Q: We have made a successful offer to buy a house. We are worried that, while we carry out searches and so forth, we may be gazumped by someone offering a higher price. We have been told we can enter into a “lockout agreement” to protect our position. Is this the best option?

A: In England and Wales (unlike in Scotland) the acceptance of an offer to buy a property is not generally binding. The offer is almost always made “subject to contract”, and the seller is free to accept a higher offer until contracts are exchanged. Gazumping is perfectly legal.

A lockout agreement is a preliminary contract, quite separate from the contract for the sale of the property itself, whereby the seller agrees not to accept another offer for a specified period. It gives the buyer some breathing space. If at the end of the specified period the buyer can’t exchange, then the agreement is at an end and the seller is free to accept another offer.

In 1992 the House of Lords upheld the validity of such agreements in the landmark case of Walford v Miles, and for a time they were very much in vogue. However, lockout agreements are now fairly rare. The seller is unlikely to want to miss the chance of a more lucrative last-minute offer from elsewhere. If the seller does get a better offer, he or she can refuse to exchange contracts with you until after the lockout period expires and then sell to the gazumper later.

There are other ways. The seller can agree to grant the buyer a formal option to buy the property. This means the seller is bound to convey the property if the buyer serves a notice within a set timescale. A seller can also enter into a costs guarantee to pay the buyer’s legal and survey costs if the seller withdraws before exchange of contracts. This can work on its own or with a lockout agreement or option.

However, the fundamental problem is that in a rising market there is no incentive for a seller to agree to dealing with you alone. If you can persuade the seller to enter into some kind of exclusive deal, you will probably have to pay dearly for these extra rights.

The writer is a barrister at Tanfield Chambers (020-7421 5300). E-mail your questions to: property.consumer@thetimes.co.uk

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