Misrepresentation in Property Transactions

Misrepresentation occurs when party A makes a false statement of fact or law to party B, which induces the latter party to enter into a contract which then leads to party B’s loss. For a claim of misrepresentation to succeed, it is necessary to show:

• A false statement of fact or law was made;
• The statement induced the party to enter into the contract; and
• The statement materially affected the party’s decision to purchase the property.

Types of Misrepresentation

There are three main types of misrepresentation under English law:

1. Fraudulent misrepresentation: Where the statement was made knowingly, or without belief in its truth, or recklessly as to whether it was true or false;
2. Negligent misrepresentation: Where the statement was made carelessly or without reasonable grounds to believe it was true; or
3. Innocent misrepresentation: Where the party making the statement genuinely believed it to be true and had reasonable grounds for such belief.

Caveat Emptor (“Buyer Beware”) and Seller’s Duty to Disclose

It is essential to address the principle of caveat emptor, which applies in English property law. Caveat emptor means “buyer beware”, whereby the buyer is responsible for ensuring the suitability and condition of the property they are purchasing. Under this principle, the seller is not obligated to voluntarily disclose defects or issues with the property unless specifically asked.

While the principle of caveat emptor places the burden on the buyer, there are important exceptions, particularly where misrepresentation is concerned. These exceptions include:

• Where the seller actively makes a false statement about the property’s condition, boundaries, legal status, or other material facts. Even if you did not ask specific questions, any misleading statements made by the seller could still amount to misrepresentation; and

• Non-disclosure of hidden defects: If the seller conceals defects that could not reasonably be discovered during a normal inspection, they may be held liable under certain circumstances. However, the law typically does not impose a duty on the seller to disclose defects unless they were asked about them directly.

More specifically in property transactions, the seller is required to complete a Property Information Form (“TA6 form”), which is designed to reveal important information about the property. This form must be completed truthfully, and any false or misleading answers may give rise to a claim for misrepresentation.

If the seller made false statements in the TA6 form or failed to disclose material information, this could provide further evidence of misrepresentation.

Responsibilities as a Buyer

Under caveat emptor, buyers are expected to conduct their own due diligence. This includes:

• Survey and inspection: It is the buyers’ responsibility to have a survey or inspection carried out to assess the condition of the property; and

• Specific enquiries: If there are particular concerns, it is important that the buyer, through their solicitors, raise these explicitly during the pre-contract stage to ensure that any issues are addressed in writing.

How can Pinney Talfourd help?

If you are concerned that a form of misrepresentation occurred during your property transaction and for more information, please contact our Residential Property Litigation department who would be happy to assist in reviewing your conveyancing documentation and through any negotiation and litigation that may arise in resolving the issues.