When you are selling a property, you will have to give information to your buyer about the property. We have looked over a series of articles about the information you may have to provide to your seller. You will usually be asked to complete a Seller’s Property Information Form (SPIF). Further, some buyers will have extra enquiries about the property, over and above those in the SPIF. It is important to carefully consider your replies to any enquiries and ensure that each statement is true and accurate. Failure to do this could give rise to a misrepresentation claim made by the buyer.
What is misrepresentation?
Misrepresentation is a false statement which, whilst not being a term of the contract, induces a buyer into entering into a contract. It applies where the false statement is one of fact or law, and not opinion.
The law acknowledges that sometimes people make mistakes, and there are therefore different types of misrepresentation, which will be treated slightly differently:
Fraudulent misrepresentation: Where the seller knows that the statement is false and does nothing to rectify this.
Negligent misrepresentation: Where the seller cannot show that he both believed that the statement was true and had reasonable grounds to believe this.
Innocent misrepresentation: Where the seller believed the statement to be true and had reasonable grounds for this belief.
How does it apply to the sale of my property?
As mentioned above, throughout the sale transaction you are likely to give statements about the property in response to queries raised by the buyer.
Sometimes, however, you may have owned the property for some time and may not remember everything about the property. For example, dates of any works carried out at the property. Furthermore, the documents you may need to refer to or retrieve may have been destroyed. It is important, however, that the information you give is accurate.
If you misrepresent something within the pre-contract enquiries (whether on purpose or innocently), the buyer may have a claim against if he can show:
A misrepresentation by you;
That the buyer believed the statement to be true;
That the buyer relied upon the statement when making the decision to complete the purchase; and
That the buyer suffered loss as a result.
Sellers are asked two questions about their neighbours within the SPIF.
Have there been any disputes or complaints regarding this property or a property nearby? If Yes, please give details. And
Is the seller aware of anything which might lead to a dispute about the property or a property nearby? If Yes, please give details.
Let’s say you answer No to both questions, but in fact you have been involved in a dispute over a boundary fence. On his purchase, the buyer might then inherit a costly boundary dispute. If the buyer can show that he relied on the misrepresentation in deciding to enter into the contract, you are likely to face a claim in misrepresentation.
What could this mean for me?
There are a number of remedies the buyer may seek in a misrepresentation claim. The buyer must issue a claim against you within six years. The courts can order that you pay monetary damages for the loss suffered by the buyer. Alternatively, the Court could order that the contract be rescinded (i.e. undone), putting both parties back into the position they were in before the contract was agreed.
How do I minimise the risk of a claim if I choose to sell my property?
A misrepresentation claim years after you have sold a property would be undesirable and highly detrimental incurring time, cost and legal fees. It is vital therefore, that you take care in answering any enquiries.
If you cannot recall the information, make it clear in your replies to enquiries. Similarly, where appropriate, it may assist to express your replies as an opinion. This can minimise the likelihood of the statement being interpreted as an actual fact. If you are unsure of what reply to give to a buyer, ask your legal adviser before making any statements or assurances.
If you would like further advice regarding a potential misrepresentation claim in property or any other matter, contact our specialist property litigation team on 0113 244 9931.