My Seller Lied To Me! When Is It Property Misrepresentation?

Misrepresentation In Property Sales: the consequences of not telling the truth when selling property

Buying property is a big investment for anyone, so it’s only right that the purchaser should be satisfied with what they are buying.

Likewise, the seller should be entitled to some comfort in knowing that once their property transactions are completed, that is the end of the matter.

The Seller’s Property Information Form

What happens if the seller’s information is not accurate?

We see a lot of cases where a seller, sometimes unintentionally but sometimes deliberately, misleads a buyer by answering a question on the Seller’s Property Information Form or during negotiations incorrectly – or partly incorrectly – so as to create a misleading impression. Property misrepresentation occurs when sellers provide false or misleading information about their property during a sale. The buyer then purchases the property and moves in, only to discover that the information provided by the seller was inaccurate.

We have dealt with cases where a seller has:

• failed to disclose existing disputes with neighbours;
• suggested that a property does not suffer from a flooding issue when it does;
• inaccurately maintained that the property does not suffer from Japanese knotweed when it does;
• stated that the boundaries are in one place or have not moved when in fact they are not or have been changed;
• suggested that the property does not suffer from damp, when it does;
• explained something in relation to an existing tenant which is incorrect;
• declared that no restrictive covenants apply to a property when they do; and
• stated that there are no planning or other proposals nearby which could have an effect on the property.

… the list goes on.

In all of these cases, the buyer may very well have a claim for misrepresentation, depending on what the seller said about the position.

If you are interested to read about real cases which have been decided by the Courts, examples can be found in our article Property Misrepresentation in Practice.

The importance of reliance

Misrepresentation is a false statement of fact that a party relies on when entering into a contract causing a financial loss. Innocent misrepresentation occurs when a seller provides incorrect information without any intention to deceive, which can still cause issues for the buyer. It does not have to be the sole inducement, but the buyer would have to have relied upon the statement to bring a claim. Read more about reliance in misrepresentation claims here.

Depending on whether or not the seller innocently, negligently or fraudulently answered the questions inaccurately in the Property Information Form, the buyer may be entitled to claim damages from the seller if they relied on the information when going ahead with their purchase.

In some cases, the buyer will be entitled to ‘rescind’ the contract. This means that the buyer is entitled to their money back and to return the property to the seller. This does not happen very often and a Court will normally award only damages.

Normally the measure of damages awarded to a buyer is based on ‘diminution in value‘, or the difference between what a buyer would have paid for the property knowing about the issue, and what they actually did pay for it. This may not necessarily reflect the actual cost to the buyer in rectifying the issue. However, in some cases, additional damages can be awarded to cover other expenses incurred.

Diminution in value

To give an example of how diminution in value is calculated, we have acted for insurers in professional negligence claims against surveyors, who have failed to identify that a property suffered from subsidence. The measure of damages was based on diminution in value. The cost to the buyer in underpinning the property to stop the subsidence was greater than the actual loss suffered. This is because the property was situated in a highly sought-after location with a large rental market, meaning that the impact on the value of the property was less.

Based on the fact that a hypothetical purchaser would have seen the property as an investment opportunity that could provide a return by renting it to tenants, rather than considering it a family home for life, the expert’s opinion was that a hypothetical purchaser would have been more likely to negotiate a smaller reduction in the purchase price than the full cost of the repairs. This would ensure that the seller accepted their offer, and even with the defect, the property represented a good investment.

How can a seller ensure that their buyer will not bring a claim for misrepresentation against them?

Sadly there is no way to be 100% certain that a buyer may not make a claim after a sale. Negligent misrepresentation occurs when a seller or their agent carelessly provides false information about a property, leading to potential legal claims. All a seller can do is minimise the risk as much as possible.

Although completing the Seller’s Property Information Form is not mandatory, it is unlikely that a buyer will proceed with the purchase if their questions are not answered. 

Therefore when completing the Seller’s Property Information Form, the seller should answer questions as fully and honestly as possible. We often advise clients to think about what they would want to know about the property if they were buying it, and how they would react if they bought a house with problems that were not disclosed.

If a seller is not certain about an answer to a question in the Seller’s Property Information Form, they should think carefully about whether they want to answer it. 

What happens if the seller’s replies were accurate at the time they were given to the buyer, but by the time of exchange the information has changed?

In some circumstances, a seller is under a continuing obligation to ensure that their replies to enquiries are accurate up to the date of exchange of contracts. Therefore if there is a change of circumstances meaning that the original statement is no longer accurate, there is every chance the seller would be obliged to update the buyer.

The Seller’s Property Information Form also specifically tells the seller that if something happens which would mean that their replies are no longer accurate, they should notify their solicitor of this, who should in turn notify the buyer’s solicitor.

If they don’t do this, the seller risks a potential claim against them for misrepresentation.

What if a seller knows something which is not specifically asked about by the buyer?

Have you bought a house with problems which were not disclosed?  Unfortunately, this is unlikely to give rise to a claim for misrepresentation.

The basic position here is ‘caveat emptor’, or ‘buyer beware’. If a buyer does not ask the seller a question, they cannot then look to the seller for compensation if they discover something that they do not like about the property. It is up to the buyer to satisfy themselves that they want to purchase the property and ask questions about it which are important to them.

As the basic position in a property transaction is buyer beware, it follows that if no statement or answer is given by the seller, the buyer cannot be said to have relied on it to enter into the transaction.

Having said this, sometimes (but this is unlikely unless a special or fiduciary relationship exists) a misrepresentation can take place by a failure to mention something material to the transaction.

In some cases, a “half-truth” or explanation which is accurate on the face of it but misleading about the true circumstances of the matter can also amount to a misrepresentation.

The moral of the story

Sellers should be upfront about any issues that affect their property and buyers should take all steps they consider appropriate to obtain the information they want before committing to a purchase. 

If a seller doesn’t know – or is unsure of – the answer to a buyer’s question, they should consider not answering the question. However, by not providing a response the seller could be putting their sale at risk, as the buyer may not be prepared to proceed without an answer.

Sometimes a seller will qualify their response, but this in itself is not always enough to prevent a claim. It is important to discuss it with your property solicitor, and to make sure the solicitor who is carrying out conveyancing on your property transaction has undertaken the correct conveyancing searches.

If you would like to read about real cases which have been decided by the Courts, examples can be found in our article “Property Misrepresentation Claims in Practice”.

If you are facing a claim for property misrepresentation or believe that you have a claim yourself, please do feel free to get in touch with us.

And if you are looking for a property solicitor to make sure your sale goes well from the outset, contact one of our specialist property solicitors in Braintree, Brighton,  Chelmsford, Croydon, Hornchurch  or Wickford. 

This article is for information only. It is not a precise statement of the law and should not be relied upon as or for a substitution for proper legal advice.

The circumstances of every case are different. We are always happy to discuss your circumstances to see if we can assist.

Try our new Property Misrepresentation Assessment service

If you think your seller withheld information about your property, you may be able to claim against them.

We now offer a fixed-fee service so that we can assess your claim. Have a look at Assess My Claim and see if we can help.

Questions people ask about misrepresentation

As you can see, buying and selling property is not always as simple as you think. Understanding your legal position is crucial when faced with potential misrepresentation in property transactions, and we’ve tried to address some common questions below.

However, if you are still unsure please feel free to contact us for an answer.