Estate Agents and Sellers Making False or Misleading Statements

When buying a property it is important to ensure that you inspect everything that you can and that you have surveyed everything that you can’t, such as the structure or the electrics and central heating system. This is because of the principal of caveat emptor – Latin for buyer beware.
What caveat emptor means the buyer proceeds at his own risk and the seller is not under a duty to disclose anything which the buyer does not enquire about, providing the seller does not deliberately conceal any issue. The seller must not however make any deliberately false or misleading statement and nor must his selling agent. If such statements are made then there may be recourse through the courts.

Property Misdescriptions Act 1991

Under the Property Misdescriptions Act 1991 a selling agent can be criminally prosecuted if he makes a false or misleading statement as to the description of a property and importantly the statement does not have to deliberate. The agent’s only defence is if he used “due diligence”, i.e. that he took all reasonable steps to verify that the information was correct before using it.

If an agent is convicted under the Property Misdescriptions Act then this can be used as compelling evidence in a civil action for misrepresentation by a property buyer who has suffered loss as a result of the misstatement.

This legislation can be useful where it is not possible to sue the seller because of a clause in the contract stating that the buyer confirms he has not relied on any information or statements other than those contained in correspondence between solicitors (which is quite common).

A disclaimer may protect the estate agent but this must be at least as noticeable as the statement to which it relates and it must be brought to the attention of the buyer. The legislation also applies to developers who sell their own properties.

Disclaimers in Contracts

A well drafted conveyancing sale contract will contain a clause that states two things, that the buyer is not relying on any statement or representation made to him other than any contained in correspondence between the seller’s conveyancer and his, and that where the seller has answered any enquiry “to the best of his knowledge” it is not presumed that he has made any inspections or investigations before answering so that his knowledge extends only to things he actually knows and not things he ought to know.

As a result it is important for a buyer to have any enquiry raised via his conveyancer so that if the seller lies or misleads the buyer can sue under the contract. The statements made in the property information form do count as correspondence between conveyancers.

Even where the buyer cannot sue under the contract, he may be able to sue under the Misrepresentations Act 1967, provided the statement is either a fraudulent or negligent misstatement, i.e. not a genuine and reasonable mistake.

Misrepresentation Act 1967

Under the Misrepresentation Act 1967 a buyer will have a claim against a seller in tort if he can show that the seller has made either a deliberate (fraudulent) misstatement or a negligent misstatement on which he has relied to his detriment. If the misstatement is “honest”, that is a genuine mistake; it is not so clear cut.

If the misstatement is not contained in correspondence between conveyancers however, and if there is a clause in the contract stating that the buyer confirms he is not placing any reliance on any statements made to him directly by the buyer, then it is likely that any claim will fail. There will still have been misrepresentation by the seller but that cannot have been the cause of the loss.

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