In residential property transactions, both buyers and sellers have important responsibilities in providing replies to enquiries and misrepresentation. The legal principle of “caveat emptor” (“buyer beware”) places a burden on buyers to conduct due diligence. However, sellers must truthfully answer enquiries and disclose any material facts that may impact the buyer’s decision-making process.
Buyers should thoroughly investigate the property and raise any questions or concerns they may have. Sellers, on the other hand, are obligated to provide accurate replies to these enquiries and disclose any relevant information.
Misrepresentation in this context refers to providing false or misleading information. Both buyers and sellers should understand the potential consequences and legal implications of misrepresentation.
Rosser v Pacifico Ltd – The case background
The Claimant (Mrs Rossar) claimed damages for misrepresentation made by the defendant (Pacifico Ltd) prior to the purchase of a leasehold property in Cardiff in 2016.
The property was marketed and sold with the benefit of two bedrooms on the second floor, 1 bedroom with the benefit of a Velux rooflight window.
There was no consent for the Velux window, which was needed because the property was in a conservation area. Subsequently, the window had to be removed. As such, the bedroom could not be used as a bedroom anymore because of the lack of ventilation and light.
s.1 Misrepresentation Act 1967
The claim was bought under s.1 Misrepresentation Act 1967 which provides:
“Where a person has entered into a contract after a misrepresentation has been made to him by another party thereto and as a result thereof has suffered loss, then, if the person making the misrepresentation would be liable to damages in respect thereof had the misrepresentation been made fraudulently, that person shall be liable notwithstanding that the misrepresentation was not made fraudulently, unless he proves that he had reasonable ground to believe and did believe up to the time the contract was made that the facts represented were true.”
Mrs Rosser had to prove the following:
- An actionable representation or representations was or were made to her;
- One or more of those representations was untrue
- She relied on it or them in entering into the contract to purchase the property; and
- As a result, suffered loss
If the above is established then it is up to the defendant to show that he had reasonable grounds to believe and did believe up to the time the contract was made, that the representations were true.
Property information form
During the conveyancing process, the defendant completed and signed a Property Information Form. One question asks if the seller is aware of any breaches of planning permission conditions or work that does not have all necessary consents and that there were no planning issues to resolve. The defendant confirmed no.
The Property Information Form itself contains a clear warning to the vendor of the importance of providing accurate answers.
Mrs Rosser completed the purchase in July 2016.
In October 2017, Mrs Rosser received a letter from the Council notifying her that there was an unauthorised rooflight installed in the roof of the property and warning her of potential enforcement action. Mrs Rosser removed the Velux window which meant the room could no longer be used as a bedroom.
In the judgement, the defendant complained that it seemed that the burden for discovering the true position in relation to planning consents was being put unfairly on him, in circumstances where Mrs Rosser had experienced conveyancing solicitors acting for her who should have investigated the position more fully. The judge said that the defendant was missing the point that the conveyancing process operates on the basis that the purchaser is entitled to ask questions of the vendor, rather than having to make its own enquiries from scratch and is entitled to rely on a vendor who has the greater knowledge about what has been done, with what permission to the property having made its own reasonable enquiries before answering those questions.
The judge considered that the answer “no” given by the defendant to question 4.4 of the Property Information Form carried with it the implied representation that the defendant had reasonable grounds for believing that there was no work that did not have all the necessary consents.
Although the defendant was not aware of the work for which required building regulations, the defendant did not have reasonable grounds for believing that planning consents had been obtained for the Velux window.
The judge commented that the sort of enquiries which the representation implies included checking the actual work done against the planning permission which had been granted.
The Judge concluded while not calling into question the defendant’s integrity, skills or expertise in developing properties, he did not in the circumstances of this case have reasonable grounds for believing that there was no work that lacked a requisite consent.
Compensation for the defendant
The defendant was found liable to compensate Mrs Rosser for misrepresentation made in the course of the sale of the property and Mrs Rosser was entitled to damages as follows:
- £30,000 being the difference between the value of the property in 2016 and the amount paid for it by Mrs Rosser
- 1,399.60 being the increased amount in stamp duty land tax
- £2,535 being the cost of removing the Velux window and making good the roof and ceiling
- £208.32 in respect of obtaining advice
The total amount recoverable is £34,142.92
Points to note
Clients should be aware that their answers to information forms and replies to enquiries during the conveyancing process must be accurate. You do not need to establish fraud to be found liable for misrepresentation. The replies the seller gives must be true or there must be evidence to prove the seller could have reasonably believed the replies to be true. Providing replies that the client thinks is probably true but has not investigated is not a reliable defence.
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