#4868 - Misrepresentation In A Property Transaction Diagram - Property Law and Practice

Misrepresentation in a property transaction 1) Has there been a misrepresentation? a) Misrepresentations arising out incorrect pre-contract enquiry responses * Would be actionable only after exchange of contracts * E.g. if the seller states in the enquiry response that there are no boundary disputes and post-contract it turns out there is an ongoing dispute about a boundary fence. * E.g. Covering over the physical defects (e.g. damp) with paint b) Replying "not so far as the seller is aware" is an assertion that the seller had made reasonable investigations into the matter * if it turns out to be incorrect, can be sued for misrepresentation - William Sindall v Cambridgeshire County Council 2) What is the basis for a misrepresentation claim to be actionable? Position under the Standard Commercial Property Conditions (SCPC) / Standard Conditions for Sale (SCS) 1) Grounds SCPC 9.1.1 If any statement made by the seller in the negotiations leading up to the contract is misleading or inaccurate. 2) Remedies SCPC 9.1.2 / SCS 7.1.1(a) - Damages Where there is a material difference between the description or value of the property represented, the buyer is entitled to damages SCPC 9.1.3 / SCS 7.1.1(b) - Rescission and (implicitly damages as damages threshold passed) Where the seller acted fraudulently or recklessly, or where the buyer would be obliged to accept the property differing substantially in quantity, quality or tenure from what the misrepresentation led the buyer to expect, the buyer may rescind the contract. Position under the common law and statute 1) Grounds Common law and Misrepresentation Act 1967 Would have to show that the seller had made a misrepresentation which included the buyer to enter into the contract (more difficult to satisfy than the position under the SCPC or SCS) 2) Remedies Misdescription - Rescission and damages If there is an error in the particulars of sale and the matter is sufficiently significant, the innocent party can seek rescission and damages Misrepresentation - Damages under Misrepresentation Act 1967 This includes the loss resulting from incorrect replies to pre-contract enquiries. 3) Apply the facts to the law SCPC 9.2 - Consequences of rescission If the buyer rescinds the seller will have to return the deposit and the various purchase papers