Protecting your investment

A recent High Court ruling highlights the importance of transparency and due diligence in property transactions and underscores the legal responsibilities of both sellers and buyers.

The case concerned the purchase of a £32.5m mansion in west London, which was, following completion, found to have a severe moth infestation. This had not been disclosed during the pre-contract enquiries, although the infestation was serious enough to be detailed in at least two reports from pest control companies before the sale. Despite this, the seller claimed he did not know of any vermin infestation or hidden defects in the property.

The court found that the seller made "fraudulent misrepresentations" by failing to disclose the moth problem. As a result, the judge ruled that the couple should receive a repayment for some of the £32.5m they paid for the property, minus an amount for the years they lived there. Additionally, they were awarded substantial damages, including the stamp duty land tax, all costs incurred in trying to eradicate the moth infestation, and £15,000 for ruined clothes.

This case underscores the seller's duty in English residential property transactions to provide accurate and honest information about the property they are selling. Sellers must disclose any known defects or issues that could affect the property's value or saleability. This duty of disclosure is crucial in ensuring that buyers are fully informed about the property they are purchasing.

The introduction of new Property Information Forms in conveyancing aims to improve this transparency. These forms require sellers to provide detailed information about the property's condition, including any known defects or infestations. By ensuring that all relevant information is disclosed upfront, the aim of the new forms is to help protect both buyers and sellers and promote a smoother transaction process.

However, it is also important to remember the principle of "caveat emptor" or "buyer beware." This means that buyers must take responsibility for thoroughly inspecting the property and conducting their own due diligence before completing the purchase. Buyers should not solely rely on the seller's representations, but should also seek independent advice, commission surveys and inspections to uncover any potential issues. By doing so, buyers can identify any potential problems and make informed decisions about their purchase.

Although the principle of "buyer beware" places an onus on the buyers, the Law Society’s guidance on the Consumer Protection from Unfair Trading Regulations 2008 reduces the application of "buyer beware". The guidance introduces the following test:

“is omitting to disclose material, or a failure to provide it in a clear, intelligible and unambiguous manner, likely to cause the average consumer to take a different transactional decision?”

If so, the seller must disclose the information to the buyer of the property. If they fail to then, as in the moth infestation case, the seller could be found to have made a fraudulent misrepresentation.

As a buyer of a residential property, it's essential to be aware of both the seller's duties and your own responsibilities. Similarly, as a seller, it is crucial to understand the information you need to provide to potential buyers to ensure you have fulfilled your disclosure obligations. By working with a solicitor who has the expertise to guide you through the legal framework and assist with thorough due diligence, you can protect your investment and avoid potential pitfalls.

At TLT, we have the experts who can advise you on all aspects of the sale and purchase process, and have a team dedicated to advising on high-value residential transactions.

If you have any questions or need further advice, please do not hesitate to contact our experienced team at TLT.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at February 2025. Specific advice should be sought for specific cases. For more information see our terms and conditions.