Misrepresentation in Property
Misrepresentation can occur in property transactions where the seller makes an inaccurate statement about the condition of the property.
When purchasing a property, a buyer is reliant on certain information that can only be provided to them by the seller, which is typically found in the Property Information Form.
In most instances, a seller will complete the form as thoroughly and honestly as possible, allowing the buyer to make an informed decision as to whether to go through with the purchase. But what happens when a seller mistakenly or deliberately withholds information or is dishonest?
If the buyer relies on incorrect information or an omission (a failure to do something) when deciding to purchase the property then the seller could be liable for misrepresentation.
Misrepresentation is where one party provides another with a false statement of fact to induce them into entering into a contract. The statement does not have to be incorporated into the contract but it must have been a factor in the innocent party’s decision to enter into it.
Types of Misrepresentation
There are three types of misrepresentation: fraudulent, negligent, and innocent.
Fraudulent misrepresentation is the most serious, but also the hardest to prove in court. It requires the seller to have knowingly or recklessly made the particular statement that induced the buyer into purchasing the house. It can be very difficult for the buyer to obtain evidence to prove beyond reasonable doubt that the seller deliberately lied or withheld information.
It is less difficult to try to prove negligent misrepresentation which requires the seller to have made the statement carelessly or without having reasonable grounds to show that it is true. This is easier to prove in court because, under the Misrepresentation Act 1967, the burden is on the seller to prove that they had reasonable grounds to believe that the statement they gave was true.
The last type of misrepresentation is innocent misrepresentation which is where a seller provides the information they believe to be true and factual and it actually isn’t.
When is Litigation needed?
In some cases, a seller’s misrepresentation may not have affected the buyer in any significant way and therefore it may not be worth entering into litigation as any damages which may be awarded are likely to be nominal.
However, it is more often the case that a seller’s misrepresentation leaves the buyer with extensive problems in relation to the property such as drainage issues, flooding, boundary disputes or other neighbourly issues. In these instances, it is likely that negotiations or litigation will be necessary as the buyer will have probably incurred costs in solving, or attempting to solve, the issues.
Remedies to Misrepresentation
If a court finds that there was misrepresentation on the part of the seller, the most common remedy for cases involving property purchases is damages.
It is only in very exceptional cases that a court will look to rescind a contract. Damages are usually assessed by the “diminution in value” of the property as a result of the issues. This is the difference in value between the property without the issues and how much it is worth with the issues involved. Damages might also include “compensation” for the inconvenience caused and for the cost of having any problems fixed.
Our dispute resolution team can help you
If you have bought a property and are concerned that misrepresentation may have occurred on your purchase, please do not hesitate to contact Sam Lees or any member of the Dispute Resolution team if you have any questions and we would be happy to assist.
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