There’s nothing like an ultra-high value property dispute to attract the attention of the media; and the recent misrepresentation case involving the £32.5m purchase of a moth-infested Notting Hill mansion is no exception. The ruling itself will undoubtedly be relished by property lecturers for years to come to illustrate the practicalities of fraudulent misrepresentation, rescission and the limits of caveat emptor.

The High Court found that the seller had falsely responded to pre-contract enquiries by deliberately and knowingly failing to disclose that he knew there was (or may have been) a moth infestation - and the buyers relied on those replies. The court ordered that the 2012 sale be rescinded and compensation paid.

Crucially for sellers and their legal representatives, just two words, ‘not aware’, proved fatal to the seller’s case. The implications for all property lawyers and the parties in a property transaction are significant.

Buyer beware

It is important to remember that caveat emptor has a limited function. While the buyer has a responsibility to undertake reasonable inspections and reports on the property and to ask questions about the property, the seller has a responsibility to respond truthfully to enquiries and not treat pre-contract enquiries and questions as mere paperwork.

In his ruling, Mr Justice Fancourt made clear “there is no duty of disclosure… (caveat emptor) except to the extent that a failure to disclose would make information otherwise given to a buyer misleading or incomplete”.

Misrepresentation

Under s1 of the Misrepresentation Act 1967, a purchaser can make a claim where they have suffered loss as a result of the seller knowingly giving a misrepresentation.

Property sellers must therefore carefully and accurately respond to pre-contract enquiries; and correctly complete the Law Society’s TA6 Property Information Form. Where necessary, sellers should carry out further checks before responding to the enquiries to avoid the risk of misrepresentation.

The TA6 (5th edition) was published last year (partly because of an uptick in claims for misrepresentation based upon inaccurate information in the form) but is not yet mandatory while further feedback is considered ahead of implementation.

The new version has been expanded to include additional issues such as potential physical defects and defects as to legal title. However, it has been criticised as onerous and that it will increase conveyancing costs. Conveyancers will be watching to see if the Law Society’s final version will those very real concerns into account.