Property Misrepresentation – What can be done?

property misrepresentation

Property misrepresentation is a significant concern in property transactions, impacting buyers, sellers, and professionals within the industry. Misrepresentation occurs when false or misleading information is provided about a property. This can lead to various legal, financial, and emotional consequences for all parties involved. There are different types of misrepresentation and remedies to address each type.

Types of Property Misrepresentation

Material misrepresentation: This involves providing incorrect information on aspects of the property that would affect a buyer’s decision on entering into the contract and the purchase price for the property. Examples include misstating the property’s size, age, condition of the property, or the presence of pests.

Fraudulent Misrepresentation: This type of property misrepresentation arises when a seller lies or deliberately hides critical details about the property. This could include hiding issues with the foundation or not disclosing a history of surface water flooding etc.

An example of misrepresentation in a property dispute can be shown in the case of McMeekin v Long. The seller in this case answered an enquiry inaccurately in relation to conflicts regarding the property or its usage. She misled the buyers by describing the neighbours as “good and friendly.” Contrary to these assertions, a protracted conflict existed with a neighbour concerning the use of a shared access road.

Following completion of the purchase, the buyers found themselves entangled in disputes with the same neighbour over access to the road.

In this case, the Judge determined that the buyers were justified in expecting disclosure of such a longstanding issue. He concluded that the sellers were guilty of deliberately misleading the buyers—a fraudulent misrepresentation—since the information provided was intentionally false, aimed at facilitating the sale without any obstacles.

Negligent misrepresentation: This type of misrepresentation occurs when the seller or their agent carelessly makes a statement about the property that they should have known was untrue. This does not involve the intentional provision of false information but results from failing to take reasonable care in ensuring the information’s accuracy.

Innocent misrepresentation: This type of misrepresentation happens when the seller or their agent provides incorrect information believing it to be true. Although there is no intent to deceive, the misinformation can still lead to problems for the buyer.

Implications of property misrepresentation

Misrepresentation can have severe ramifications for all parties involved:

  • For buyers, it can result in overpaying for a property, facing unexpected repair costs, or purchasing a property that doesn’t meet their needs. The emotional and financial stress of dealing with these issues can be overwhelming.
  • For sellers, if found guilty of misrepresentation, they may face legal action.
  • For other professionals involved in the transaction, it can damage their reputation, result in the loss of their license, or lead to legal consequences.

 

Property misrepresentation claims

Property misrepresentation claims arise when false or misleading statements about a property are made, leading the buyer to enter into a contract under false pretences. These claims can significantly impact both parties involved in a property transaction. The assessment of such claims and the remedies available depend on the nature and severity of the misrepresentation.

Several critical criteria that must be established for a property misrepresentation claim to be actionable:

  • The assertion that influenced the buyer’s decision was a statement of fact provided to them by the seller or the seller’s representative.
  • The seller had the intention to persuade the buyer to enter into the contract using this statement.
  • The buyer was indeed swayed to sign the contract based on this statement.
  • The statement in question was presented as a representation of truth.
  • This representation was false.
  • In cases where the claimant wishes to claim damages, it must be demonstrated that the misrepresentation led to a financial loss for the buyer.

Remedies for misrepresentation

The recourse available to the buyer varies according to the nature of the misrepresentation:

Innocent misrepresentation:

  • Rescission: Recission is the main remedy for innocent misrepresentation. This involves undoing the transaction to restore both parties to their original state before the contract.
  • Damages: The court has discretion under the Misrepresentation Act 1967 to award damages where recission is not possible.

Negligent misrepresentation:

  • Rescission: The option to nullify the contract is the main remedy for this type of misrepresentation.
  • Damages: Compensation is usually based on the principle of tort, aimed at covering the direct losses from the misrepresentation. They can also be claimed under the Misrepresentation Act 1967.

Fraudulent Misrepresentation:

  • Rescission: The contract can be revoked, effectively cancelling the transaction.
  • Damages: The affected buyer may receive compensation designed to put them in the position they would have been if the misrepresentation had not occurred. This includes a wide array of losses, even those indirectly linked to the fraudulent act. When evaluating damages for fraudulent misrepresentation, the criteria used for a deceit claim are applicable.

How can South Bank Legal assist?

Our commercial law solicitors cover all types of misrepresentation cases. We can provide professional advice and representation to both individuals and businesses.

For more information or further legal advice, you can contact South Bank Legal using the contact form below. You can also call 02035765179 for a confidential discussion with a solicitor today.

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