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The Law Reform Commission Report on Gazumping

The Law Reform Commission was requested in particular to look into and report on:

(a) review the present position by which payment of such a deposit confers no interest in the property on the prospective purchasers;
(b) consider what protection, if any, could be afforded to such prospective purchasers;
(c) consider whether it is feasible to equate the payment of a booking deposit with an option to purchase the property; and
(d) if it is not feasible to confer any form of protection on the prospective purchasers, to review the desirability of permitting such deposits to be required and the feasibility of making such a requirement unlawful.

The Law Reform Commission attempted to inform itself as to the frequency with which the problem of gazumping arises and the practice following in paying and accepting booking deposits. The Law Reform Commission concluded that gazumping existed in less than 5% of all cases involving booking deposits. The report states that gazumping is "both a temporary and infrequent phenomenon" and thus no proposal for a change in the current laws would be recommended as it may put in jeopardy the benefit of the current system.

The report records other practices which cause concern, a practice was reported of opening a show house or apartment and inviting anyone interested to queue; where the number of people interested exceeded expectation, the vendor/developer increased the price which he/she is willing to accept booking deposits, either prior to taking any deposit or after accepting a limited number of bookings.

The report makes the following recommendations:

Legislation should be enacted requiring that a receipt in the form to be prescribed by law be issued to a purchaser on the payment of a booking deposit. The receipt should contain at least the following information:

• A statement that the receipt is one which merely confirms the payment and receipt of the booking deposit and does not in itself create a contract.
• The name of the person paying the deposit.
• The name of the person receiving the deposit.
• The amount of the deposit.
• Reference to the property concerned.
• A statement that the purchaser will not be entitled to reimbursement of any expenses incurred should the parties not proceed to a formal contract.
• Any further matters as may be prescribed by law. For example, it might be desirable to require that they need to identify the organisation of which he is a member.