Homefront: ‘Can a seller withdraw from a property sale after a buyer signs the contract?’

The practice of ‘gazumping’ is becoming more common in Dubai

Estate agent giving house keys to woman and sign agreement in office
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I was in the process of buying a property in Dubai Marina through a real estate agency. The agent prepared the contract and I signed it. One day later, the property seller informed the agent that he was withdrawing the contract because he received a much higher offer from another buyer.

I briefly listened to a radio show discussing a topic called "gazumping". What is this and what are my rights to claim any compensation from the seller? MF Dubai

Gazumping is the terminology used when a seller withdraws from a property sales contract after receiving a higher offer on the same property from a different buyer. This is a phenomenon normally associated with a fast-paced seller’s market.

The opposite is called “gazundering”. This is when a buyer decides to lower an agreed sale price due to falling house prices. These practices are very common in the UK.

It happens mainly because of the time taken between verbally agreeing an offer, which is non-binding, and contracts being exchanged, which is binding. This can last between two to three months or even more. This gives either the seller or the buyer time to re-position themselves to gain an advantage over the other.

However, this is not a common occurrence in Dubai. That’s not to say it doesn’t happen, as your case highlights. However, in Dubai, when a contract (form F) is signed and registered at the Dubai Land Department through the Dubai Rest app, it is not so easy to leave the transaction mid-way.

Presumably, you have an addendum to your contract that outlines what happens should either party withdraw. It is good practice for the agent to request that the seller also lodges a 10 per cent deposit cheque at the time of signing the contract. If your agent has not done so, your only other course of compensatory action would be to take the seller to court and fight for your rights.

Taking someone to court is sometimes not the answer even when one is in the right, as the whole process is time-consuming and can be costly, which is why this doesn’t happen as often as one would think.

Gazumping is ethically reprehensible, but it is a trend that unfortunately might become more common in Dubai

I suggest that you use your current agent to help you organise your out-of-pocket expenses, if any. You could also look at this incident in a positive light. Because the seller did this right at the start of the transaction, I assume you haven’t paid any fees, such as on bank valuation or other expenses, as yet. However, it is your right to take the seller to court.

Gazumping is ethically reprehensible, but it is a trend that unfortunately might become more common in Dubai if a fast-paced property sales market persists.

Mario Volpi is the sales and leasing manager at Engel & Volkers. He has worked in the property sector for more than 35 years in London and Dubai. The opinions expressed do not constitute legal advice and are provided for information only. Please send any questions to mario.volpi@engelvoelkers.com