ABOLITION OF GAZUMPING AND KINDRED PRACTICES BILL (Hansard, 14 December 1971)

§ Mr. Kevin McNamara (Kingston upon Hull, North)

I beg to move, That leave be given to bring in a Bill to protect prospective purchasers and vendors of houses and other dwellings, and in particular to abolish the practice known as "gazumping". "Gazumping" is a term introduced into this country from the United States where it is used in the second-hand car trade. Briefly, it may be described as a racket whereby, having agreed to sell a commodity—in this case a house—to one person, the seller sells it at a high price to another. Hon. Members will be aware of the great amount of distress, anger and expense that this practice is causing to people throughout the country, and national and provincial newspapers, and other media, have been particularly helpful in drawing attention to this abuse. Not least was an important leader in The Times, to which I respectfully draw the attention of hon. Members who may not have seen it.

In normal business contracts, once an agreement is made it is legally binding, but contracts for the sale of land have to be evidenced in writing, and when such evidence is provided there is often inserted the words "subject to contract" so that until the contracts are exchanged nobody is bound by them.

A few illustrations will suffice to show the typical situation which arises. The first concerns a man who was temporarily a constituent of mine. In the summer of this year he was a police inspector seconded to do a degree course in sociology at Hull University as a mature student. He then returned home, and he writes: I returned to my own Force on completion and, as is the vogue, sought my own house. I found one suitable which was offered at £7,350, made a full price offer and paid a 'good faith' deposit to the vendor's agents. I know that other buyers were told that the house was 'sold' and contracts were subsequently drawn up and agreed by both parties. I paid my full deposit, and awaited exchange of contracts. There was some delay in exchange due to the vendor's new house not being ready. On the very day that we were to exchange, that is, when my building society confirmed that my mortgage was available, the vendor withdrew and demanded another £1,000. I wanted to offer £500 but my building 276 society would not advance this amount as they said the house was over-valued. After some discussion the vendor gave me two days to exchange at £8,000 but this did not allow me sufficient time to get another survey carried out and I was obliged to withdraw. My cash loss, due to sale of car, legal and survey fees, purchase of various items for the new house and other expenditure, I estimate at some £300 to £400 none of which can be claimed from the person that caused the loss.… Incidentally the same vendor 'accepted' an offer of £8,350 from a prospective purchaser and subsequently sold it 'over his head' for £8,600 to another buyer! The evil reached its zenith in a letter which I received from a person living in Chippenham, who sent me a letter he had received from the estate agent for the vendor in which he said: I am writing to inform you that I have received a second offer for the above property. It is one of more than the asking price, in fact £7,500. I am very sorry this has happened but, as you will appreciate, there is very little one can do about it. The writer goes on to say, and this is the terrible thing: The best course of action now would appear to be for both prospective purchasers to make their highest offer and put it in writing to us by 12 noon next Monday, 1st November. I shall open the envelopes at that time and the highest bidder will be the purchaser. Then comes a nice little touch: It is also important for my client to effect an early completion. The second way in which this can occur—and for this example I am indebted to the hon. Lady the Member for Gloucester (Mrs. Sally Oppenheim) who has had counsel's opinion on it—relates to the purchase of a house about to be built. An advertisement appeared in a local paper, The Citizen, which said: Firm Price on Payment of £50 Initial Deposit subject to contract. In this case a person put down a deposit, saw his building society solicitors, suddenly found that contracts could not be exchanged until the house was almost completed, and then found that the price had accelerated. In this type of case the acceleration in price often more than compensates for any increase in material and labour costs. Counsel's opinion was taken, but the magic words "subject to contract" were sufficient to kill any hopes of recompense of the prospective purchaser.

My Bill seeks to deal with those abuses, to protect a purchaser or a seller 277 from inverted gazumping. I propose that once a sale price has been agreed, subject to contract or otherwise, and the prospective purchaser has incurred any legal or surveying costs, or any expenses in connection with trying to obtain a mortgage, the seller cannot increase the price or sell to a third party at a greater price unless, first, he repays all the purchaser's fees and expenses, and, secondly, he informs the purchaser in writing of his desire to sell elsewhere.

If he gives such notice in writing, the purchaser shall have 14 days in which to deliver his part of the contract. If he does so, the seller will be bound. If he does not do so, the seller will be liable for the expenses of the purchaser only up to the date of the notice. Breach of that provision would be an offence punishable with a fine on summary conviction.

As a further safeguard, once a price had been agreed the purchaser would be entitled to register the agreement at the local Land Charges Register, or at the Land Registry, thus giving any third person knowledge of his claim for expenses against the seller.

To prevent a seller from being inversely gazumped, he will be allowed to withdraw from any agreement six weeks after the original agreement has been reached, or at the end of a period of 14 days of which he has given notice, subject to whichever is the lesser period.

The Government have referred this matter to the Law Commission, but it is too urgent and too immediate a problem to await the Commission's deliberations. A measure to meet the abuse will receive support from hon. Members on both sides of the House, from the estate agents' representative body, the National Association of Estate Agents, and from the Royal Institute of Chartered Surveyors, who support the Bill in principle and who are very concerned about this practice. It will save many young people the misery of seeing their savings disappear as they are gazumped, and it will help elderly people seeking homes to which to retire. Above all, it will help the conscience-striken from whom I have received letters, the gazumped who have been forced to become gazumpers. The Bill will prevent the introduction 278 of a new counsel of perfection—"Gazump not that ye be not gazumped."