A “Contract of sale” for those buying and selling a property specifies exactly what is being sold and the terms and conditions of a sale. A contract, once signed by both parties, binds the parties to the completion of the transaction. Disputes regarding contracts are a matter for the law and the courts.
“Gazumping” occurs where there has been an oral pre-contract agreement between a buyer and a seller, including the payment of an initial “booking deposit”, for the sale of property at a particular price and, subsequently, the seller
either:
- Refuses to execute a formal contract of sale to the buyer in question and sells to someone else for a higher price; or
- Refuses to execute a formal contract of sale to the buyer in question unless the buyer agrees to pay a higher price.
The non-enforceable relationship between the original parties is preserved by use of the term "subject to contract".
The problems associated with gazumping were examined in detail by the Law Reform Commission in its 1999 "Report on Gazumping" (LRC 59-1999). The Commission noted that delays arising between the conclusion of negotiations and completion of the formal contract were usually for the benefit of the intending purchaser, for example, to ensure the availability of funding for that property, or to ascertain if there were any legal difficulties in relation to the title. The Commission concluded that the only practicable reforms were to improve the information available to intending purchasers and to regulate the terms according to which booking deposits are paid and accepted. It did not recommend any specific legislative reforms to the legal framework within which gazumping occurs.
There are no plans at present to introduce or amend legislation in this area. However, as with other policy and legislative reforms, interested parties are welcome to make submissions on this matter.
The Property Services Regulatory Authority, which was established under the Property Services (Regulation) Act 2011, published a detailed “Guide for Users of Property Services Providers in Ireland" which explains the legal position in relation to gazumping and related matters such as payment of deposits and signing of contracts. The Guide is available on the Authority's website at: www.psr.ie.
