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07 June 2018

Handling responses to buyers’ enquiries

Question

I am a conveyancing solicitor and am acting for a client in a purchase of a property. When I received the property information form from the seller, they had left blank the answer to the question on whether they were aware of any disputes or complaints in relation to the property or property nearby. I assumed this was simply an error on their part. I was intending to write and ask them to answer it, but a colleague said she lived on the same street and there were no disputes in relation to the property. She said there were two families living on the street who both had antisocial behaviour injunctions made against them, who would regularly cause noise nuisance, but that their properties were at the other end of the street to this property. I didn’t think this would be material and simply informed the clients that there was nothing that would adversely affect the property and we exchanged contracts with the sellers. Yesterday, the clients called to say they had been to visit the property and had seen some people screaming at each other in the street and they do not want to complete anymore. They want to know whether they can now rescind the contract? If they cannot, what should we do next? Will I be liable? What should I do in the future if I receive those sort of responses from a seller?

Answer

Unfortunately, it may be difficult for the client to rescind the contract before completion on the basis of misrepresentation because the seller has not actually said they were not aware of any complaints about properties nearby. Also, it is likely that some sort of evidence would be required that they were actually aware of the complaints. If the client does not want to complete, then the risk is that they ultimately forfeit the deposit and that you incur liability for this loss. Given that you were aware of the neighbours, you are likely to be liable for not having disclosed this to your client. In future, you should seek clarification from the seller as to why they had not answered the question. If their answers are still not sufficient, the best course of action would be to contact your client raising your concerns and setting out the further steps which could be taken.

Explanation

There is no express representation here as the sellers have simply not answered the question. A court would therefore need to consider whether there was an implied representation, that is whether a reasonable person with the relevant information would conclude, from the lack of response, that they were not aware. This may be arguable and could be used in negotiation with the seller, but it seems unlikely that a court would conclude that there was an implied representation that they were not aware, when they could simply have ticked the “no” box.

On top of this, the question on the form asks whether the seller “was aware of” any disputes or complaints about the property or nearby property. The misrepresentation needs to be made either fraudulently or negligently. Therefore, in order to rescind, your client would need to be able to demonstrate, on the balance of probabilities, that the seller was aware of the development and considered it to be nearby. It may be that this does not present an issue, if it is well known, but you would need more information as to the conduct and how near the property it is.

The first instance decision in Orientfield Holdings Ltd v Bird & Bird LLP [2015] EWHC 1963 (Ch); [2015] PLSCS 215 made clear that where a solicitor has relevant information in his/her hands and does not disclose this to the client, they will incur liability, even where such information would not have been discovered in the usual scope of the conveyancing transaction. In this case, the solicitors had acted on a claim where the seller had responded to the property information form by not answering whether any notice had been received in relation to any planning application/permission, and answered the question about any known development with “the buyer should conduct their own enquiries”. When the solicitors queried these responses, they were told that, given the scope of the area, it was better for the buyer to conduct their own enquiries. As a result, the solicitors conducted a PlanSearch and discovered that there were a number of applications/permissions within 300m of the property, but concluded that none of them were material. They did not inform the client of the results of the search. The buyer then became aware of a development of a school nearby and did not complete.

Judge Pelling QC considered that if the solicitors had not done the PlanSearch they would not have been liable, but where a solicitor undertakes the further enquiries he/she will be under a duty to disclose them to his/her client. He found that it was not possible for the solicitor to draw a conclusion as to what would and would not be material to his client. He further concluded that the solicitors’ breach of duty had caused the buyer to lose part of their deposit. The findings on causation were challenged and upheld on appeal ([2017] EWCA Civ 348; [2017] EGLR 26). In the circumstances, it seems likely that you would be liable if the deposit is forfeited. Your situation is different in that you did not carry out a further search, but it seems likely that the principle that you had potentially relevant material in your possession and did not disclose this to the client would apply.

The best practice for the future would be to ensure that you are clear in your scope of instructions that no enquiries, outside the norm, will be undertaken without payment of an additional fee and additional instructions to do so. In the first instance, you should go back to the sellers and ask them to provide an answer to the question.


This article was written by Robert Highmore and Claire Thompson (Enterprise Chambers). For more information please contact Robert on +44 (0)20 7203 5201 or robert.highmore@crsblaw.com

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