When a home or commercial property is changing hands, the buyer’s solicitor will normally ask the seller various questions so they are clear about what their client is actually buying.
Q. What happens if the seller lies or fails to update their replies?
The buyer may be able to claim back their deposit and claim significant compensation. A recent case, Greenridge Luton One Ltd and another v Kempton Investments Ltd [2016], demonstrates this point.
The solicitor acting for the buyer of a commercial property raised enquiries with the seller. Having anticipated these, the seller drafted the replies some months earlier and forwarded the replies to the buyer’s solicitor. Circumstances then changed when a financial dispute escalated between the seller and the property’s tenant. The seller did not subsequently disclose the dispute to the buyer or their solicitor. Based on the original replies, contracts were exchanged and a significant deposit paid. The dispute came to the attention of the buyer’s lender who then refused to finance the rest of the purchase until the matter between the seller and tenant was resolved.
The buyer, powerless to resolve the dispute, decided to cancel the contract and claimed the return of the deposit plus compensation for fraudulent misrepresentation.
The judge decided in favour of the buyer. He agreed that the buyer had relied on the seller’s out-of-date replies and had been induced by them, and that the seller had either fraudulently misrepresented the situation or been reckless as to whether the information provided was still accurate at the date of exchange.
As such, the buyer was entitled to the return of the deposit and £395,948 compensation for deceit.
Take-home message
It is important for a seller to take all the time necessary to ensure that their replies accurately reflect their knowledge at the time of being asked. If the seller’s knowledge of a matter then changes, they must immediately inform their solicitor and the buyer before contracts are exchanged. Please note this is not the same thing as ensuring that the reply given to the buyer is factually correct.
How we can help
Should you need expert legal advice regarding any of the above please contact us at Bromleys Solicitors on 0161 330 6821 or email Paul Westwell on pwestwell@bromleys.co.uk or Rachael Frankland on rfrankland@bromleys.co.uk
The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.