Can you pull out if the House Conveyancing reveals that the seller has failed to give you some information, or there is a misdescription in the sales brochure?
Solicitors during House Conveyancing are frequently consulted by homebuyers wanting to know what they can do when an error or misrepresentation arises on a purchase.
Sometimes a problem arises during the House Conveyancing where the seller or his agents have failed to disclose some information; does this entitle the buyer to pull out or rescind a contract?
A recent decision by the Court of Appeal gives some help to buyers who become aware of a possible misrepresentation after they have already exchanged purchase contracts, and highlights the need for sellers to provide buyers with full information about a property as the House Conveyancing process begins.
If a problem is discovered before contracts are exchanged then a buyer can withdraw without any penalty. Of course by then he or she might have paid out survey and other fees which the seller is not liable to reimburse.
Restricting buyers’ rights – standard contract conditions.
Solicitors acting for sellers in a House Conveyancing transaction have traditionally sought to restrict buyer’s rights.
Sale contracts incorporate clauses which appear to restrict a buyer’s right to pull out of a contract if some misrepresentation is discovered before completion. For example the current edition of the Law Society’s Standard Conditions of Sale, used by Conveyancing Solicitors in most residential property sales, includes provisions preventing the buyer from rescinding a contract on the grounds of an error or omission except where it results from fraud or recklessness, or where the buyer would be obliged, to his prejudice, to accept property differing substantially from what the error or omission had led him to expect.
However Conveyancing Solicitors have long questioned the extent to which such standard conditions may be affected by the Unfair Contract Terms Act 1977. This was passed to give consumers some protection against standard conditions which are incorporated in many contracts, usually in circumstances where the consumer has no way of negotiating about them. A common example is the conditions printed on the back of tickets such as car park tickets.
The 1977 Act imposes a test of ‘reasonableness’ and contains a provision that if a contract contains a term which would exclude or restrict any liability to which a party to a contract may be subject by reason of any misrepresentation made by him before the contract was made … that term shall be of no effect except in so far as it satisfies the requirement of reasonableness.
Court of Appeal holds that Standard Condition excluding buyer’s right to withdraw is unreasonable
In the recent case of Cleaver and another v Schyde Investments Ltd. the Court of Appeal confirmed that a buyer was entitled to pull out of a contract despite the provisions of the contract.
The buyer became aware of something after exchange which would have had an adverse effect, and which the sellers knew about before exchange.
The seller refused to accept that the buyer could rescind the contract, claiming that the provisions in the Standard Conditions prevented this. The buyer brought an action for the recovery of the deposit which had been paid on exchange.
The county court judge concluded that the buyer was entitled to the deposit as the condition was not fair and reasonable in the circumstances of the case.
This decision was confirmed by the Court of Appeal.
This does show that these standard form conditions cannot always protect sellers, and buyers may be able to withdraw from a contract if some error or misdescription is discovered.
The whole law of misrepresentation is complicated, and if you become aware of something after exchange which you think constitutes misrepresentation then you should inform a competent Conveyancing Solicitor immediately.
What can you do when the misrepresentation is discovered after you have completed the purchase?
The real problem arises for buyers when the misdescription is only discovered after completion has taken place.
Although lawyers can spend days discussing the position, buyers want to have a practical remedy. Unfortunately in many cases the advice has to be that it is not worth the potential expense of taking further legal action. It can be difficult to trace sellers after completion, especially if they have emigrated.
One solution to this possibility is to ask your House Conveyancing Solicitors to arrange a Home Owners Protection Policy. For the payment of a single premium you can be covered against a wide variety of problems which might only be discovered after completion.
There are some risks that simply can’t be foreseen, however carefully you or your House Conveyancing lawyer search for them. Policies include cover for legal expenses incurred in enforcing legal rights.
Specialists in House Conveyancing will always advise if you think that you have discovered some misrepresentation. If you are looking to buy a home and want Conveyancing Solicitors who will provide a comprehensive service get a quote online or phone 0800 038 6446.
Cleaver and another v Schyde Investments Ltd  EWCA Civ 929.