The Law Society’s consultation paper has discussed whether the doctrine of ‘caveat emptor’ in residential conveyancing transactions should be modified by the principle of ‘seller disclosure’. The issues here are:
a) How this could improve the conveyancing process?
b) On what basis the modifications should be made?
Residential conveyancing is currently governed by the principle of ‘caveat emptor’ (‘let the buyer beware’). Under this principle, the responsibility to check the title and undertake relevant searches and surveys lies with the buyer’s conveyancing solicitor. This has gradually led to various detailed enquiries developing to protect the purchaser.
The current view on ‘caveat emptor’ is that it is an inquisitorial and defensive approach to information that is actually readily available to the seller. Some may also consider it out-dated and, furthermore, I would argue that it breeds distrust between the buyer and seller.
An alternative principle could be that of ‘seller disclosure’.
To some extent, the Property Information Questionnaire within the HIP has already steered conveyancing towards ‘seller disclosure’. However, this is only in relation to the marketing of the property. HIPs are not a helpful part of the conveyancing process and furthermore HIPs are on their last legs (no pun intended!).
The ‘seller disclosure’ principle should be further developed by modifying the conveyancing process . Within these changes, the seller’s conveyancing solicitor should be required to provide increased information with the draft contract papers. This contract should certainly incorporate ‘seller disclosure’, including comprehensive warranties, guarantees, covenants and certificates from the seller.
Whilst the purchaser would continue to undertake their own property survey, the level of pre-contract and pre-completion enquiries raised by the purchaser’s conveyancer should be reduced.
This should enable the buyer to have increased information, thus reducing costs in a culture that would inevitably lead to more proactive conveyancing.
The main disadvantages to the seller would be:
a) increased costs- though these would still be less than the combined cost of conveyancing and HIPs
b) possibility of greater uncertainty
c) risk of litigation.