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. (See Article 9 Code of Conduct)
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:
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.
Solicitors acting for prospective purchasers of residential property whose offer is accepted - either verbally or in writing - should withdraw from acting if the client subsequently wishes to re-negotiate the price downwards without having made the offer subject to a satisfactory valuation or obtaining satisfactory finance. If there is a valid issue arising out of an unforeseen problem with the title that would not require the agents to withdraw.
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 offer is only subject to survey and 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.
There is no difficulty where a seller initiates renegotiation at a lower price if the prospective purchaser has withdrawn an offer due to an unsatisfactory survey, whether or not valuation was the sole issue. There is no legal requirement on a selling solicitor to fix a Closing Date when more than one interest is noted.
Selling solicitors are entitled to accept their client's instructions to accept an incoming offer without having a Closing Date and without giving other parties who may have noted an interest an opportunity to offer although every effort should be made to give them such an opportunity if at all possible.
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 unless the Closing Date is brought forward giving those who have noted an interest a reasonable opportunity to offer. Sellers solicitors should therefore advise their clients of this in advance of fixing a closing date.
Where possible when fixing a Closing Date, the client should be advised to make him/herself available to consider the offers received. If this is not possible (e.g. Executries, Trusts, Companies etc.) prospective offerers should be told this when being advised of the Closing Date.
In taking instructions from the selling client to fix a Closing Date, solicitors should advise the client that, although not bound to accept the highest - or indeed any - offer, if the client instructs the solicitor to enter negotiations with a view to concluding a bargain with a party who has submitted an offer at the Closing Date, the solicitor will not be able to accept any subsequent instructions to enter negotiations with or accept an offer from another party unless and until negotiations with the original offerer have fallen through. Unsuccessful offerers should, of course be advised as soon as possible after the Closing Date of the situation.
In the event of the selling client subsequently attempting to instruct the solicitor to discontinue such negotiations in order solely to enter into negotiations with or accept an offer from another party the solicitor should decline to act further in the sale unless the client reconsiders and adheres to the original instructions.
Where, at a Closing Date, two or more offers are received in terms that are such that they cannot be distinguished by the selling client, the solicitor may revert to those offerers and give them equal opportunity to revise their offer.
These Guidelines apply equally to solicitors acting as estate agents as well as solicitors acting in the conveyancing. Different considerations may apply however to sales of commercial property and to sellers owing statutory or fiduciary duties to others. These Guidelines apply equally to solicitors acting as estate agents as well as solicitors acting in the conveyancing. Different considerations may apply however to sales of commercial property and to sellers owing statutory or fiduciary duties to others.
In the event of an unsuccessful prospective purchaser subsequently attempting to instruct the solicitor to submit a revised offer or formal amendment after a Closing Date has passed and without an express invitation by the seller's agent, the solicitor should decline to implement those instructions. The solicitor may accept instructions to intimate to the seller's agent that in the event of negotiations with the successful party falling through, the prospective purchaser would be willing to enter negotiations, but no indication of any increased bid should be given.
Solicitors acting for purchasers who have received a verbal or qualified acceptance - whether following a Closing Date or not - should advise clients that although an initial acceptance may have been given by the seller, the contract will not be binding until Missives are concluded. Solicitors acting for prospective purchasers should advise their clients that noting an interest may not guarantee the clients an opportunity to offer, and if the clients are not in a position to put in an early offer they may not be allowed an opportunity to submit an offer at all.
