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Jun
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Hi, My partner recently bought a grade 2 listed property from her local council at auction. We both went through the sellers pack carefully, all okay as far as that is concerned. However we have just discovered that the property was only in auction following two almost sales which the council lost when those potential buyers found out that it was actually a scheduled monument. The sellers pack neglected to say it was such, the council clearly knew and also clearly knew it was a big issue when coming to sell. We now realise that the property which needs work, which we were aware of and had costed taking into account the grade 2 listing, now is completely unaffordable, no doubt by an order of magnitude. And, of course this renders the property all but worthless. Any thoughts on this? Is there such a thing as fraud by omission?
Thank you for your comment.
We cannot provide specific advice on our website but can set out some general points which might be relevant considerations. Such guidance is not, however, a substitute for proper legal advice considered in the context of any particular case.
The basic position is that a seller is not under an obligation to disclose anything in particular about the property or even answer a buyer’s questions. Therefore not saying something does not amount to a misrepresentation, fraudulent or otherwise. The buyer cannot complain about being misled by the seller if nothing misleading was said by the seller for the buyer to rely on. If the buyer has relied on assumptions, then it is not the seller that has misled them.
Sometimes it is possible to base a misrepresentation claim on an omission, but there would generally also have to be something said by the seller to (in effect) create an obligation on the seller to set out the facts in full. What the seller says might have been perfectly true and accurate and, therefore of itself, not a misrepresentation. However, because of some fundamental fact or point that was omitted, it renders what the seller has said inaccurate and misleading.
By way of a simple example, it could be that a seller truthfully explains that the property benefits from a dedicated parking space and points to a terms in a lease which confirms that it legally does. However, the seller fails to point out that the parking space cannot be used because ownership of it is in dispute and someone else has blocked access to it, that it is damaged beyond repair and cannot be used again, or perhaps that using the parking space might be a breach of planning restrictions. Whilst just an illustration (and one that is probably open to some legal debate, as misrepresentations by omissions are complicated), it is all well and good to have the legal benefit of a parking space, but it does seem quite a fundamental point that it cannot be physically used.
You are right to mention “fraud” (in the civil, rather than criminal sense), as it is normally in a fraudulent misrepresentation matter that such points come up. A party to a contract might deliberately over embellish particular facts in an attempt to convince the other party to rely on what is being said and enter into the contract (as principles relating to misrepresentation apply to all contracts, not just the sale of land and real property). If they have deliberately omitted or supressed certain additional information which in effect renders what was actually said factually inaccurate, then there may be a claim. However, any claims involving fraud or deceit are often difficult evidentially, as proving the other party’s state of mind (i.e. that they knew they were misleading the aggrieved party) can be difficult.
Another “exception” to the rule regarding the fact that there is no obligation on seller to volunteer information about a property is the “duty” to disclose latent title defects. These are things such as rights of way or other rights over the property which cannot be discovered on reasonable inspection. It is questionable the extent to which Grade II listed status would be considered a latent title defect, especially since there are ways to discover if a property is listed or not. SPS Groundworks v Mahil [2022] is a relatively recent decision of the High Court. This case involved an overage agreement (a right over a property, which again was sold at auction) and it was held that as the seller was aware of it, the seller was “…bound to give the purchaser full, frank and fair information, or a fair and proper opportunity to gain such information, about any defect… Full and frank disclosure required the Overage Clause to be specifically brought to a potential purchaser’s attention by description in the particulars, addendum notice of the type produced at the second auction, or specific reference by the auctioneer.”
Hello we completed in June last year
We have now found out via a letter from solicitors that my freehold house is required to pay service charge to a resident run maintenance company.
I am still unsure if the maintenance company is real as the name has no relevance to the road we live on and have only ever received hand posted letters mentioning a management company that again the name has no relevance to our property. We was not told when we purchased that there was a management company and never received a share certificate or anything indicating this. We have just received a final demand before the solicitors take further action is there anything I can do ?
Many thanks in advance
Thank you for your comment.
Firstly, we would not put too much weight on the fact that a company name does not reflect what that company does or where it operates. There is generally no legal requirement that a residents management company must have a particular name that associates it with a particular property or estate. Check the Companies House website to find out details of the limited company, including who the directors of it are and who owns any significant beneficial share of it.
It sounds as though what you are talking about is a rentcharge of some sort. We are not certain that it could be anything else, especially if you have not entered into a direct contract with the company. We would need to consider the title documentation. The first thing to look at would be the transfer or TR1 that you signed. This might contain a provision that you covenant (“promise”) to pay the service charge to this company.
In some ways a rentcharge is a bit like a leasehold covenant (a ”requirement”, or “obligation”) on a lessee to pay a service charge to a management company in exchange for managing the communal parts of the property/estate. However, a rentcharge relates to freehold land and it is also not necessary for the rent owner (that is the person or entity entitled to the payment) to have a particular legal interest in the land.
Estate rentcharges are not hugely uncommon or necessarily unreasonable to have. Someone maintaining the communal gardens of the estate, or ensuring that pot holes in unadopted estate roads are patched up, for example, can add amenity value and benefit to the residents. However, other types of rentcharge can be problematic, especially for mortgage lenders.
The reason why mortgage lenders are not overly keen on rentcharges is because of the draconian enforcement measures that can be used if payment is not made. Some rentcharges impose no obligation on the rentowner to demand rent or even give notice if an intention to enforce their rights. One enforcement method that by law would normally be available to a rentowner is to create a lease over the freehold. If a lease is created over a freehold (which can even be sold on to a third party!), the freehold can lose value. If the freehold loses value, it might not be worth what the mortgage lender has secured against it. Put another way, the equity in the property might not be enough to pay off the mortgage if a leasehold interest is created over the freehold and the lender loses the value of its security over the property.
If it is a rentcharge that you are talking about, short of simply paying or trying to negotiate a variation of it (which the rentowner does not have to agree) there is generally little scope to legally challenge them.
Consequently, properties subject to rentcharges can therefore lose value on the basis that the market of buyers available for them is limited to cash buyers that are not concerned about the enforcement rights a rentowner may have. Often, during the conveyancing process, if a rentcharge is spotted, the buyers solicitor will try to get the seller to enter into a deed of variation, either excluding the ability to create a lease in default of payment or at least to give the lender notice of the intention to take such steps, so the lender can pay the arrears and add it to the mortgage without losing the value of its security.
We are surprised that this was not brought to your attention during the conveyancing process. If it is a rentcharge, alarm bells should have been ringing for the solicitor, as it should have been clear from the title documentation that one existed. Since the 2016 case of Robert’s v Lawton, which is an extreme example of what can happen if a rentcharge is not paid, the issue should have been in the radar of a coveyancing solicitor. Whilst a conveyancing solicitor cannot be expected to advise on how this might effect the value of the property (they are neither a surveyor nor do they have crystal balls, despite the expectations on them by some clients) they can at least identify the risk to their client that it might cause problems in the future.
In any event, it is generally unusual for a freehold property to have any obligations to pay anything to anyone. Generally, a positive covenant (that is a requirement to “do” something) would not pass to a new owner (although it is a little more complex than this, as the original owner that agreed to the requirement can normally still be pursued for a breach of it and then pursue the new owner). If it is the case that your solicitor should have spotted and advised you of the issue and did not, you may have a professional negligence claim against them.
Having spent a year in counselling due to domestic abuse, whilst supporting my own father who battled leukaemia and ultimately died an excruciatingly painful death which my brothers and I were by his side and all traumatised by. The same solicitors who were instructed to act for me in family law, also undertook conveyancing of my house move so they knew the stress I was under at the time. I moved to Glasgow and was told the flat was valued at 115k, I have documentary proof of this from the mortgage provider at the time, 2008. 6 months after I moved in locals told me I paid far, far too much. It appears other, similar 2 beds sold for 60-90k at the time, I paid 115k. Flats in the street are now selling for 120k some 15 years on. The estate agent who sold the flat to me at the time are now refusing to give a valuation in writing. Event though I have two 1st class degrees I’ve not been able to get a job in Glasgow. I feel like I was trafficked here, been held in destitute servitude on £368 a month UC, lied to and financially raped as I now can’t even afford to move back to the smallest houses on the cheapest side of the street I came from when I was told it was a like for like exchange. What action would you advise?
Thank you for contacting Cunningtons, we are sorry to hear of the difficulties you have experienced.
As you are resident in Scotland we would advise that you seek legal advice from a Scottish law firm who are qualified in that jurisdiction, to try and assist you.
Hi, Great article thankyou. I’m considering exploring this in relation to a property we purchased in April 2022. The sellers deliberately misled the surveyor by replastering walls heavily damaged by ongoing water ingress to the middle floor bedrooms with heavy duty plaster, that we have been informed by builders should only be used for ground floors and basements. In addition, they used heavy duty wallpaper on top of this plaster and painted it magnolia. It was only apparent after a few weeks of residing in the property that the wall was in fact wallpaper. Once removed, this revealed severe damage, which we have now discovered is due to a large structural crack in the building. Are we able to bring a claim of misrepresentation against the sellers?
Thank you for your comment.
There would generally have to be an actual factual representation made about the condition of the property for there to be an argument that the seller “misrepresented” that fact. “Concealing” defects in a property, when nothing is said about the defect in question, would be very unlikely to form the basis of a claim. Whilst arguably morally objectionable (at least to the buyer but from the seller’s point of view, they want/need to get the best price that they can and why should they not leave it to the buyer’s surveyor to check for problems?), it is not necessarily going to be enough to bring a successful claim.
There might be other factual misrepresentations that have been made which could be considered. For example, in the standard property information form (the TA6 – published by the Law Society), there is usually a question about insurance and whether or not any claims have been made. If there has been a structural problem and an insurance claim has been made, then there may be a misrepresentation if the seller said “no” to this.
Whether or not you have a professional negligence claim against your surveyor will depend on a number of factors. It is not uncommon for a surveyor to limit the scope of their retainer (this is the agreement between them and their client) to just matters which can be identified from a visible inspection. To a degree this is understandable, as a seller, you would not want a surveyor moving your belongings about, drilling, taking up carpet or otherwise performing invasive inspections. It is not uncommon for sellers to “hide” issues with their property by painting or papering over cracks and defects. Whether or not you should have been advised by your surveyor of such things to put you on notice of such a risk is questionable.