“Buyer beware” – even lawyers get things wrong

19 April 2017

When a prospective purchaser or tenant agrees to buy or lease a property part of the legal process involves the raising of either enquiries before contract or enquiries before lease. In most cases, a Vendor will state that a “buyer should obtain own survey” when responding to any queries about the state or condition of the property in sale. As solicitors, we always advise our purchaser clients to obtain surveys as the old legal saying of caveat emptor or let the buyer beware prevails.

“Buyer beware” – even lawyers get things wrong

A relatively recent English case entitled Hardy and another v Griffiths and another [2014] EWHC 394 shows what can happen when purchasers do not carry out proper due diligence prior to signing a contract to purchase. 

Mr and Mrs Griffiths made a contractual offer  to buy a 30-room old manor house in East Sussex for £3.6 million by signing the contract which was duly accepted by the Vendors, Mr and Mrs Hardy.  The nature of the sale and the history is such that the Griffiths had previously offered to pay considerably more but withdrew their original offer.  Their revised offer to purchase was made before securing bank finance or obtaining a survey.  Furthermore, the vendors’ solicitor had protected the vendors by saying in the contract that the purchasers were not allowed to rely on anything said to them, and they were only entitled to rely on replies to enquiries in writing between solicitors.  What the special condition actually said was that purchaser had not relied on any oral or written representations, save for representations confirmed in writing by the sellers’ conveyancers.  The Purchasers were deemed to accept the physical state and condition of the property in sale at the date of exchange of contracts. 

After some delay, Mr and Mrs Griffiths then tried to arrange a mortgage. The valuer identified the property was affected by dry and wet rot and rising damp.   Mr and Mrs Hardy lost patience and served a notice to complete affording a set time for the Griffiths to complete.  The Griffiths did not comply with the notice to complete leading to the Hardys rescinding the contract.  Mr and Mrs Hardy then sued Mr and Mrs Griffiths for the balance of the 10% deposit (£210,000).

Mr and Mrs Griffiths argued that it was the Hardys who were in breach of contract and they were entitled to withdraw and get a refund of their £150k deposit.

The Griffiths alleged they were entitled to do so because:

  1. The Hardys had been reckless in not telling them about the damp problems. 
  2. The Hardys misled them during conversations about the condition of the property.
  3. The written Replies said nothing about the existence of damp

The evidence did not point to any deliberate or negligent misrepresentations by the Hardys and indeed the judge, Amanda Tipples QC, did not see any evidence to show that Mr and Mrs Griffiths had even read the replies to enquiries.

In any event, the Hardys’ evidence that they were unaware that their home was damp was upheld and the judge favoured the Hardys’ version of the story on the precise nature of the conversation that took place when the Griffiths viewed the property.  The judge also held that the non-reliance clause was reasonable and enforceable. The judge went on to say that if Mr and Mrs Griffiths had concerns about the nature of the conversation then the matter could have been raised in correspondence but no inter-party correspondence was disclosed.

The judge concluded that the sellers were entitled to rescind and get the balance of the full deposit which was set at 10%.  They went on to sell the property and made no loss whatsoever.

What is particularly surprising in this case is that the Griffiths were both legally qualified.  One is an eminent property senior barrister and the other is a commercial property solicitor who ought to have known better but clearly forgot the law of caveat emptor or let the buyer beware.  A vendor of land is not required to disclose physical defects – it’s up to the buyer to investigate the obtain a survey. In this case, the Griffiths chose not to get a survey themselves before signing the contract is surprising when you consider the nature and type of property they were intending to purchase which was a 30- room 160 year old manor house.

Always know what you are buying.  Always get a survey.  Always use an experienced solicitor to raise enquiries and ensure the solicitor analyses the replies to those enquiries.  Do not be afraid to ask your solicitor to raise any additional items in correspondence and when you do get a survey, follow up on all points raised by the surveyor.  

Huw Worthington is a Partner of Worthingtons Solicitorsand is experienced in all areas of property law.

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