Buyers or sellers who pull out of a property transaction process without a “legitimate” reason could face a financial penalty for doing so – if politicians approve a proposition from a backbencher seeking to protect islanders against gazumping and gazundering.
The proposal brought forward by Deputy Max Andrews calls for all residential property transactions to include a legally binding pre-sale agreement.
Deputy Andrews has also asked the States Assembly to decide whether there should be a financial penalty “to be paid by the seller or purchaser should they default on the agreement without a legitimate reason, to be stipulated in law”.
Without legislation, islanders will continue to be vulnerable to gazumping and gazundering
Deputy Max Andrews
In the report accompanying his proposition, he argued that “no action” has been taken to address gazumping and gazundering in Jersey, despite the matter being subject to scrutiny in 2018.
Gazumping refers to instances in which a seller accepts a higher offer from another buyer despite already having agreed a sale, while gazundering is where a buyer places pressure on a seller by reducing their offer close to the completion of a sale – often just before contracts are exchanged.
Deputy Andrews explained: “As politicians, we must instil confidence in the housing market for both buyers and sellers.
“It is evident that without legislation, islanders will continue to be vulnerable to gazumping and gazundering.
“The 2018 panel found that lawyers often advise against pre-sale agreements – advice which may leave clients exposed to the very risks they are trying to avoid.”
Deputy Andrews added: “This reinforces the case for legislation to modernise the property transaction process to better protect islanders.
“With legal recourse in place, buyers and sellers would have greater confidence in the process and some financial recompense should a transaction fail.”
If approved, the legislation would include exceptions for certain transaction types (as pictured below) – such as auctions, forced sales or transfers within a family or company.
How would it work?
Under the system proposed by Deputy Andrews, a signed pre-sale agreement would establish a fixed completion period with an exclusivity clause preventing the seller from accepting other offers.
Estate agents and sellers would also be prohibited from advertising the property after an
agreement is signed.
“If either party withdraws without a legitimate reason, then the defaulting party
would be required to pay a financial penalty,” Deputy Andrews explained.
“Sellers and agents must not mislead buyers. If they do, the buyer can withdraw
without penalty.”
His proposition asks that the Chief Minister bring forward legislation for approval by June 2028, and to establish a list of exceptions to the financial penalty.