Property misrepresentation claims: hiding the truth

As a potential homebuyer, you may be surprised to hear that the burden of discovering exactly what you are getting for your money lies squarely with you. Whether the garden floods, the roof leaks, the floorboards are rotten, the house is subsiding, the electrics are dangerous, or the property boundaries are in dispute, the seller does not have to volunteer any of that information.

The big reveal begins with three lines of enquiry:

• conveyancing searches;
• the property information form; and
• your survey.

Conveyancing searches

Conveyancing searches are enquiries made by your solicitor to various authorities to find out more information about the property you wish to purchase. Searches may uncover a host of unpalatable information about your dream home, including whether it:

• floods regularly, making it difficult or impossible to insure.
• has an unstable mineshaft running beneath it.
• has debt attached to it.
• is saddled with the responsibility to pay for repairs to the parish church.
• is affected by radon gas.
• sits on land used previously for industrial purposes and now contaminated with such delights as asbestos, arsenic, solvents, or gases.
• has a new housing estate, road, wind farm, or factory planned close by, which may affect not only your enjoyment of the property but also its value.

Property information form

The Law Society’s Property Information Form (known as a TA6) is completed by the seller to give a potential buyer more detailed information about the property. At sixteen pages long, with fourteen sections, the TA6 is comprehensive. Every time the seller responds to a question or enquiry, they are making a representation to you as to the state of the property. If they fail to answer honestly and accurately, they may open themselves to a claim for misrepresentation.

House survey

Instructing a surveyor to carry out a survey on the property is always recommended. However, despite the substantial financial commitment you are about to make, moving home is an expensive process, and a survey may be low on your list of priorities. So, many buyers decide to skip the survey or opt for a less expensive – but less thorough – type of survey. See our earlier article on the types of survey available when buying a house.

Further enquiries

The information gleaned from your searches, the TA6, and your survey may raise red flags. After discussing those with your conveyancing solicitor, further enquiries will be raised with the seller about those issues of concern. Just as with the TA6, the seller must answer those enquiries honestly and accurately.

A claim for misrepresentation

In legal terms, a misrepresentation is where one party to a contract makes a false or misleading statement to the other party to induce them to enter into that contract. In a property transaction, a misrepresentation occurs when a seller knowingly misrepresents any of their answers on the TA6 or in response to further enquiries raised.

For example, let’s say your seller was asked whether the property suffers from surface water flooding and answered that it does not. However, after completion, the neighbours advise that the garden is waterlogged regularly as a result of a nearby stream which is liable to flooding. In relying on the seller’s misrepresentation, you have lost the opportunity to negotiate a lower purchase price or to chose not to proceed at all.

Bringing a claim for misrepresentation

To bring a claim against your seller for misrepresentation, you will need to find evidence that they:

• answered an enquiry inaccurately; and
• prove that it was more likely than not that the seller was aware of the issue before you bought the property.

Even if you can prove misrepresentation, you must also prove you have suffered a loss. The likely measure of damages is the difference in the property’s value on the open market with the known problem or defect, compared with the price you paid. To establish this, you will need evidence from a valuation surveyor. Of course, the seller is also likely to be allowed to rely on their own valuation evidence.

Remember, it is much more difficult to persuade the Court that had you known of the defects you would not have proceeded with the purchase.

Negligent surveyor?

If you obtained a survey, should the issue or defect have been identified and highlighted by the surveyor? If so, your claim may instead be against your surveyor in negligence. Much depends on the nature of the problem and the type of survey you paid for. Remember, only with a more expensive full building survey will the surveyor look behind walls, between floors and above ceilings.