This month we will review what information a property seller should disclose as part of a conveyancing transaction and consider a recent case where a seller has been accused of misleading a buyer by saying nothing.
The starting point in any sale of land is to apply the contractual principle of caveat emptor or buyer beware. However, in practice it is rarely this simple. As part of a normal conveyancing transaction, a seller would complete a property information form in order to give a buyer detailed information about a property. The form has several versions, which cover sales of freeholds, leaseholds and new build residential properties. All of these forms have been designed by the Law Society as part of the national conveyancing protocol used in the majority of transactions in England and Wales.
Problems can arise when a seller decides not to disclose certain information about a property as they do not want to put a buyer off. In the most common version of the property information form (the TA6), a seller should disclose information about things such as:
• Disputes with neighbours
• Planned developments
• Alterations to the property
• Drainage, sewers and utilities
The information in the form becomes part of the contract, so how it is completed and the information that is provided are important. Where a seller does not disclose information (for example if the TA6 is only partly completed), this is likely to raise more questions. Where a seller refuses to answer some of the questions on the TA6 form, it should raise a red flag with a buyer and may put them off the transaction.
If a seller deliberately lies on the form, it may result in legal action. It can even be a problem if a seller tries to be vague with their answers as they can be accused of making a misrepresentation. The best policy a seller can adopt when completing a property information form is to give as straightforward an answer as possible. In a recent ongoing case, the buyer of a property brought an action against the seller for £300,000 for failing to disclose that a motel was opening near the home. The barn conversion based in the Oxfordshire countryside was sold for nearly £1,000,000. The couple that purchased the property only found out about plans to build a 61-room motel near the property after they had exchanged contracts. In the property information form, the sellers had indicated that they did not know of any nearby development that might affect the property, but this was a lie. The sellers had actually been caught out by the fact that they not only knew of the development but had actually made strong objections to it. This made the sellers’ later claim that they did not believe that the development would affect their home fail to ring true.
The case is still ongoing, with the buyers having refused to complete the purchase despite having reached an agreement in November 2017. In addition to the buyers seeking the refund of their deposit and for the purchase contract to be revoked, they have also claimed more than £200,000 compensation for costs associated with the failed transaction.
Despite the property having now been sold to a different purchaser for a slightly reduced price of £985,000 (and presumably with very clear answers on the TA6), the case is rumbling on. Regardless of who wins the claim, this is a case where a straightforward answer could have avoided a lengthy and stressful situation for all parties. My personal view is that the sellers are likely to be found to have made some kind of misrepresentation, as there is a damning paper trail. At the very least they were negligent in not disclosing what they knew and it may prove to be a very expensive “white lie”.
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