Buying a house or property is a serious commitment. We rely on various professionals to obtain the information we need when purchasing a property.

Property misrepresentation in real estate transactions can lead to significant financial and emotional distress. Misrepresentation occurs when a seller lies, or provides false, misleading, or incomplete information about the property being sold. The buyer relies upon this information when entering into the contract and purchasing the property.

What constitutes property misrepresentation?

Misrepresentation in property transactions can be classified into three types. These types include fraudulent, negligent, and innocent.

Fraudulent misrepresentation happens when a seller knowingly makes a false statement to induce a sale. In this type of misrepresentation, it must be shown that the seller was aware that the statement was false.

Negligent misrepresentation occurs when the seller makes a statement carelessly, without verifying its truth. This may include answering a, enquiry inaccurately, or negligently filling in a property information form without verifying information.

Innocent misrepresentation involves making an untrue statement without any intention to deceive or being careless about its truth.

Examples include misleading statements about the property’s, boundaries, structural integrity, or the existence of disputes related to the property. Misrepresentation can significantly affect the property’s value/ purchase price or the buyer’s decision to purchase. This makes misrepresentation a serious issue in property transactions.

Legal Framework for Misrepresentation in England and Wales

The Misrepresentation Act 1967 is the primary legislation governing misrepresentation claims in England and Wales. This Act provides the basis for understanding and addressing misrepresentations in property transactions. It allows for various remedies, depending on the type of misrepresentation involved.

Making a Property Misrepresentation Claim

If a buyer suspects misrepresentation, the first step is to gather evidence supporting the property misrepresentation claim. This includes any statements made by the seller or their agent, property descriptions in marketing materials, and expert evaluations contradicting the seller’s assertions.

The buyer should then seek legal advice to assess the strength of the claim for property misrepresentation and understand the potential remedies.

A specialist property dispute solicitor can guide the buyer through the process of making a claim against a seller for misrepresentation.

Their assistance can range from sending a formal notice to the seller to initiating legal proceedings if necessary.

It’s essential for the buyer to act promptly, as there are time limits for seeking certain remedies under the Misrepresentation Act 1967.

Legal representation ensures that the claim is handled effectively, maximizing the chances of a favourable outcome.

Remedies for a Property Misrepresentation Claim

The legal remedies available to the aggrieved party, typically the buyer, are designed to address the harm caused by reliance on incorrect or misleading information provided by the seller.

These remedies are established under the Misrepresentation Act 1967 and further shaped by case law. The main remedies include rescission and damages, each serving a different purpose in rectifying the effects of misrepresentation.

Rescission

Rescission is a remedy that allows the contract to be nullified or cancelled. This returns both parties to the position they were in before the contract was made.

This remedy is primarily available in cases of fraudulent, negligent, and sometimes innocent misrepresentation. It should be proven that the misrepresented facts were a significant factor in the buyer’s decision to enter into the contract.

The aim of rescission is to undo the transaction as if it never happened, which can involve the return of the property to the seller and the refund of the purchase price to the buyer, along with any other adjustments needed to restore both parties to their original state.

However, rescission is not always available or practical, especially if the property has changed hands or if third parties have acquired interests in the property. In such cases, or where rescission is deemed insufficient or inappropriate, damages may be sought instead.

Damages

Damages are a financial compensation awarded to the buyer for losses suffered as a result of the misrepresentation. The purpose of damages is to put the aggrieved party in the position they would have been in had the misrepresentation not occurred. The calculation of a claim for damages can vary depending on the type of misrepresentation:

• Fraudulent misrepresentation: Damages for fraudulent misrepresentation aim to cover all losses directly resulting from the misrepresentation. This can include both the difference in value between the property as represented and its actual value, and any consequential losses suffered by the buyer.
• Negligent misrepresentation: Under the Misrepresentation Act 1967 and the common law, damages for negligent misrepresentation are calculated similarly to those for fraud, intended to compensate the buyer for the financial impact of the misrepresentation.
• Innocent misrepresentation: When misrepresentation is found to be innocent, the court has the discretion to award damages in lieu of rescission. This is typically considered when rescission is not possible or practical. The calculation of damages in such cases focuses on the loss of bargain or the difference in value, rather than the broader consequential losses.

In addition to these remedies, the court may also consider specific performance or rectification in certain circumstances, although these are less common in misrepresentation claims related to property transactions.

Defending Against a Misrepresentation Claim

Sellers facing a misrepresentation claim have several defences available. One common defence is to prove that the buyer was aware of the true condition of the property or that the buyer did not rely on the misrepresented information when making the purchase decision.

The principle of “buyer beware” (caveat emptor) also plays a role in property transactions, placing some responsibility on the buyer to conduct due diligence. However, this principle has its limitations, especially in cases of fraudulent or negligent misrepresentation.

Legal representation is crucial for sellers to navigate the complexities of defending against a misrepresentation claim, ensuring that their rights are protected.

Preventing Property Misrepresentation

Both buyers and sellers can take steps to prevent misrepresentation. Sellers should ensure that all information provided about the property is accurate and complete, conducting thorough checks if necessary. Buyers should conduct their own due diligence, including obtaining independent surveys and legal advice before completing a purchase.

Transparent communication and documentation are key to avoiding disputes related to misrepresentation, and fostering trust and confidence in real estate transactions.

How can ARC Costs assist?

If you wish to make a property misrepresentation claim, ARC Costs can introduce you to a solicitor from our network.

ARC Costs are a team of specialist Law Costs Draftsmen and Costs Lawyers who can assist you in a case relating to legal costs in a property dispute, irrespective of whether a costs award has been made at the Civil Court or the Property Chamber of the First Tier Tribunal.

We may receive payments from third party solicitors on our panel to whom we may refer your claim. We will never charge you for any referrals made to our panel of third parties.