Fraudulent Misrepresentation: Be Truthful When Selling Property

Fraudulent Misrepresentation: Be Truthful When Selling Property

A cautionary tale from the UK courts has emerged concerning fraudulent misrepresentations made to the purchasers during a property sale – leading to a substantial damages award. The expert commercial and property litigation lawyers at Bahamas law firm ParrisWhittaker are highly experienced in advising and representing individuals and businesses in property-related litigation.

What’s the background to this case?

The buyers of a property, which included boarding kennels and a cattery, experienced significant drainage issues after completion had taken place. This had not been disclosed to the purchasers by the sellers, even though the UK’s Environment Agency (EA) had informed the sellers before the sale took place that substances from the property were overflowing onto neighbouring land, and despite the fact that the sellers had promised the EA that they would correct the problem before the sale. In any event, experts for both sides later agreed that the work actually carried out by the sellers was inadequate, and the problem continued.

The buyers did not commission their own survey before going ahead with the purchase, relying instead upon various statements made by the sellers before proceeding with the purchase. They subsequently sought damages in relation to the diminution in value of their land on the basis that the sellers had fraudulently misrepresented the remedial work which had been carried out before the sale.

What did the court decide?
The sellers had fraudulently misrepresented the remedial work completed before the purchase. A representation might be fraudulent in law where it is made by a person who knows it to be untrue, does not believe it to be true, or makes statements that are reckless to its truth.

The court found that the buyers were entitled to rely on the sellers’ representations provided in, for instance, the pre-contract Property Information Form (SPIF), and the sellers’ response to an enquiry raised by the buyers' solicitors in relation to the drainage, stating that the drainage issue had been dealt with.

The court found that the sellers had made a false statement about the remedial work in the SPIF: they had asserted that there had been no negotiations or discussions with the Local Authority about matters affecting the land. However, when that statement was made, the sellers were aware that the EA had been in contact with them.

There were also further written representations which were untrue.  The court therefore awarded the buyers £33,000, a representation of what the court decided was the diminution in value of the buyer’s property.

What does this mean?

When anyone – whether an individual or organisation – sells a property, all information and representations made to potential and eventual purchasers must be truthful, accurate and transparent.  Great care must be taken when answering buyers’ questions about the property. Misrepresentations, whether fraudulent or careless, could lead to substantial damages claims after the sale has taken place – sometimes even years later.  There is no duty or requirement for purchasers to obtain their own property survey (though it is highly recommended.)

If you are considering selling, purchasing or leasing a property (including commercial premises) or if you are involved in a dispute involving property, it is imperative that you seek legal advice. We take an aggressive approach to our clients’ claims where we believe this is required to protect our clients’ financial and property interests.

How can we help?

At ParrisWhittaker, our expert commercial and property litigation lawyers have many years’ experience in handling all kinds of property related claims. Contact our expert litigation lawyers at Bahamas law firm ParrisWhittaker for urgent, strategic advice before taking any further action.

1 Morrell & Anor v Stewart & Anor (2015) High Court