Important new guidelines
7 Jan 05
Society's Council has approved new practice guidelines on gazumping, gazundering and closing dates
In the light of increasing concern both within and outwith the profession about the integrity of the system of offer and acceptance for houses in Scotland, the Professional Practice Committee have reviewed the existing Practice Guideline on Closing Dates and Notes of Interest. The Committee were particularly concerned about the increasing frequency of both gazumping and gazundering. The following Practice Guidelines have been approved by the Council of the Society:
Gazumping
Where a solicitor for a seller has intimated verbally or in writing to the solicitors for a prospective purchaser that their client’s offer is acceptable – whether after a closing date or otherwise – the seller’s solicitor should not accept subsequent instructions from the seller to accept an offer from another party unless and until negotiations with the original offeror have fallen through. The solicitor should advise the seller to instruct another solicitor if he wishes to accept the later offer.
This Guideline extends the Guideline on Closing Dates to a situation where no closing date has been fixed.
Gazundering
Solicitors acting for prospective purchasers of residential property should advise their clients that if their offer is accepted – either verbally or in writing – the solicitors will require to withdraw from acting if the client subsequently wishes to re-negotiate the price downwards without a valid reason arising out of an unforeseen problem with the title or the condition of the property. Where an offer has been submitted subject to survey, and the survey discloses a problem – e.g. unauthorised alterations; new windows; damp or rot requiring specialist treatment – the solicitors would be entitled to accept instructions to seek to adjust the price in the light of that problem. However if the survey discloses no such problem but the valuation is regarded as too low by the offeror, solicitors should not accept instructions to withdraw the original offer and re-submit a lower offer but should refer the client to other solicitors if the client insists on doing so.
Purchasers’ solicitors should advise the clients in advance of submitting an offer that if the client subsequently wishes to re-negotiate the price downwards without good reason, the solicitor will require to withdraw from acting.
Closing dates
Where a client has instructed a solicitor to intimate a closing date to other solicitors who have noted interest, that solicitor should withdraw from acting if the selling client wishes to cancel the closing date and accept an offer submitted in advance of it. Sellers’ solicitors should therefore advise their clients of this in advance of fixing a closing date.
The full text of the existing Guideline on Closing Dates and Notes of Interest can be found on the Society’s website at www.lawscot.org.uk; on page F1222 in the Parliament House Book; or on page 42 in the Journal of February 1999.