A recent case emphasises the importance to developers and purchasers of local authority search results and what happens if the results are wrong.
In a recent case (Chesterton Commercial (Oxon) Ltd v Oxfordshire County Council  EWHC 2020 (Ch)) the High Court held that a local authority was liable to a purchaser where a local authority search result confirmed incorrectly that part of a property was not highway maintainable at public expense.
The claimant had bought a property comprising three buildings and some land fronting them. The land fronting the buildings comprised of a footway, a driveway and several car parking spaces. The claimant purchased the land with a view to redeveloping the properties and selling them each with two parking spaces and selling the remaining car parking spaces separately.
In June 2007, in reply to the claimant’s local authority search, the local authority confirmed that none of the property was highway maintainable at public expense. However, the local authority failed to disclose that the property had been under investigation since 2005 (following claims by third parties) as to whether the part of the property where the parking spaces were located was in fact a public highway.
The claimant completed its purchase in September 2007. In 2009, while negotiating the sale of one of the buildings on the property, the claimant was told by the prospective purchaser about the local authority’s investigation, which had since been revealed on the local authority register. As a result of the uncertainty this created, the sale of two of the buildings proceeded without the car parking spaces and at a reduced value.
In 2010, the local authority concluded (following further investigation) that part of the property was and therefore always had been a highway maintainable at public expense. The claimant had also attempted unsuccessfully to apply for the relevant part of the highway to be stopped up.
The court held that the local authority owed a common law duty of care to the claimant in respect of its replies to enquiries. Under section 36 of the Highways Act 1980, local authorities are obliged to make and keep up to date a list of the streets within their area which are highways maintainable at public expense.
The local authority had not kept this list up to date and had not disclosed the investigation which it had been carrying out in respect of the property. As such, the local authority search result amounted to a statement that the parking spaces were not part of the highway but were private land capable of being used and sold as the claimant wished. The local authority was therefore liable for breach of its common law duty of care to the claimant and also for negligent misstatement.
The claimant was successful in claiming damages for the loss in value which had been attributed to the parking spaces (£240,000) and also for its expenses of £150,000 in applying for the unsuccessful stopping up order. However, as the local authority was not aware that the claimant was seeking to redevelop and sell the spaces, losses incurred by the claimant in respect of the development profit were held to be too remote.
WHAT DOES THIS MEAN FOR PURCHASERS AND DEVELOPERS?
Clearly this case is most relevant for local authorities – they must always ensure that the information provided in their search results is up to date.
This case serves as a welcome reminder to purchasers and particularly developers of the importance of carrying out a local authority search before exchanging contracts for the purchase of a property (even if the search results turn out to be wrong). Purchasers should also remember that local authority search results can go “stale” if there is a delay in proceeding to exchange – if necessary the search should be repeated if there have been delays for more than three months.
The decision provides comfort to buyers – if the information provided by a local authority is incorrect, it is clear that the buyer can claim for the loss in value to the property. However, developers should take note that development profit is likely to be too remote to recover unless the local authority has been made aware of the intention to redevelop. Therefore it is essential when submitting a highways search to the local authority to make it clear in writing that the site is to be acquired for development purposes.