guideline was published in 1991 to provide some protection for the integrity of the closing date system – which has no legal status – on the basis that the solicitor and client have committed themselves to considering offers for the property at a specific date and time. The Committee agreed that that distinction remains valid and that the closing date guideline should remain unchanged. They agreed that if there has not been a closing date and a client instructs a solicitor to accept a better offer than the one previously accepted, the solicitor is entitled – but not obliged – to continue acting.

Offers submitted by non-solicitor businesses

For some years now the Society have received enquiries from different parts of Scotland from solicitors who have received offers for property – usually houses – from agents who are not solicitors. It should be noted that missives are expressly excluded from the work reserved for solicitors in the Solicitors (Scotland) Act 1980, section 32(3). Any person is therefore entitled to prepare missives on behalf of clients. However solicitors receiving such offers should enquire which firm of solicitors will be dealing with the conveyancing and how the purchase price will be settled. They should not lend title deeds to such a person, particularly where these have been received on loan from a lender.

Where the seller has instructed a non-solicitor business or is acting for himself, the purchasing solicitor should clarify the position regarding the letter of obligation and should consider whether it is in the clients’ interests to settle on a letter of obligation which is not backed by the Master Policy. This should be dealt with in the missives.

Bruce Ritchie, Secretary to Professional, Practice Committee