When in the throes of a house move, it is vital that anyone selling their home understands the importance of providing accurate and honest replies to the standard questions raised by purchasers in conveyancing transactions.
Lyons Davidson are commonly instructed by clients who have purchased property after relying on sellers’ replies to pre-contract enquiries in the Seller’s Property Information Form, only to find that these replies were inaccurate – in some cases deliberately or fraudulently so. As a result, the client is left with a different property to that which they thought they were purchasing.
Property Information Form
Within the conveyancing process, the replies of the seller are generally provided via the seller’s solicitors on their instruction or in the Law Society Seller’s Property Information Form (in lawyer’s jargon, the ‘SPIF’ form). The replies provided in the SPIF come directly from the seller themselves, who signs the SPIF to verify the authenticity of the replies.
Sellers are required to provide their replies to a number of questions on aspects concerning the property, including:
- The position and ownership of boundaries;
- Relations with their neighbours;
- Rights affecting their property;
- Planning and building control matters; and
- Structural or flooding issues affecting the property.
If it is alleged by a buyer that a seller did not provide truthful replies, the legal basis of a claim would be founded in misrepresentation. Claims for misrepresentation can be brought under the Misrepresentation Act 1967 or in negligence. Commonly, a claim would be brought in both.
A misrepresentation claim can take three different forms, the distinction between them being the perceived knowledge of the seller at the time they make the representation:
- Fraudulent misrepresentation: in this scenario, the seller has made a representation that he or she knows to be false;
- Negligent misrepresentation: in this scenario, the seller has made a representation which he or she cannot ‘reasonably’ have believed to be true;
- Innocent misrepresentation: in this scenario, the seller can demonstrate that he or she had reasonable grounds to believe the representation was true.
Irrespective of the type of misrepresentation claimed, an aggrieved buyer must demonstrate all of the following in order to succeed:
- The seller made a representation of fact rather than opinion;
- The buyer relied upon the representation when deciding to enter into the contract (i.e. the purchase of a house);
- The representation was false at the time of the contract; and
- The buyer suffered loss as a result.
For the majority of clients, it is only once they have completed the purchase and moved into a property that they smell a rat. Some examples of buyers’ experiences are:
- The dawning realisation that, in spite of representations by the seller, their new next door neighbour is a serial litigant and they have now unwittingly entered a bitter neighbour dispute regarding the position of the common boundary;
- Someone walking, driving or parking on their property. Upon taking the person to task about this, justifiably aggrieved, they might be told that this has been common practice for many years and was agreed with the seller;
- The discovery that the property has been subject to improvement works that have not passed relevant building control measures or have been constructed despite not having planning permission.
So, what can an aggrieved buyer hope to achieve from a claim in such circumstances? The available remedies will depend upon the severity of the seller’s misrepresentation. Theoretically, in the case of a fraudulent misrepresentation, a buyer could seek rescission of the contract, a remedy that terminates the contract and aims to place all the parties in their original positions before contract (i.e. the seller repays the purchase price to the buyer and takes back the house). In practice, however, when a buyer has completed a purchase as part of a chain of transactions, this is impossible. In the vast majority of claims for misrepresentation, aggrieved buyers can ask the court to award damages instead.
The primary measure of damages will usually be based on the difference in value between the price paid for the property and the theoretical value of the property if the defect had been apparent. The assessment of damages is complicated and, usually, it is necessary to obtain an expert valuer’s opinion. Depending on the severity of the misrepresented fact and its effect on the marketability of the property, damages can range from no loss in value to a large proportion of the value, in which case tens and occasionally hundreds of thousands of pounds can be recovered.
For those who will shortly be completing these forms, please be aware that, although the replies do not constitute part of the contract (unless otherwise stipulated), they can be influential for buyers and proper consideration should be given before answering. As can be seen above, there are mechanisms available for buyers to seek compensation for inaccuracies or deliberate deceit.
Finally, another important consideration for buyers is that the time available for them to make claims for misrepresentation is not endless. It may be the case that misrepresentation only becomes apparent to a buyer some considerable time after the purchase, but the applicable legislation provides six years to make such a claim, generally starting on the date contracts were exchanged.
If you have sold or purchased a property recently and you think you might have been affected by any of the issues raised in this article, or for more information on the Seller’s Property Information Form, please get in touch with Jonathan Calverley by emailing [email protected] or phoning 0117 904 5837.