Division C: Gazumping, Gazundering and Closing Dates
This guidance applies 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.
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 for bona fide reasons unconnected with the possible offer from another party. The solicitor should advise the seller to instruct another solicitor if he wishes to accept the later offer. ‘Fallen through’ could mean, but is not limited to, an inability for a solicitor to obtain instructions to progress the transaction, failure to purify suspensive conditions within a reasonable timescale and failure to meet a time limit specified in the missives.
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 survey 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 (unless the original offer was clearly subject to satisfactory valuation) but must refer the client to other solicitors if the client insists on doing so.
’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.
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 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.