A recent High Court case has provided useful guidance on what a seller should disclose in replies to standard enquiries when selling a property.
It is standard practice for a buyer to raise standard enquiries of a seller when purchasing a property. False or misleading replies could lead to a claim of misrepresentation or negligent misstatement against a seller.
The two particular enquiries at the heart of this High Court case asked whether (1) the seller had been sent or received any communication or notices which affected the property (for example from or to neighbours, the council or a government department) and (2) whether the seller had any negotiations or discussions with any neighbour or any local or other authority affecting the property?
When asked the questions above, the seller of a residential property answered ‘no’ to both questions.
The truth of the matter was that, at the time he gave these replies, a number of local authorities were involved in a joint consultation regarding further housing development in the vicinity and the seller had been well aware of the planned development. Although he had received no official communications, he had attended public meetings regarding the development, had received a flyer from a group opposing it, had signed a petition against it and had discussed the proposals with local residents.
Following the purchase, planning permission for 800 houses in the locality was granted and the buyer took legal proceedings against the seller for damages for fraudulent misrepresentation.
The High Court, however, held that the seller’s answers were not misrepresentations. In coming to this decision it said that:
- The starting point in a conveyancing transaction is still 'caveat emptor' - let the buyer beware.
- The terms used in the enquiries should not be construed too widely otherwise sellers would be under a duty to disclose speculative and remote information. There needs to be a degree of certainty that an event was likely to happen and would affect the property before an obligation to disclose arose.
- The standard questions are intended to be capable of being answered by a lay person, and should not be interpreted in such a way that expert advice would be needed to understand the information required.
- The seller's discussions with local residents did not affect the property, because the outcome of the discussion would have no bearing on whether the proposal went ahead or not. To find otherwise would mean that sellers were required to disclose matters that may be no more than gossip.
Whilst this case was residential, it may provide useful guidance to sellers of commercial properties. However, care should be exercised in applying this case to a commercial property transaction, as a Court may well decide that commercial property standard enquiries are not aimed at lay people in the same way as residential enquiries.