Make sure your replies are correct

We have reported before on the importance of ensuring that replies you give to a buyer if you are selling a property are accurate and correct.

We have reported before on the importance of ensuring that replies you give to a buyer if you are selling a property are accurate and correct. Another recent case had highlighted the importance of this issue once again.

The seller of a property does not have to give information to a buyer about the state and condition of a property. This principle is known as 'caveat emptor'. This is the reason why a well advised buyer will ask their solicitor to carry out a range of searches and enquiries when buying a property.

However, this principle does not absolve a seller from all responsibility when answering the questions that a buyer asks. A seller must answer enquiries and questions honestly and fully otherwise a buyer might bring an action against a seller and claim misrepresentation.

The recent case involved the sale of a commercial property but the principles also apply to the sale and purchase of a residential property.

The transaction in question involved the sale of a commercial building. A key tenant of the building had started to complain about the level of service charges and was withholding payments. The result of this was that significant service charge arrears has built up. The seller did not disclose this information to the buyer of the property. By the time exchange of contracts came, the tenant had written to the seller to state that they considered that a dispute had arisen. Yet still the seller did not reveal this to the buyer.

Sellers must remember that the duty to tell the buyer about disputes, notices etc continues after exchange and up to the point that the transaction completes.

The service charge dispute came to light between exchange and completion and the buyer sought to withdraw from the contract on the basis that the property was worth less as a result of the dispute.

The Court held in the buyer's favour. The Court found that the seller had fraudulently misrepresented the situation to the buyer and awarded the buyer the return of the £812,500 deposit paid on exchange and costs and damages of almost £400,000.

The case was unusual because the seller was found to have deliberately misled the buyer, as opposed to making an innocent misrepresentation.

Sellers are reminded that replies to enquiries must be accurate and must be updated if the information changes; even if the information to be imparted might deter a buyer.

Internet link: Greenridge Luton One Limited v Kempton Investments Limited

To discuss this or any other property related issue, contact us.