Gazumpers out of court: Sue Fieldman meets a buyer who sued on a matter of principle

THERE will be a dramatic change in the way we negotiate buying and selling a home when word gets round about the result of a recent court case. Gazumping is likely to be well and truly a thing of the past.

The mini-revolution in property negotiation is thanks to one man, Tim Pitt. In September 1991 he made an offer of pounds 190,000 for a cottage in the village of Chelsworth, Suffolk, where he still lives.

Mr Pitt's offer was accepted. But someone else was also interested in buying. A series of offers and counter-offers followed.

Mr Pitt raised his offer to pounds 200,000. The offer was accepted.

He was then told that the other purchaser had made an offer of pounds 210,000. The seller was backing out of his acceptance of Mr Pitt's offer.

He finally persuaded the seller to accept his offer of pounds 200,000. Mr Pitt asked for written confirmation that the seller would not consider any further offers as long as he exchanged contracts within 14 days of receipt of the contract.

The confirmatory fax from the seller said: 'We confirm our instructions to continue with the sale to Mr Pitt for the sum of pounds 200,000, subject to exchange of contracts within 14 days of receipt of draft contracts.

'If exchange does not take place within the required time, we will then reconsider the second offer.'

Mr Pitt thought he was home and dry. As a result of the letter and believing he would quickly get a contract, he confirmed instructions to his bank. He was arranging a bridging loan for the purchase pending the sale of his existing home.

He also instructed a solicitor, surveyor, estate agents - for the national advertising of his existing property - and architects.

As it happened, the draft contract was not sent by the seller's solicitor for more than a month.

Mr Pitt says: 'On 11 November my wife and I both signed the contract and we returned it with a deposit for pounds 20,000 to my solicitor.

'We were all ready to exchange.

'On 14 November, still well within the 14-day period, the estate agent said the seller had changed his mind. He had now decided to accept the pounds 210,000 earlier offer from the other party.

'We were subsequently invited to match this offer, but by then I had had enough.'

Mr Pitt asked the seller to reimburse his costs, but to no avail. He was so incensed that he went to the local county court to sue for damages for the money he had spent on the aborted transaction.

Geoffrey Challacombe, of the solicitors Steed & Steed, of Sudbury, Suffolk, who acts for Mr Pitt, says: 'We argued that the fax formed a separate contract meaning that Mr Pitt could have a clear run at the property.

'It was not part and parcel of the usual buying process where everything is 'subject to contract' (not binding until the contracts are exchanged).

'The judge agreed. A purchaser could make an indepedent agreement to have a clear run for a period without the danger of being gazumped by anyone else.

'The parties had made what is known as a lock- out agreement.

'The seller broke it and was liable for damages.'

The seller appealed, but the Court of Appeal has now confirmed that Mr Pitt was right. The amount of the damages is being assessed.

Mr Pitt brought the case as a matter of principle. His principle, however, will have wide- reaching consequences.

John Samson, property partner with the solicitors Nabarro Nathanson, says: 'The result of the case will undoubtedly start a new trend in property transactions.

'As soon as buyers hear about it, they will ask for the extra protection available to make the seller keep to his word.

'Purchasers should immediately request a lock-out agreement from the seller.

'Ideally it should not be for less than 21 days.

'A purchaser should get the agreement before committing money to a survey fee and other expenses.'

Mr Samson's advice to sellers, who could be faced with purchasers demanding a lock-out agreement, is to agree to one for a short period on the strict understanding that the purchaser is immediately making a mortgage application and a commitment to the survey fee.

Lock-out agreements are undoubtedly very good news for purchasers. But they are not the panacea for all the ills of the conveyancing system.

Mr Samson says: 'A lock-out agreement stops a seller dealing with anyone else during the quarantine period. It does not force him to exchange with you during that period, and at the end of the time the seller can go elsewhere.

'And, if there is a delay because everyone is caught up in a chain, the protection of the lock-out agreement may be lost because the time period runs out.'

(Photograph omitted)