Don’t fall foul of the disclosure laws when selling or letting a property

admin    Uncategorized     agents

Traditionally, contracts for buying and selling property always relied on the old English common law principle of ‘caveat emptor’, or let the ‘buyer beware’. In other words, the seller did not need to reveal material facts (defects) about the property for sale so long as the buyer, with reasonable due diligence, could find out about them itself.

And of course, sellers would be reluctant to volunteer any information about a property for sale that could potentially make the property less valuable or difficult to sell.

All of this changed with the introduction of consumer protection legislation. In particular with the Consumer Protection Against Unfair Trading Regulations 2008.

Descriptions must be accurate

These Regulations (known as the CPRs) are the Regulations that control descriptions used by estate agents and letting agents. They create criminal offences for agents and landlords that breach them. The Regulations prohibit ‘misleading actions’ and ‘misleading omissions’ that cause, or are likely to cause, the average consumer to take a transactional decision they would not have taken otherwise.

Great care needs to be taken when using general descriptions involving the location, environment, planning, photographs, measurements, parking, pricing. General disclaimers in the small print informing buyers and renters not to rely on the details provided will not be enough to prevent offences. This also applies to information provided on websites and in agent’s window displays.

Selling residential property

All this places the onus on the seller of a private residential property to divulge anything and everything that may have an impact on the buyer’s decision to proceed with a purchase. If the seller omits anything of importance (that they are aware of) they could face prosecution – whether the buyer asked about the issue or not – and also a claim for damages if a sale goes through with less than full information.

The Law Society’s Property Information Form (TA6) asks sellers to divulge all details about the property that they are aware of under various categories:

• Occupiers living at the property
• General disputes or complaints made by or about the seller, anti social behaviour, nuisance, crime etc
• Property boundaries and any boundary disputes
• Planning permission on the property, pending, granted or denied
• Flooding issues, current or historic
• Structural defects
• Any changes made to the property such as extensions, alterations with planning permissions and completion certificates
• Areas shared with neighbours, rights of way, licenses, easements, formal and informal agreements or disputes over these
• Guarantees and warranties affecting the property
• Any environmental issues or future plans affecting the area, roads, large scale building etc

It is most important to give honest answers to these questions, otherwise it could come back to bite you in a big way somewhere down the line – you are likely to get sued. It may be uncomfortable to reveal some issues and could cause you anxiety about losing a sale, but a new owner could come back with legal action, even years after the sale.

It’s also best to be open and transparent when answering these questions. Being economical with the truth will likely just arouse suspicion. The buyer’s solicitor is bound to ask for further clarification in the ‘additional enquiries’ phase of the conveyancing process if you do this.

Good evidence is the key when issues are present. If the problem was solved, show the paperwork to confirm this. A structural issue has been dealt with, show reports and invoices. If the house flooded, show what has been done to prevent recurrence. If you resolved disputes with neighbours, show written correspondence to that effect.

Commercial Contracts

Commercial propriety is not exempt from these matters. A recent court case shows just how far reaching the disclosure issue goes. Although in the case of commercial contract the principle of caveat emptor does apply to some extent as a commercial contract between two consenting parties, there are exceptions, one of which is the seller’s duty to disclose latent defects in title.

A commercial property seller is bound by law to disclose any defects in title and encumbrances which it may be aware of. What’s more, written contract clauses and conditions cannot avoid liability for a seller’s failure to disclose material defects – the purchaser may rescind the contract.

SPS Groundworks & Building Ltd v Mahil (2022)

In the recent SPS Groundworks case, the buyer successfully bid on a piece of land at auction that had been described in the auction catalogue as having “excellent scope for development”. The buyer intended the land for the building of a house.

It was discovered later that the land was subject to an overage clause*. Contained in a deed of covenant, it was provided that the Co-operative Limited would receive 50% of any increase in the land’s value as a result of obtaining planning permission to build.

Although a copy of the deed of covenant was included in the legal pack prepared for the auction and available for the buyer to download, the buyer did not do so. Neither did the auctioneer on the sale day refer to the deed, although in both cases it had been suggest that all potential purchasers should read the legal packs for the properties on which they were bidding.

The buyer also discovered after the sale concluded that 80% of the land could not be built on, this being registered by the council as a local green space and protected from development.

When the buyer realised the facts it refused to complete the purchase. Subsequently, the land was sold for considerably less than the original bid, and the seller went on to seek to recover the difference from the original buyer.

Buyer beware, or no?

At trial the judge took the view that having accord to the principle of ‘caveat emptor’, or ‘buyer beware’ the purchaser should have downloaded and studied the legal pack containing the full information. And had it done so it may not have raised a bid, or otherwise went ahead and purchased the property in full knowledge of the defect. Hard luck was the judgement, pay up!

However, on appeal the appeal judge took a different tack, finding that the references in the auction catalogue and the actions of the auctioneer informing bidders to read the legal pack were insufficient to comply with the duty of disclosure.

Full and frank disclosure the judge said, required the overage clause to be specifically brought to a potential purchaser’s attention not only by the description in the particulars, an example being the type of notice produced at the second auction, or by specific reference made orally by the auctioneer.

The buyer had the right to assume that in the absence of specific references to defects, a purchaser could assume that entries on the property register or in the relevant sale documentation would not significantly affect the property’s value.

It was also noted and underlined by the judge that liability for failure to disclose cannot be avoided by including a clause in the contract, deeming that the purchaser had access to the information and therefore full knowledge of the defects.

The lessons from this case:

As with consumer sales, the SPS Groundworks case highlights the importance of ensuring that title defects are disclosed when selling a property. Whilst it is usual to expect buyers to exercise full due diligence, there is still a duty to advise the buyer of any defects in title that materially affect the value of the property. The description must be accurate and transparent, and active in drawing defects to a buyer’s attention.

*Overage clause – sometimes called a “claw-back” or “uplift” clause, it’s an agreement, usually by way of a deed of covenant in the title, that the buyer of a property will pay extra, on top of the original purchase price, in the event that, for example, the buyer increases the value of the purchase in the future by obtaining planning permission.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Don’t fall foul of the disclosure laws when selling or letting a property | LandlordZONE.

View Full Article: Don’t fall foul of the disclosure laws when selling or letting a property

Interest Rates Have Risen To 1% – What does This Mean For UK Property Prices?

admin    Uncategorized     agents

Interest rates have now risen to 1%, and this is not the last time they will be raised, so what does the future hold for property prices and how can property investors battle the inflation in the market?

Stay tuned to find out in the video below:



View Full Article: Interest Rates Have Risen To 1% – What does This Mean For UK Property Prices?

LAUNCH: ‘Incendiary’ book promises to dish dirt on dodgy UK property deals

admin    Uncategorized     agents

A new book promises to explode the myths created around ‘armchair investments’ and off-plan developments and expose corrupt developers and sales agents.

Author Neil Bromage labels the schemes featured in The Great British Property Scam as the buy-to-let scandal of the century.

He says many continue to be sold by unscrupulous individuals who often hide behind legitimate big brand names, offering property deals with a registered title and promising high-level returns.

The book identifies those developers and agents who have been responsible for leading investors astray as well as those solicitors who failed to protect the clients they acted for.

Unwary investors

“Student accommodation, care homes and hotels have all been broken up into small pieces with the rooms being sold to unwary investors in contravention of UK law enacted more than 20 years ago,” he explains.

“Off-plan flats and apartments have also been similarly structured as unlawful unregulated collective investment schemes.”

The Financial Conduct Authority is currently investigating and prosecuting the first culprits, says Bromage, while others will follow in their wake as the Serious Fraud Office has now stepped in.

He says: “There are tens of thousands who have already lost money to these schemes but a great many more will lose their pensions and nest eggs if they are not warned of the dangers of buying these types of investments.”

The book brings together years of research and work with investors who have lost their life savings and the lawyers who are helping to recover them. “Over the last few years I’ve had contact with around 2,000 investors and helped to put two substantial groups together with a view to getting their money back,” adds Bromage.

The Great British Property Scam is published on 1^st July and is available on Amazon to pre-order.

​

​

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – LAUNCH: ‘Incendiary’ book promises to dish dirt on dodgy UK property deals | LandlordZONE.

View Full Article: LAUNCH: ‘Incendiary’ book promises to dish dirt on dodgy UK property deals

The Council has no workers?

admin    Uncategorized     agents

My neighbour is a council tenant and is not the best neighbour it is possible to have. Her children have made the fence fall down and that has taken my tenant’s privacy.

The fence belongs to the council and as such declined me from putting it back up as it is considered as council’s land.

View Full Article: The Council has no workers?

NEW: Campaigners persuade SIX London councils to get tougher on landlords

admin    Uncategorized     agents

Campaigning group the London Renters Union has secured promises from six Labour-controlled councils to change the way they run local housing services.

As Labour celebrates taking control of Wandsworth, Westminster and Barnet in the local elections, the union credits its campaigning might for getting Brent, Tower Hamlets, Haringey, Newham, Hackney and Lewisham to promise greater landlord regulation, expanded landlord licensing and hire more enforcement officers.

They have also all vowed to campaign for rent controls, reduce attempts to move people out of the borough and to reduce their use of ‘intentional homelessness’ decisions. 

London Renters Union launched its #SideWithRenters campaign in March and says: “Because of the way we’ve been building power, the main parties across six boroughs have committed to implement our demands.”

It adds: “After a rest, we’ll get on with the hard work of holding politicians to the promises they’ve made.”

Pressure

Other campaigning groups – Generation Rent and the Renters Reform Coalition – are also keeping up the pressure and this week handed a letter into 10 Downing Street urging Boris Johnson to end unfair evictions by announcing the Renters’ Reform Bill as part of next Tuesday’s Queen’s Speech.

It says private landlords are getting away with renting out poor quality homes that can make people ill, and that even when it’s serious enough for the council to get involved, most tenants still don’t get the protection they need.

Generation Rent adds: “Getting rid of Section 21 evictions entirely and requiring landlords to provide legitimate grounds for eviction will give tenants more confidence to demand improvements. Unless the Queen’s Speech contains measures to reform the rental market, the government will fail in its mission to level up housing.”

Read more about Section 21 and the government's plans.

These groups don’t always get their way – as we reported in LandlordZONE last month, tenants’ rights group Acorn was taken to court by a landlord it harrassed in Sheffield and it must now pay £100,000 to her after she won her case.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – NEW: Campaigners persuade SIX London councils to get tougher on landlords | LandlordZONE.

View Full Article: NEW: Campaigners persuade SIX London councils to get tougher on landlords

EVENT: Gala property networking evening launched, and you’re invited!

admin    Uncategorized     agents

Landlords are invited to attend a new rental sector networking event making its debut next month in St Albans.

Organised by industry expert Julie Ford, The Shire Black Tie Summer Ball will bring together landlords, property professionals, developers and investors for a gala evening of advice, networking and entertainment as well as a three-course dinner.

To be held on 30th June 2022, the event will be hosted by comedian, writer and TV and radio presenter Bennett Arron (main pic) who bills himself as the ‘Welsh Seinfeld’.

He will introduce three high-profile speakers from different sectors of the private rented sector.

These are evictions expert and Channel 5 TV star Paul Shamplina, investment guru and property developer John Howard and HMO specialist, author and MD of New Era Property Rick Gannon.

The event is taking place at the Aubrey Park Hotel in St Albans where attendees will enjoy a private bar and terrace and a pre-dinner drinks reception prior to the main event.

“After the long months of Covid where it was so difficult to meet people face-to-face, I thought it was time that everyone involved in the private rental sector had a chance to network once more,” says Ford (pictured).

She is a seasoned legal expert within the sector who has helped thousands of landlords solve tricky tenancy problems and also runs the Hemel Hempstead-based Land and Property Network.

Tickets for the event, which cost £75 a head, can be bought via Julie’s website. Additional tickets costing £100 secure seats at tables hosted by the celebrity speakers.

To see more details of the event in the coming weeks on social media follow it via the hashtag #SPS22.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – EVENT: Gala property networking evening launched, and you’re invited! | LandlordZONE.

View Full Article: EVENT: Gala property networking evening launched, and you’re invited!

NTSELAT deem Price on Application unlawful

admin    Uncategorized     agents

The National Trading Standards Estate and Letting Agency Team (NTSELAT) has released its opinion, with the collaboration of the Competition and Markets Authority (CMA), on the use by agents of the term price on application (POA) in property listings.

View Full Article: NTSELAT deem Price on Application unlawful

Build to Rent – A good idea or not?

admin    Uncategorized     agents

I am wondering what subscribers think about the new trend of large build to rent developments. I can see the attraction to young people, with communal hubs, IT suites and on-site coffee shops etc. It means that if their own home is the size of a box they can go and hang out in other parts of the building.

View Full Article: Build to Rent – A good idea or not?