BUYING & SELLING HOUSES  

The Dilemma of Disclosure

News headlines have recently reported of a Surrey based couple who have launched a landmark legal case to sue the previous owner of their £250,000 two bedroom flat for not telling them of the “neighbour from hell”. Upon the first weekend of moving into their new home, their front door was destroyed, and they were subjected to violent outbursts causing them to have to vacate the property. Michelle Smyth and Jason Stevens are claiming thousands of pounds in compensation from their Vendor and former occupant, Mr Flynn, insisting that he was aware of the neighbour’s allegedly aggressive and violent disposition but that he failed to disclose it in the pre-sale documentation. This poses the question what exactly must be disclosed to a prospective purchaser upon the sale of your property.

The Latin principle of Caveat Emptor or “Buyer Beware” governs property transactions however there will undoubtedly be matters which are not public record or cannot be discovered through a search which the buyer will want to know pre-completion. In Northern Ireland, a seller must complete the Vendor’s Replies to Pre-Contract Enquiries prior to the formation of the contract. This encompasses a series of questions ranging from whether recent works have been undertaken which required statutory approvals to whether the property is connected to mains water and gas. More prudent questions require the Vendor to disclose whether they have experienced any problems with systems in the property or whether there is any pending litigation which would threaten the sale of the property. Certainly, there is an onus on the Vendor to provide accurate contractual warranties as they are considered best placed to answer such questions so that the buyer may rely on these.

If a buyer does rely on the answers given in the Replies to Pre- Contract Enquiries and enters into a contract, an incorrect reply may result in the seller being liable for misrepresentation. This is the case where it can be shown that the seller has made an untrue statement of fact, the buyer has relied on it by entering the contract and has suffered loss as a result. A misrepresentation can be fraudulent (where it is made knowingly, or recklessly as to its truth), negligent (where a statement is made carelessly or without reasonable grounds for believing its truth); or innocent (where the seller had reasonable grounds for believing his statement was true). Where fraud or negligence is proved, the buyer may seek rescission or damages, or both. Any damages awarded will seek to place the buyer into the position he was in before the misrepresentation took place. If there is a finding of innocent misrepresentation, the buyer may seek rescission, or the court can award damages in lieu of rescission, but both remedies are not possible.

While there are not many reported instances of property misrepresentation, a notable case is that of McMeekin v Long in which a Court awarded damages of £67,500 to the buyer in circumstances where the seller failed to disclose a dispute with a neighbour and was found liable for fraudulent misrepresentation. This re-iterates that despite the temptation and often the pressure to progress quickly towards completion and secure a moving date, it is extremely important for sellers to carefully consider all enquiries put to them and ensure that any replies given are accurate to avoid a situation where misrepresentation could raise its head.

Fiona is a solicitor in the firm’s private client department. For more information on disclosure when buying and selling a property, contact Fiona at fiona.mcflynn@mmwlegal.com.

 

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