Commercial property update - June 2011

Disclosure of Information

Case law in recent years has considered the extent to which a seller of property ought to have disclosed information.  The traditional rule has been that the burden of risk relating to the purchase of a property sits with the buyer rather than the seller.  The majority of information in a property transaction is provided by the seller before the parties enter into a binding legal contract.  In order to bring a claim arising out of information disclosed or not disclosed prior to the contract would involve the buyer relying on the law of misrepresentation.

Misrepresentations may be:-

(a) innocent, where the person making the statement did not know the nature of the incorrect statement;

(b) negligent, where the person making the statement (if he or she were acting with reasonable care) ought to have known the nature of the error; and

(c) fraudulent, where the person making the representation knew that it was false or was reckless as to whether it was truthful or not.

It is a normal term of a property sale contract that the buyer is not entitled to rely on any information relating to the property unless made by the seller’s solicitor in writing or by the sellers in completing the commercial property standard enquiry form. 

The traditional view was that a seller could answer a question which was difficult by using such a phrase as “not so far as the seller is aware but the buyer must rely on its own enquiries”.  For many years the view was that this shifted the risk burden onto the buyer from the seller.  However, in William Sindall PLC –v- the Cambridgeshire County Council (1994), the Court held that the use of such words implied that the seller had in fact made reasonable enquiries and that such a term should only be used in circumstances where such enquiries had in fact been made.

More recent cases have made it clear that the seller must indeed answer the questions in any forms supplied in an open and truthful manner (eg not claiming that there is no dispute with neighbours when in fact there is a continuing dispute).  If in doubt, it will certainly be safer for a seller to disclose more rather than less information.  The seller should refer any query as to the meaning of questions on the property forms to his solicitor for advice.

This is most important as a disaffected buyer may bring an action in the courts for misrepresentation in respect of his losses arising out of the incorrect information.  In particular, if fraudulent misrepresentation is proved then all the loss sustained by the buyer may be claimed including losses arising from a fall in the general property market.  Simply put, even though a seller may be desperate to sell his property, he should not take a risk with or pay scant attention to the provision of information that could adversely affect the value of the property.

The Equality Act 2010

The Equality Act 2010 came into force last October.  It covers a range of discrimination including provisions that specifically affect property owners and occupiers.  Anti-discrimination measures concerning property were previously contained in the Disability Discrimination Act 1995 and the Equality Act 2006 and these have been repealed and reinstated with amendments in the 2010 Act.

The Act states that disposals including sales, assignments, lettings, sub-lettings, licences and parting with possession, must not be undertaken in a way which could harass, discriminate or victimise a person.

It is unlawful for anyone managing any type of premises to discriminate against or victimise the occupier in respect of the use of a facility associated with the premises, to evict them, or to treat them unfavourably.

The Act also extends the previous requirement to make reasonable adjustments to help disabled people if they will be placed at a substantial disadvantage should the adjustment not be carried out.

Service providers must not discriminate in their provision of services in connection with property and must also make reasonable adjustments to help disabled people.

It should be noted that if the consent of a superior landlord or third party is required to make reasonable adjustments, it cannot be unreasonably withheld.

A disaffected person may bring a claim to the court within 6 months the remedies being damages, an injunction and a declaration.  Although the burden of proof lies with the claimant, once the facts have been proven, the defendant needs to satisfy the court that it has not breached the Act’s provisions.  Where consent is applied for and refused or granted with conditions, the applicant may refer the matter to the court for determination.

Note:  This is provided for general information purposes and not as legal advice.