The meaning of caveat emptor - and how it works in the conveyancing process

Caveat emptor is a Latin term that means ‘let the buyer beware’. The legal principle that dates back centuries is still relied on today in the conveyancing process and it places the onus on the buyer to find out if there are any physical defects in the property or legal issues relating to the property.   The main reasons why caveat emptor still applies are: the seller is not obligated to reveal defects in the property and the buyer’s purchase is not protected by a warranty.

Since for most people buying their home is the biggest purchase they make in their lives, in order for the buyer to beware, he/she should instruct a conveyancing solicitor to check the related legal documents and a surveyor to inspect the property for any structural defects before signing the contract and committing to purchasing the property.

Following the enactment of recent legislation, the seller now has to provide a Home Information Pack (HIP) when the property is put on the market. The HIP contains most of the necessary paperwork for the solicitor to make a good start with the conveyancing process. Once a price is agreed and the solicitors have been instructed, the buyer’s solicitor will examine all the documents in the HIP carefully. It may be that the buyer’s solicitor will need to raise further enquiries, order more searches and request any additional documents to ensure that he/she is satisfied and can advise the buyer fully on their purchase. The solicitor will be checking the title to ensure that the seller is the owner of the property and can therefore sell it, to find out if anyone else is in occupation and for rights, easements, charges and incumbrances. The buyer’s solicitor will also check the necessary searches and will show the boundaries of the property on the plan to the buyer so that the buyer can confirm that they are the same. If the buyer’s solicitor finds any defects in the title he/she will try and rectify them and make the buyer aware of them. Note that if there is to be a mortgage, the buyer’s solicitor will also be acting for the mortgage company and will owe a duty to them to investigate these matters.

Although the seller is not obliged to reveal any defects he/she must not cover them up because if he/she does they risk the possibility of being sued for fraudulent misrepresentation. Therefore the seller must answer all enquiries about the property honestly.

At the same time as the buyer’s conveyancing solicitor is examining the paperwork, the buyer should make a physical search of the property and also should instruct a surveyor to inspect for any structural defects. If a lender is involved it is likely that the lender will instruct a surveyor. It should be noted that the buyer should not rely on the lender’s surveyor unless agreed with the lender in advance. Usually for the lender’s surveyor is simply valuing the property to confirm that the purchase price is reasonable so that they can recover their loan should the land need to be sold in the future. A buyer should  therefore seriously consider to instructing his/her own surveyor to check for structural defects.

Once the buyer’s conveyancing solicitor has gathered together all the relevant information, he/she will be able to report to the buyer. At this point the buyer will find out a substantial amount more about the property and will be able to make a decision on whether or not to buy it and will be the buyer who is aware!

In the event that the buyer is a cash buyer and not obtaining a mortgage and wants to buy property quickly, he/she can of course do this. But the solicitor must explain the principle of caveat emptor and the consequences of not carrying out the necessary checks to the client so that the solicitor will not be considered liable should the buyer suffer any related loss in the future.