Flooding case a 'stark warning' to sellers, according to legal experts

Flooding case a stark warning to sellers, according to legal experts

A couple whose new home was repeatedly hit by flooding are to sue the previous owners, claiming that the problem was deliberately hidden from them before they bought the property.

Paul and Hazel Edwards, who bought the £750,000 Newcastle property in 2014, claim a Facebook post from two years earlier proves that the previous owners were aware that the property was prone to flooding, despite declaring that there were “no flooding problems” on the legally required ‘Property Information Pack’.

The couple have now applied to the High Court to force the previous owners to take back the property, refund the full amount paid and reimburse the Edwards for mortgage repayments, plus damages.

Experts have suggested that the case serves as a ‘stark warning’ to sellers.

Natalie Bradley, a solicitor and conveyancing expert at the national law firm, Stephensons, says that anyone selling a home has a legal obligation to provide certain information about the property to the prospective buyer.

“The majority of that information is contained in the ‘Seller’s Property Information Form.”, she explains. “This document must be provided to the prospective buyer before they make a formal commitment to purchase the property.

This form’s main function is to make sure that the buyer has a comprehensive understanding of the details relevant to the property, including any alterations, any invasive species on the property – such as Japanese Knotweed, issues with neighbours and information about boundaries and any disputes. Flooding is also covered.

Natalie says: “In short, the form gives the buyer the opportunity to get a more thorough impression of any problems with the property which they might have missed during viewings. It allows the buyer to make an informed decision as to whether they will proceed with the purchase or not.”

“Equally, it is designed to prevent sellers from deceiving any potential buyers by disguising serious or underlying problems with the property.”

As part of the conveyancing process, sellers are asked to disclose details of any flooding, covering both the house and any gardens. This covers all types of flood, whether caused by a burst water pipe, a flooded bathroom, extreme weather or a river which has burst its banks.

Natalie adds: “As we have seen in the case of Mr and Mrs Edwards, where a home owner is caught unawares by an underlying issue with the property, the cost of putting the problem right can run into the thousands of pounds.

“If a seller provides inaccurate or misleading information in the Seller’s Property Information Form, it could well be construed as misrepresentation, and the buyer could pursue financial remedies.”

The question of ‘what happens next’ in cases of misrepresentation is handled by a separate area of law – dispute resolution.

Liam Waine, a solicitor and specialist in dispute resolution at Stephensons explains that the template for handling problems with the sale and purchase of 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 sets out what happens when it is found that there have been inaccuracies in the contract, or the negotiations leading up to it”, he says. “It covers the rights of the buyer and – importantly in this case – the obligations of the seller.”

“The first step is to determine whether the inaccuracy was deliberate deception on the part of the seller, rather than an error or a mistake. When you have an answer to this question, you can look at what remedies are available.”

Liam explains that at the most basic level, where something can be found against the seller, the buyer is entitled to damages.

“Damages can include the difference between the value of the property when it was sold and actual, lesser value of the property in light of the problem which was found.

“However, if it can be proven that the seller has acted deceitfully – ie: by ‘deliberate concealment’ – then the buyer could be entitled to rescind the contract, declaring it ‘null and void’. In this instance, the property would be returned to the seller and the purchase price returned to the buyer.”

Where the contract is rescinded, Liam says that the buyer may be entitled to other damages, including stamp duty, conveyancing fees, mortgage penalties and broker fees. Damages might also be awarded for distress and inconvenience, removals fees and the wasted cost of decorating the property.

However, getting to such a stage isn’t always straightforward and requires some persistence from the buyer. This includes passing five key ‘tests’ to prove that the seller actively set out to deceive the buyer.

5 ‘key tests’ to proving ‘property misrepresentation

  1. That the seller made a ‘representation of fact’
  2. That the representation is known to be false or was ‘reckless’ in its truth
  3. That the representation made by the seller was designed to be relied upon by the buyer
  4. That the buyer relied upon this representation
  5. That the buyer suffered a loss as a result

“This could include having discussions with neighbours and – where possible – 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.”“Unfortunately”, says Liam, “much of the ‘burden of proof’ lies with the buyer, including the process of gathering information and plenty of evidence.

Time is also an important consideration for anyone looking to rescind the contract. Evidence must be gathered as quickly as possible and, Liam says, seeking legal advice at an early stage is a must.

“The first legal step is making contact with the seller to highlight the issue, with relevant evidence and to request a full, formal response. This provides an opportunity for dialogue and negotiation between the two parties, perhaps avoiding a costly and lengthy legal battle.

Ultimately, however, should the dispute not be resolved, taking the matter to court may be the best option available.

Liam said: “After issuing a claim at court, it will be up to the buyer and their legal representation to prove that deceit or negligent misrepresentation has taken place and that the buyer is entitled to some form of remedy.”

By Natalie Bradley, senior associate in the residential conveyancing team and Liam Waine, partner in the dispute resolution team

First published by Moneywise on 5th October 2017.