REPLIES TO BUYERS’ ENQUIRIES – The need for accuracy

09 May 2013

Replying to pre-contract enquiries and completing property information forms is nobody's favourite task, but the recent High Court decision in Harsten Developments Ltd v Bleaken is a timely reminder of the need to take care that the information given by sellers in replies to pre-contract enquiries and on property information forms is accurate and not to just assume that replies caveated with disclaimers will protect a seller against a claim for misrepresentation. A misrepresentation occurs when a seller makes a statement of fact about a property which is untrue and a buyer relies on that statement and suffers loss. It is easy for sellers unwittingly to make actionable misrepresentations, particularly where their own knowledge of the property is limited.

In the Harsten case a small development plot was sold at auction with the benefit of planning permission for a house to be built on the plot. When the developer started work on the land it discovered that the hedge it was intending to remove to facilitate the work did not belong to the property, as had been stated in the auction particulars. There was also a drainage pipe running under part of the plot, which had not been revealed in the seller's property information form. The sellers claimed that they did not know about the pipe, although evidence given by the previous owner of the property confirmed that she had informed the sellers of the presence of the pipe when she sold the property to them. The court decided that the information the sellers gave to the buyer was misleading with the serious consequence that the developer could not build the proposed house on the site and would have to make a fresh application for planning permission. The constraints of the site caused by the true position of the boundary and the presence of the pipe meant that the property was substantially different from what the buyer had been led to expect. The court found that there were actionable misrepresentations as to the location of the boundary and the drainage easement.

The remedies for misrepresentation are damages and/or rescission - where an order is made for the seller to buy back the property. In this case rescission was ordered. The sellers were required to repay the purchase price to the developer, together with interest and damages, including the developer's conveyancing costs and Stamp Duty Land Tax. In the meantime the market had fallen substantially, resulting in devastating financial consequences for the sellers.

The lesson to be learned from this case is that sellers cannot rely on the principle of "buyer beware" to relieve themselves of the obligation to check carefully the information given to buyers. The judge reminded the sellers in this case that they had an obligation to establish themselves that the replies they were giving were accurate: it was not sufficient to simply trot out the replies they had been given when they had acquired the property. It is also a reminder that the disclaimers frequently used to caveat replies to enquiries only work if they are reasonable in the light of all the circumstances known to the parties at the time, so whether or not a standard disclaimer is effective will depend on the circumstances of each individual case. Clearly the safest course is for care to be taken that the information supplied to any buyer is full and accurate.

For further information, please contact:

Janet Armstrong-Fox, Partner and Head of Real Estate

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