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Property misrepresentation - how to avoid it and what to do if it occurs

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Help to Buy ISAs explained

When you buy a property you are making a big financial investment and it is therefore important that you know everything, good and bad, about it before committing to the purchase.

It is your responsibility as the buyer to make sure all of the necessary checks and enquiries on a property have been carried out before you buy it and it is therefore advisable that you have an in-depth survey on the property before signing a contract.

Unfortunately, surveyors do not always detect everything that may be wrong with a property. This could be due to them being unable to access a particular area of the property or land or because the seller has hidden or covered up any problems.

Obligations of the seller

The seller of the property has a legal obligation to provide you with information about the property. Most of this information is contained in the seller’s property information form which must be provided to you before you commit to the purchase.

This form is designed to prevent sellers from deceiving potential buyers by disguising serious or underlying problems with the property. It provides the buyer with a complete understanding of any problems with the property which they may have missed during viewings and allows them to make an informed decision as to whether they want to proceed with the purchase or not.

The form provides information on an array of potential issues including any alterations the seller has made to the property, any invasive species on the property – such as Japanese Knotweed, any issues with neighbours, information about boundaries and any disputes. Sellers are also required to disclose details of any flooding that may have happened under their ownership either inside the property or in the garden.

When misrepresentation occurs

If a seller provides inaccurate or misleading information in the seller’s property information form, it may amount to misrepresentation, and you could pursue a claim for a financial remedy.

The template for handling problems with the sale and purchase of a residential property is set out by the Standard Conditions of Sale (Fifth Edition), which can usually be found, or referred to, in the contract of sale. This document sets out what will happen if it is found that there are inaccuracies in the contract and covers the rights of the buyer and the obligations of the seller.

The first step towards recovering a financial remedy is to establish whether the seller has provided an inaccurate statement. If it is found that the seller did misrepresent the property you may be entitled to damages. The amount of damages may be the difference between the amount that the property was bought for and the actual, lesser value of the property in light of the problem which has since been found.

In exceptional circumstance it may be proven that the seller has acted deceitfully and you could be entitled to overturn the contract, making it void. In this instance, the property would be returned to the seller and the purchase price returned to you. If the contract is made void you may be entitled to other damages such as stamp duty, legal fees, and fees to other professionals involved in the purchase. Damages might also be awarded for the stress and inconvenience caused by the situation, removals fees and to compensate for any wasted decorating of the property.

Proving misrepresentation

Getting to a stage where damages are paid or a contract is void requires persistence from the buyer. Unfortunately much of the ‘burden of proof’ sits with the buyer, including the process of gathering information and evidence. This includes passing the following five key tests to prove that the seller misrepresented the sale:

  • the seller made a ‘representation of fact’
  • the representation is known to be false or was ‘reckless’ in its truth
  • the representation made by the seller was designed to be relied upon by the buyer
  • the buyer relied upon this representation
  • the buyer suffered a loss as a result

Proving that the seller misrepresented the sale could include having discussions with neighbours and asking them to provide statements. Other evidence can include documents relevant to the sale, photographic evidence that might prove the previous owners were aware of the issue and the opinion of experts, such as an independent surveyor.

Time is also an important consideration for anyone looking to overturn the contract. Evidence must be gathered as quickly as possible and seeking early legal advice is key.

It is crucial that you seek independent legal advice as soon as you think there is a problem. It can then be determined whether you have a valid claim against the seller. If it is found that you do have a valid claim then the first step is to make contact with the seller to make them aware of the issue. This initial contact with the seller should include relevant evidence and a request for a full, formal response. This provides an opportunity for dialogue and negotiation between the two parties which may help to avoid a long and expensive legal battle.

However if the dispute cannot be resolved, taking the matter to court may be the only option available to bring the dispute to a close. When a claim is issued at court it will be up to the you and your legal representatives to prove that deceit or negligent misrepresentation has taken place and that you are entitled to compensation, whether it be financial or an overturning of the sale contract.

To speak with one of our dispute resolution specialists about property misrepresentation call us on 01616 966 229.