22 January 2016 by Sonal Ghelani

It Is What You Know That Counts

There have been two recent property cases which have involved additional information coming to light after exchange of contracts. The question arising in these cases was whether this information should have been notified by the seller, to the buyer, prior to exchange of contracts.

In the first case, the seller answered ‘no’ to the question in the Property Information Form regarding whether they had received any notices or correspondence from a neighbour or the local authority which would affect the property or property nearby. They were also asked whether they were aware of any proposals to develop property or land nearby. The seller replied that the buyer should ‘make their own enquiries’ on this issue despite the fact that they had knowledge of plans to develop a nearby school; the seller’s reply to the first question was therefore incorrect.

The buyer rescinded the contract and sought to recover the deposit from the seller. The buyer settled before the matter went to trial, and recovered half of the costs from the seller, as the seller had withheld information. The buyer then sued their solicitors for the other half its costs and alleged a breach of duty. The buyer’s solicitors had carried out a Plansearch but had failed to report the results of that search to the buyer. The Court held that they had a duty to communicate to their client those search results that were material to their client, to provide an explanation of what further investigations could be undertaken with the local authority, and then to request their client’s instructions. At that point, it is for the client to read the search results and to instruct their solicitors if they wish for any further investigations to be carried out.

In the second case, the seller of a property received some leaflets, from the local authority and a residents group, which highlighted proposals for residential developments at three different sites in the area. The seller attended a residents meeting about the local plans. The seller’s view was that the local authority would not support the development of the site which was closest to their home.

The seller sold their property a year later and, when they completed the Property Information Form, they answered ‘no’ to the questions which asked whether they had received or sent any communications which would affect the property or if they had entered into any negotiations or discussions with the neighbours, or the local authority, which would affect the property.

After completion of the sale, planning permission was granted for more than 800 homes to be built on the site closest to the seller’s home. However, the Court held that the seller had provided reasonable replies to the relevant questions on the Property Information Form as they could not have known, at that stage, that planning permission would be granted for the site in question.

This raises a couple of points for consideration when you are either buying or selling a property:

  1. If you believe that there is a site near to the property you are buying where there is potential for development, or there is development taking place, you should notify your solicitors that you wish to carry out a Plansearch. This is important as the Local Authority Search does not reveal whether or not there are any proposed developments in the vicinity of a property. It is the solicitors’ duty to pass on any information they have obtained regarding a property, but it is for the buyer to read all the information provided. If a buyer requires further questions to be asked, then it is for them to instruct their solicitors accordingly.
  2. If you are selling a property, it is important that you complete the Property Information Form correctly and include all information in your possession, including in relation to any potential development(s) that may affect the property or nearby property.

For advice on these issues, or any query regarding the sale or purchase of a property, please contact Sonal Ghelani at sonalghelani@boltburdon.co.uk or on 020 7288 4705.

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