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Don't fall foul of the disclosure laws when selling or letting a property

Auction - disclosure

Full disclosure

Are you selling or letting a property? Don't risk serious problems later on because you failed to notify the buyer or renter of issues with the property in the seller's disclosure questionnaire or when advertising the property.

Traditionally, contracts for buying and selling property always relied on the old English common law principle of 'caveat emptor', or let the 'buyer beware'.

In other words, the seller did not need to reveal material facts (or defects) relating to the property for sale so long as the buyer, with reasonable due diligence, could find them out for themselves.

And of course, sellers would be reluctant to volunteer any information about a property for sale that could potentially make the property less valuable or difficult to sell.

All of this changed with the introduction of consumer protection legislation. In particular with the Consumer Protection Against Unfair Trading Regulations 2008.

It's very important that sellers disclose all the information which they are aware of in the Law Society's TA6 form which your solicitor will provide you with as the sale progresses. Honesty and answering to the best of your knowledge is definitely the best policy to ensure that the completion of the sale is not delayed.  

Also, a buyer could sue you after the sale goes through if you were untruthful or you conceal an important piece of information about the house that could have influenced the buyers decision. The TA6 form is a permanent record of what you have said so be extra careful when completing the questions, of which there are many. Remember, the document will form the basis of any legal action the buyer may take later.  

Usually a keen buyer will be understanding about issues you disclose so long as they are not too serious. If you are not transparent in the way you allude to issues it is likely to arouse suspicion in the buyer and the buyer’s solicitor.  Unfortunately if there are fixable issues, when the buyer becomes aware of them you could expect them to "chip" you on the selling prices to cover the cost of putting things right later.

The Law Society publishes to helpful guidance notes to help sellers understand the form and explains the legal concepts. The Law Society’s TA6 form, and notes can be found here.  

Descriptions must be accurate

Selling residential property - the legislation places the onus on the seller of a private residential property to divulge anything and everything that may have an impact on the buyer's decision to proceed with a purchase.

If you as seller omit anything of importance (that you are aware of) you could in the worst case face prosecution - whether the buyer asked about the issue or not - and also a claim for damages if a sale goes through with less than full information.

The Law Society's Property Information Form (TA6) asks sellers to divulge all details about the property that they are aware of under various categories:

  • Occupiers living at the property
  • General disputes or complaints made by or about the seller, anti social behaviour, nuisance, crime etc
  • Property boundaries and any boundary disputes
  • Planning permission on the property, pending, granted or denied
  • Flooding issues, current or historic
  • Structural defects
  • Any changes made to the property such as extensions, alterations with planning permissions and completion certificates
  • Areas shared with neighbours, rights of way, licenses, easements, formal and informal agreements or disputes over these
  • Guarantees and warranties affecting the property
  • Any environmental issues or future plans affecting the area, roads, large scale building etc

It may be uncomfortable to reveal some issues and could cause you anxiety about losing a sale, it's just not worth the risk of a new owner suing you, even years after the sale.

Good evidence is the key when issues are present. If the problem was solved, you could show the paperwork to confirm this. Where a structural issue has been dealt with, show reports and invoices. If the house gets flooded, show what has been done to prevent recurrence. If you have managed to resolve previous disputes with neighbours, try to show written correspondence to that effect.

Commercial Contracts

Commercial propriety is not exempt from these matters.

A recent court case shows just how far reaching the disclosure issue goes. In the case of a commercial contract the principle of "caveat emptor" - business to business - does apply to some extent as a commercial contract between two consenting parties, but there are exceptions, one of which is the seller's duty to disclose latent defects in the title.

A commercial property seller is bound by law to disclose any defects in title and encumbrances which it may be aware of. What's more, including written contract clauses and conditions cannot enable you to avoid future liability for a your failure to disclose material defects - the buyer may rescind the contract.

SPS Groundworks & Building Ltd v Mahil (2022)

In the SPS Groundworks case, the buyer successfully bid on a piece of land at auction that had been described in the auction catalogue as having 'excellent scope for development'. The buyer intended the land for the building of a house.

It was discovered later that the land was subject to an overage clause*. Contained in a deed of covenant, it was provided that another party would receive 50% of any increase in the land's value as a result of obtaining planning permission to build.

The buyer also discovered after the sale concluded that 80% of the land could not be built on, this being registered by the council as a local green space and protected from development.

SPS had made enquiries and the local planning officer said that most of the land was classified as an “important open space.” Consequently, the buyer would struggle to obtain planning permission. The Parish Council did not agree that the land should be built on and a recent planning decision had determined that further development of the location would be unsustainable.

Although a copy of the deed of covenant regarding the overage charge was included in the legal pack, prepared for the auction and available for the buyer to download, the buyer did not do so. Neither did the auctioneer on the sale day refer to the deed, although in both cases it had been suggested that all potential purchasers should read the legal packs for the properties on which they were bidding.

When the buyer realised the facts it refused to complete the purchase. Subsequently, the land was sold for considerably less than the original bid, and the seller went on to seek to recover the difference from the original buyer.

Buyer beware, or no?

At trial the judge took the view that having accord to the principle of 'caveat emptor', or 'buyer beware' the purchaser should have downloaded and studied the legal pack containing the full information. And had it done so it may not have raised a bid, or otherwise went ahead and purchased the property in full knowledge of the defect. Hard luck was the judgement, pay up!

However, on appeal the appeal judge took a different tack, finding that the references in the auction catalogue and the actions of the auctioneer informing bidders to read the legal pack were insufficient to comply with the duty of disclosure.

Full and frank disclosure the judge said, required the overage clause to be specifically brought to a potential purchaser's attention not only by the description in the particulars, an example being the type of notice produced at the second auction, or by specific reference made orally by the auctioneer.

The buyer had the right to assume that in the absence of specific references to defects, a purchaser could assume that entries on the property register or in the relevant sale documentation would not significantly affect the property's value.

It was also noted and underlined by the judge that liability for failure to disclose cannot be avoided by including a clause in the contract, deeming that the purchaser had access to the information and therefore full knowledge of the defects.

The lessons from this case:

As with consumer sales, the SPS Groundworks case highlights the importance of ensuring that title defects are disclosed when selling a property. Whilst it is usual to expect buyers to exercise full due diligence, there is still a duty to advise the buyer of any defects in title that materially affect the value of the property. The description must be accurate and transparent, and active in drawing defects to a buyer's attention.

These Regulations (known as the CPRs) are the regulations that control descriptions used by estate agents and letting agents. They create criminal offences for agents and landlords who breach them. The Regulations prohibit 'misleading actions' and 'misleading omissions' that cause, or are likely to cause, the average consumer to take a transactional decision they would not have taken otherwise.

Great care needs to be taken when using general descriptions involving the location, environment, planning, photographs, measurements, parking, pricing. General disclaimers in the small print informing buyers and renters not to rely on the details provided will not be enough to prevent offences. This also applies to information provided on websites and in agent's window displays.

*Overage clause - sometimes called a 'claw-back' or 'uplift' clause, it's an agreement, usually by way of a deed of covenant in the title, that the buyer of a property will pay extra, on top of the original purchase price, in the event that, for example, the buyer increases the value of the purchase in the future by obtaining planning permission.


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