Gazumping (Hansard, 30 November 1988)

§ The Lord Chancellor (Lord Mackay of Clashfern)
My Lords, the Government have no plans to introduce legislation to reduce or eliminate gazumping. Such legislation is unnecessary. The delays in procedures which permit gazumping are best dealt with by changes in practice.

Lord Campbell of Croy
My Lords, I thank my noble and learned friend for that encouraging reply. Does he agree that while the Scottish system may not necessarily be the appropriate remedy for England and Wales, some action is needed soon in order to eradicate a practice which has caused much delay and embarrassment and, where a chain of house purchases is concerned, can bring delay and disappointment to several families?

§ The Lord Chancellor
My Lords, I understand the nature of the problem. I believe in part that a way of dealing with it is that people should understand fully what the position is when they enter into a preliminary agreement. In most cases, in view of the way it is worded, it really has no legal effect.
As regards the Scottish system, that is a way by which—and it is perfectly open under the law of England and Wales—to create a binding legal bargain at the early stage. The Law Commission documents also suggest another method of dealing with the matter, which is an agreement for a deposit at that stage. A third possibility is a conditional contract; that is, one which is legally binding but which has in it conditions under which in the specified circumstances the parties might be free. I believe that all those are important aspects to be kept in mind, but I certainly do not believe that legislation will assist the situation.

§ Lord Elwyn-Jones
My Lords, as the residential property market is starting to decline, is it not appropriate that steps should also be taken against reverse gazumping, so as to protect the unfortunate people who may be forced to sell their homes because of the big increases in mortgage rates?

§ The Lord Chancellor
My Lords, I very much doubt that there will be any people requiring to sell their houses on that account. So far as concerns reductions in prices which are contrary to the spirit of the initial agreement, the same points that I made in relation to gazumping apply. Provided the agreement is entered into at the early stage, that would be prevented. Therefore these matters operate in both directions according to circumstances.

§ Lord Mishcon
My Lords, will the noble and learned Lord be good enough to explain to the House, in view of the popular feeling that there is in regard to the matter of gazumping, why he thinks that legislation is not necessary? Will he also say why he believes that practices which may be highly desirable will in fact be in vogue if legislation does not compel them?

§ The Lord Chancellor
My Lords, I have yet to see practicable legislation which would be effective. What is required to prevent gazumping is a legally-binding bargain. It would be unusual to have legislation which forced people into a bargain when they did not want to enter into one. Therefore the answer is that if you want a bargain with the consequences of it, you make one. That seems to be a situation which does not require legislation in order to bring it about.
I feel strongly that a good deal of the difficulty about gazumping is that people have not fully understood the legal position, as a result, perhaps, of fairly complicated documents which they have signed. If they really did understand I think that they might not be so surprised at what happened afterwards.

§ Lord Hailsham of Saint Marylebone
My Lords, is it not the case that more than one report of the Law Commission has set out at length the disadvantages of legislation in this field? If the noble Lord, Lord Mishcon, were to acquaint himself with the content of such reports he would discover what it is that has led a series of Lord Chancellors not to legislate.

§ The Lord Chancellor
My Lords, as my noble and learned friend has said, the Law Commission reports contain much wisdom. However, I believe that the essential point is the one I made, which, if the noble Lord, Lord Mishcon, has not read the Law Commission reports, I am sure he is perfectly capable of appreciating now.

§ Lord Mishcon
My Lords, at some convenient moment will the noble and learned Lord inform the noble and learned Lord, Lord Hailsham, that the latest report from the committee set up by the Law Commission recommends altering the law by doing away with the doctrine of caveat emptor? When 299 informing the noble and learned Lord, Lord Hailsham, of that fact, will he ask him to read the report?

§ The Lord Chancellor
My Lords, the latest report to which the noble Lord, Lord Mishcon, refers has nothing to do with gazumping. No doubt that is why my noble and learned friend did not cover it in his question.

§ Lord Mackie of Benshie
My Lords, is it not possible that the amount of gazumping in England may be due to some defect in the English character?

§ The Lord Chancellor
My Lords, I do not think that it would be wise for me to associate myself in any way with such speculation; neither do I believe it to be true.

§ Lord Cledwyn of Penrhos
My Lords, does the noble and learned Lord agree that these exchanges have not got us very far? Is it not the case that, although there is a difference in practice in Scotland as compared with England and Wales, solicitors and estate agents in England and Wales do not, for some reason, follow the Scottish practice, which would go a long way towards protecting the potential buyer? What steps will the noble and learned Lord take to acquaint estate agents and solicitors of the fact that there is a better practice, which is the practice followed in his own country? Is he prepared to help English and Welsh people thus far?

§ The Lord Chancellor
My Lords, I have sought on other occasions publicly to air the views that I have been expressing this afternoon. It is unwise to speak of the Scottish system as being in any sense better. It is of course different. It has different effects; but one of the effects may be that a purchaser could find himself with a legally binding bargain when on the whole he would prefer to be without one. What is required, therefore, is that people understand the legal consequences of what they are doing whether in England, Wales or Scotland. If they want to do something different, they should ask their advisers, be they legal advisers or others, to arrange matters in accordance with their wishes.

§ Lord Hutchinson of Lullington
My Lords, does the noble and learned Lord agree that the problem is that one party may want to enter into a contract when the other party will not, and therefore legislation is required to resolve the problem?

§ The Lord Chancellor
My Lords, with the greatest possible respect, I do not agree that legislation can deal with a situation where one party wants a contract and the other party does not. I do not see why legislation should favour the one against the other.

§ Lord Hatch of Lusby
My Lords, I have been waiting for this opportunity for 25 years. This may interest the right reverend Prelates, and I should declare an interest, in that 25 years ago I was 300 gazumped by the Church Commissioners. Can the noble and learned Lord explain why, although it is possible to make a bargain with an estate agent, it is not possible to make that bargain legally binding? Is it not time that it was?

§ The Lord Chancellor
My Lords, if one person wants to make a legally binding bargain and can persuade the other side to agree to it, I can see no reason why it should not happen. I do not believe that estate agents, as a class, are incapable of entering into a binding legal bargain. It is a question of what the parties want. The mere fact that I want a legal bargain does not mean that the other side does, and therefore we cannot have one. If both sides want a legally binding bargain —whether one side be an estate agent or not—under the existing system I can see no reason why they cannot have one.