Property Sellers Must Answer Pre-Contract Queries Carefully Or Risk Legal Action

Property sellers should think very carefully about their answers to buyers’ questions before the parties have exchanged contracts, or risk compensation claims for misrepresentation, a ruling has made clear.

Owners of a residential property had received leaflets from their local authority about proposals to develop three local sites, and from a residents’ group set up to oppose the three developments. They went to a meeting and spoke to a prominent member of the residents’ group. They took the view that the local authority did not support the development nearest to their property.

When they put their property on the market a year later the owners answered ‘no’ to both the questions in the buyer’s pre-contract enquiries:

‘Has the seller either sent or received any communication or notices which in any way affect the property (for example, from or to neighbours, the council or a government department)? If yes, please supply a copy. Has the seller had any negotiations or discussions with any neighbour or any local or other authority affecting the property in any way? If yes, please give details.‘

However, after the purchase was completed, planning permission was granted on appeal (following an initial refusal) to build more than 800 homes on the site nearest to the property. The buyer claimed compensation on the basis that the sellers’ answer amounted to a fraudulent misrepresentation.

The court found that the sellers’ replies were reasonable. They could not have foreseen that planning permission would be given for the development on appeal. It also found that the wording in the question referring to ‘communications and notices’ was not sufficiently wide to require them to disclose the leaflets sent to them about the local housing strategy.

The sellers escaped liability in part because of a technical legal interpretation of the wording of the question. This shows the care with which sellers need to consider the questions they are asked by purchasers before entering into contracts to sell a property.

Standard pre-contract enquiries used by solicitors in conveyancing transactions have since changed and there would have been an obligation to disclose the leaflets if the new version had applied in this particular transaction.

Operative date

• Now

Recommendation

• Property sellers should think very carefully about their responses to buyers’ questions before the parties have exchanged contracts. If in doubt take specialist legal advice

Case ref: Thorp v Abbotts [2015] EWHC 2142

14 December 2015