My Seller Lied To Me!

My Seller Lied To Me!
18 September, 2019

Civil Litigation Residential Conveyancing

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 is sold, that is the end of the matter.

The Seller’s Property Information Form

During the conveyancing process, the buyer will ask the seller questions about their property. These are called pre-contract enquiries and requisitions on title. As part of the process of selling a property, the seller will normally complete a standard document called a Seller’s Property Information Form.

The idea behind this process is that the buyer satisfies themselves by asking the seller relevant questions, and the seller confirms that the buyer cannot rely on anything else apart from the answers the seller has given. This way, if the seller has been as upfront as possible in response to those questions, the seller cannot be held liable for anything else they say.

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

Sadly, we see a lot of cases where a seller, sometimes unintentionally but sometimes deliberately, misleads a buyer by answering a question on the Property Information Form incorrectly – or partly incorrectly. The buyer then purchases the property and moves in, only to discover that what the seller’s information 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; and
  • stated that the boundaries are in one place when in fact they are not.

… the list goes on. We have also dealt with cases where a seller has believed that they were answering a question correctly.

In all of these cases, the buyer may very well have a claim for misrepresentation.

Misrepresentation is a false statement of fact which induces a party into a contract. It does not have to be the sole inducement, but the buyer would have to have relied upon it to bring a claim.

Depending on whether or not the seller innocently, negligently or fraudulently answered the questions wrongly in the Property Information Form, the buyer may be entitled to claim damages from the seller. In some cases, the buyer will be entitled to ‘rescind’ the contract. This means that the buyer is entitled to their money back and return the property to the seller. Primarily for practical reasons, this does not happen very often. You can view the Law Society’s specimen Property Information Form here.

What does usually happen is that the buyer is entitled to 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.

Diminution in value

To give an example of how diminution in value is calculated, we have acted for insurers in negligence claims against surveyors who failed to identify that a property suffered from subsidence. The measure of damages was based on diminution in value. Sadly, 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.

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 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, to make sure that their offer was accepted by the seller.

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

Sadly there is no way to be 100% certain that a buyer may not make a claim later. All a seller can do is minimise the risk of this 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.

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, or perhaps consider qualifying that answer.

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?

Case law is clear that a seller is under a continuing obligation to ensure that their replies to enquires are accurate up to the date of exchange of contracts.

The Seller’s Property Information Form also specifically tells the seller that in the event that 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?

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.

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.

The moral of the story

Sellers should be upfront about any issues that affect the property and buyers should take all steps they consider appropriate to obtain the information that 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.

Sometimes the seller’s responses are qualified – but before giving a qualified response, it is important to discuss it with your solicitor, as a half-truth can also amount to a misrepresentation and require the services of a Litigation Solicitor.

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 substation 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.

6 thoughts on “My Seller Lied To Me!

  1. I purchased a maisonette which was advertised as share of freehold. But after spending approximately £850 on search fees, conveyancing fees and valuation, my solicitor was informed by the vendor’s solicitor that there was no share of freehold even though the property was advertised as “share of freehold”. Due to this we had to pull out due to false information given. The property in now back on the market stating “leasehold”.
    I have evidence to prove this.

    Do I have a case to reclaim damages?

    Thank you.

    1. Hello Mark,

      We are really sorry to hear of the difficulties you have had, which must have been very frustrating.

      The basic position is that a claim for misrepresentation against a seller would only arise once a contract is completed. It is therefore unlikely that there would be a claim here, as you did not rely on what they said and go on to buy the property. It sounds as though your solicitor did what they were supposed to, which is to protect your position before you committed to buy something that you did not intend to buy.

      Sometimes a different sort of claim might exist, based on what is called a negligent misstatement. However, this depends on showing that there was a duty of care between the parties. Unfortunately, there is no general duty of care between a buyer and seller and it is unlikely that you would be able to rely on a claim like this. It is a very rare case indeed where a seller’s solicitor can be held to owe a duty to the buyer, and this is normally limited to circumstances where the seller’s solicitor has failed to check things, such as the right of their client to sell the property.

      We are sorry to say that from a legal point of view, it is quite unlikely you would be able to recover anything.

      A final option is to consider the Consumer Protection from Unfair Trading Regulations 2008. Depending on how the property was described to you, the estate agent may have breached their obligations and misled you. If they are registered as members of the Property Ombudsman Scheme, this could give you an avenue to raise a complaint. This is a free service for consumers and their details can be found here, along with a case study…

      We hope this helps and wish you the best.

      (This is general advice only and cannot be relied upon in substitution of proper legal advice)

  2. I bought a flat last year, when making the decision to buy the flat I was told that a concierge would be on site in the management suite. This was also confirmed in all marketing documents. A year after buying the property the management suite has been sold off to a Lettings agency and the residents have been told that there will not be a concierge and if we want one we will have to pay more in service charges, although they originally said this would be inside our charges.

    Unfortunately, I am not the only person to have been told this. I feel that not having the Management suite and Concierge has drastically devalued my property. Would this be deemed as Misrepresentation?

    1. Thank you for your query.

      There may be some issues here to explore but we would be hesitant to say that a claim in misrepresentation exists against the seller. The reality is that most contracts for the sale of property are conducted using an industry standard set of terms. If this was a new build purchase direct from the developer, they may have used their own contracts, however the same point will most likely apply.

      The contract of sale will almost certainly contain what is called a “whole agreement” clause. This is a contractual clause in which the parties agree that unless something is in writing in the contract, in this case that they promise to keep the management suite and concierge on site for a particular period of time or a particular cost, then the other party is promising that they did not rely on any oral representations when entering into the contract. This may seem unfair but the intention behind it is to ensure that there is certainty for the parties moving forward. It means that both of the parties can feel confident that no claim might exist against the other for things said and which are not incorporated into the contract. In short, if this was something that was vital to you as a contracting party, the law would say that it would have expected you to ensure that it was incorporated as a contractual term.

      This matter is a little more complicated insofar as what you are talking about is likely the obligations under the term of the lease for the landlord to supply these services. It would be unusual to have a fixed cost to the provision of specific services, as the cost of providing the services may rise or fall.

      I hope this is of some help, although probably not what you wanted to hear. I would certainly advise reviewing the terms of your lease to see what obligations there may be on the landlord.

      (This is general advice only and cannot be relied upon in substitution of proper legal advice)

  3. I bought a house and was told on the property information form that the house had never suffered flooding which is false. The neighbours have confirmed all the street was flooded. I would probably not have purchased the property if I had known the truth or at least not at the asking price. I would like to know what I can do

    1. We are sorry to hear of the difficulties you have encountered. Failing to disclose historical flooding of properties seems to be a growing problem.

      Every case and every client is different, so in terms of what you can and should do, this does depend on the precise facts of the matter and what you are looking to achieve in terms of an outcome.

      Whilst the obvious answer is normally that a client wants the maximum compensation possible, as “rescinding” the contract is not normally an option (rescission is where the contract is “reversed”), there can often be arguments about the level of that compensation.

      Broadly the loss you have suffered is going to be the difference between what you paid for the property and what a reasonable person would have paid knowing about the defect, in this case, the flooding. Put into context, a property in a high demand area is less likely to suffer a loss of value than one in an area where there is low demand, even if the properties suffer from the same problem. Therefore, some evidence about what the value of the property with the defect disclosed might have been at the time of purchase, factoring in market conditions, might be important to obtain.

      Case law on the subject explains that the Property Information Form is designed for a layperson to answer. As there is no statutory definition of “flooding”, this leaves open the question of what does or does not constitute flooding. Put into context again, some water retention in soil following particularly heavy rainfall could lead to an argument about whether or not this constituted flooding. This is a point which we have dealt with on other cases.

      Having said this, the basic position is that if you relied on the answers when entering into the contract, and those answers were factually untrue, then there is a potential case for misrepresentation.

      If you would like to get in touch with someone in our Litigation Department, please do not hesitate to contact us and we will give you an idea of the sort of work involved in matters like these.

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