Tuesday, August 3, 1999 Published at 21:07 GMT 22:07 UK
Business: Your Money
Let the property buyer beware
When is a sale not a sale - when you are buying property
By BBC News Online's Iain Rodger
With house prices in many parts of the country rising faster than at any time since the height of the 1980s boom, it seems there is more to worry about than simply being gazumped.
The cautionary tale of Jessica Hart's experiences should be noted well by anyone in the process of buying a property from an institution rather than a private individual.
Jessica, who works for a publishing firm in London, went to view a vacant studio flat in Croydon four months ago through estate agents Barnard Marcus.
Jessica says: "It took some time to get to exchange of contracts because there was a problem over the building's freehold."
Eventually, her solicitor said they were ready and that contracts would be exchanged on Friday 30 July.
But they were not because on the very same day the Portman Building Society sold its portfolio of properties - including Jessica's - to a large residential landlord, the William Pears Group.
Out in the cold
Jessica had lost her flat and there was nothing she could do about it, even though she had spent £750 on solicitor's fees and mortgage costs.
The agents, Barnard Marcus, received only a short fax from the Portman informing them that the property had been sold and their instruction to act was therefore withdrawn.
As anyone who has been gazumped will know only too well, until contracts have been exchanged, an agreement on the sale of a property in England and Wales is not worth the paper it is printed on.
Jessica had missed out because it had suited the Portman to sell its portfolio of rental properties as a whole to a residential landlord.
The Portman's Operations Director, Robert Sharp, told me most of the properties had resident tenants and not more than about "half a dozen" had been proceeding towards exchange like Jessica's.
He said it had not been possible to remove these from the deal with the William Pears Group because the properties were bundled into a separate company and "If you sell a company, you sell it with all its assets at the time of the sale."
Tough on Jessica certainly, but not illegal.
Trevor Pears, a director of the William Pears Group, said his company would assess the properties in the process of being sold to see if the prices were "sensible".
If so, he said, the sales could go ahead. But if a higher price could be achieved they would be remarketed.
House price inflation
Jessica says she fears her £35,000 flat could achieve much more if put back on an overheated market, and would probably be beyond her means.
Mr Pears said he would prioritise these cases and undertook to "get back to the prospective buyers within a week to let them know one way or the other". But he would not be persuaded to guarantee that the sales could proceed.
He said: "This shows how important it is, especially in a rising market, to exchange contracts as quickly as you can."
This of course is very true. But the moral of the tale is also to beware that if you are buying from an institution, the property could be sold elsewhere at any time prior to exchange, without any warning or reference to the estate agent.
Your Money Contents