‘Can a seller withdraw from a property contract after it has been signed?’

QI was in the process of buying a property in Dubai Marina through a property agency. The agent prepared the contract and I signed it. A 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

A

Gazumping is the terminology used when a seller withdraws from a property 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 to 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 reposition themselves to gain an advantage over the other.

However, this is not a common occurrence in Dubai. That is not to say it does not 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 as the whole process is time-consuming and can be costly. I suggest that you use your current agent to help you to 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 have yet to pay any fees. 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