Caveat Emptor – “Buyer Beware” applies to conveyancing which makes it important to carry out your title investigation and checks before exchange of contracts. Pre-contract enquiries are a series of questions to the seller (or their solicitor) that ensure buyers and tenants of property have all the relevant information before committing to a binding contract. But what is the liability for inaccurate replies that a buyer relies upon?
What are pre-contract enquiries?
Pre-contract enquiries are formal questions raised during the conveyancing process, preferably before exchange of contracts, as this is when the agreement becomes legally binding.
For commercial property, these usually take the form of the Commercial Property Standard Enquiries (CPSEs), while residential transactions typically follow the Law Society Conveyancing Protocol, using Form TA6 (Property Information Form) and, where applicable, Form TA7 (Leasehold Information Form). Specific enquiries may also be necessary depending on the information revealed from initial replies, searches or other title investigation.
These enquiries cover topics such as boundaries, disputes, notices, environmental issues, and planning permissions. Their purpose is to allow the buyer to make an informed decision and seek to address any risks in the purchase contract.
Parties ought to deal with one another in good faith. According to equitable maxims, a person cannot benefit from their own wrong. But situations can arise were seller’s provide inaccurate replies to enquiries – innocently or not.
The seller’s duty when replying
Replies must be accurate and truthful. A seller or landlord cannot misrepresent or conceal material facts to speed up completion. Even careless or incomplete answers may give rise to a claim for misrepresentation under the Misrepresentation Act 1967.
Although replies are not usually incorporated into the sale contract, they can become binding if expressly referred to or warranted. Sellers often seek to limit liability in the sale contract, but those limitations will not protect against misrepresentation or deceit.
Misrepresentation and liability
A misrepresentation occurs where a false statement of fact induces a party to enter into a contract, resulting in loss. The courts recognise three main types:
- Fraudulent misrepresentation – where the false statement is made knowingly or recklessly.
- Negligent misrepresentation – where a statement is made without reasonable care as to its truth.
- Innocent misrepresentation – where a false statement is made with reasonable belief in its truth.
In Crown Estate Commissioners v Wakley [2016] All ER (D) 132 (Dec), the landlord was held liable for over £1.58 million in damages after tenants relied on misleading information about a farm’s condition.
Similarly, in Francis v Knapper [2016] EWHC 3093 (QB), the court found that careless answers, given without proper thought, could amount to deceit even if the seller did not deliberately lie.
The duty to update replies
A seller’s duty is continuous until exchange of contracts. If they discover that a previous reply is incorrect, they must update it. Failure to do so can amount to misrepresentation.
In FoodCo UK LLP v Henry Boot Developments Ltd [2010] EWHC 358 (Ch), the court confirmed that the duty to correct arises if a seller knows that previous representations have become false—or is indifferent to whether they are false.
This principle was reinforced in First Tower Trustees Ltd v CDS (Superstores International) Ltd [2018] EWCA Civ 1396, where a landlord failed to disclose newly discovered asbestos before completion. The court ordered the landlord to pay the tenant’s remediation costs of over £350,000.
Qualified replies and disclaimers
When acting for the seller it is important to caveat your replies (particularly as a solicitor) to avoid inadvertently holding yourself out of confirming something beyond what you intend. Replies such as “not so far as the seller is aware” or “no warranty is given” are common and must be treated with care. From the buyer’s perspective a reply caveated in such way needs to be carefully considered, whilst from a seller’s point of view, relying on “not as far as aware” is not a get-out-of-jail free card that can be used to avoid carrying out reasonable checks. It is the seller’s duty to deduce title and make reasonable checks before replying with such statements.
In Clinicare Ltd v Orchard Homes & Developments Ltd [2004] EWHC 1694 (QB), the court held that qualifying replies can still amount to warranties if they imply that reasonable enquiries have been made.
While disclaimers are often added to replies to reduce exposure, they will not be effective if they are found to be unreasonable under section 3 of the Misrepresentation Act 1967 or section 11 of the Unfair Contract Terms Act 1977.
In First Tower, the Court of Appeal ruled that an exclusion clause preventing reliance on pre-contract enquiries was unreasonable and could not be enforced.
Are solicitors personally liable?
A seller’s solicitor does not generally owe a duty of care to the buyer. In Gran Gelato Ltd v Richcliff (Group) Ltd [1992] Ch 560, the court confirmed that a buyer cannot sue the seller’s solicitor directly for negligent misstatement.
However, if a misrepresentation arises due to a solicitor’s negligence, the seller may seek damages from the solicitor—see Cemp Properties (UK) Ltd v Dentsply Research & Development Corp [1989] 2 EGLR 205.
This is an important note, and in the event of a dispute it may result in a buyer bringing a claim against the Seller and the Seller bringing their solicitor in as a part 20 Defendant in negligence.
Solicitors must therefore ensure they have reviewed all relevant material, including deeds, correspondence, and due diligence reports, and must advise clients to verify the accuracy of their replies.
Key takeaways
- Replies to pre-contract enquiries are an important part of the conveyancing process for buying and selling properties in England and Wales.
- Replies must be complete, accurate and kept up to date until exchange.
- Sellers and landlords may face liability under the Misrepresentation Act 1967 for false or misleading statements.
- Disclaimers will not protect against liability for deceit or unreasonable exclusions of responsibility.
- Solicitors should ensure clients understand the significance of each reply and document the sources of information relied upon.
Source
- Misrepresentation Act 1967
- Unfair Contract Terms Act 1977
- Crown Estate Commissioners v Wakley [2016] All ER (D) 132 (Dec)
- Francis v Knapper [2016] EWHC 3093 (QB)
- FoodCo UK LLP v Henry Boot Developments Ltd [2010] EWHC 358 (Ch)
- First Tower Trustees Ltd v CDS (Superstores International) Ltd [2018] EWCA Civ 1396
- Gran Gelato Ltd v Richcliff (Group) Ltd [1992] Ch 560
- Cemp Properties (UK) Ltd v Dentsply Research & Development Corp [1989] 2 EGLR 205
- Clinicare Ltd v Orchard Homes & Developments Ltd [2004] EWHC 1694 (QB)
- Law Society Conveyancing Protocol: lawsociety.org.uk/topics/property/conveyancing-protocol
- CPSE forms: cpse.co.uk