Property misrepresentation claim: A short guide

When engaging in the sale or purchase of property, whether you are buying a house or commercial property, the accuracy and honesty of the information provided are paramount. However, there are instances where the information exchanged is not just inaccurate but intentionally misleading. This can lead to significant financial and emotional stress for the parties involved.

This is where the concept of property misrepresentation comes into play. Expert Commercial Law aims to shed light on what property misrepresentation is, its impact, how to make a claim if you’re affected, and ways to prevent it from occurring.

Whether you’re a buyer or seller, understanding property misrepresentation is crucial in navigating the complex world of property transactions.

What is Property Misrepresentation?

Property misrepresentation occurs when false or misleading statements about a property are made, leading the other party to enter into a transaction under false pretences.

It can vary in severity from innocent mistakes to fraudulent misrepresentations. Legally, misrepresentations in property transactions are categorised into three types of misrepresentation:

  • Fraudulent misrepresentation: This happens when a seller lies or knowingly makes a false statement to entice a buyer to enter into the contract. The intent is to deceive, making it the most severe form of misrepresentation.
  • Negligent misrepresentation: Occurs when the seller makes a statement carelessly or without verifying its truth, leading to the buyer being misled.
  • Innocent misrepresentation: Involves false statements made without the seller’s knowledge of their falsity. Although not made maliciously, they can still lead to a claim if they affect the transaction’s outcome.

Understanding these types is crucial for identifying potential misrepresentations in property transactions and knowing the legal recourse available.

Examples of Property Misrepresentation

Fraudulent Misrepresentation: Consider a scenario where a property seller is aware of an ongoing legal dispute over the land’s ownership but deliberately fails to disclose this information to the prospective buyer.

This is an issue that could impact the purchase price of the property. The seller even goes as far as to assure the buyer that the title is clear and there are no encumbrances or disputes associated with the property.

This deliberate concealment and provision of false assurances, intended to deceive the buyer and facilitate the sale, is a clear case of fraudulent misrepresentation.

Negligent Misrepresentation: Imagine a seller who claims the property’s roof is new and in excellent condition, based solely on a casual glance without having professional inspections. In reality, the roof requires significant repairs. This claim, made carelessly and without due diligence, leads to negligent misrepresentation. The buyer, misled by the assertion, faces unexpected repair costs after the purchase.

Innocent Misrepresentation: A seller might state that the home includes a certain piece of land, believing this to be true based on a misunderstanding of the property boundaries. Later, it’s discovered that the land actually belongs to a neighbour.

Since the seller answered the enquiry inaccurately without knowledge of its falsity, this is considered innocent misrepresentation. Although not made with ill intent, it significantly affects the buyer’s decision and the property’s value.

How to Make a Property Misrepresentation Claim

If you suspect that you’ve been a victim of property misrepresentation, taking the following steps can help you make a claim against the seller for misrepresentation:

  1. Gather evidence: Compile all communications, documents, and expert evaluations that support the claim that false statements were made.
  2. Consult property dispute solicitors: Seek advice from a solicitor who specialises in property law to understand your rights and the strength of your case.
  3. Notice of claim: Your solicitor will likely send a notice to the seller, outlining the misrepresentation claim and seeking a resolution.
  4. Negotiation and mediation: Many cases are resolved through negotiation or mediation, where both parties reach a settlement agreement.
  5. Legal action: If a settlement cannot be reached, the next step may be to initiate legal proceedings to seek compensation or other remedies.

 

Remedies to a property misrepresentation claim

When misrepresentation has been identified in a property transaction, several remedies are available . The nature of the misrepresentation—whether it’s fraudulent, negligent, or innocent—often determines the appropriate remedy. Here, we’ll explore the most common legal remedies for misrepresentation in real estate transactions:

Rescission

Rescission is the most common remedy, effectively nullifying the contract and returning both parties to their positions before the transaction.

This means the sale is undone, the property is returned to the seller. The buyer is also refunded their money. Rescission aims to restore both parties to their original state as if the contract had never been signed.

  • Applicability: Rescission is available in cases of fraudulent, negligent, and innocent misrepresentation, provided that the misrepresented facts were a material reason the aggrieved party entered into the contract.
  • Limitations: The ability to rescind may be lost if the property has been transferred to a third party, significantly altered, or if rescission is no longer possible due to other circumstances.

Damages

Claimants can also claim damages in certain circumstances. Damages are financial compensation awarded to the aggrieved party for losses suffered due to the misrepresentation. The calculation of damages depends on the specifics of the case, including the type of misrepresentation and the extent of the financial loss.

  • Fraudulent misrepresentation: The compensation covers all losses directly resulting from the misrepresentation, including consequential losses.
  • Negligent misrepresentation: Damages are calculated similarly to fraudulent misrepresentation, under the principle that the aggrieved party should be placed in the position they would have been in had the misrepresentation not occurred.
  • Innocent misrepresentation: The court has discretion to award damages instead of rescission, especially where rescission is impractical. The aim is to compensate for out-of-pocket expenses rather than anticipated benefits of the contract.

Indemnity

Indemnity is a remedy specific to cases where rescission is granted. It compensates the aggrieved party for expenses necessarily incurred as a result of entering into the contract. This could include costs related to the property transaction, such as legal fees, survey costs, and other related expenses.

Specific performance

Although less common in misrepresentation cases, specific performance can be a remedy in certain circumstances. This court-ordered remedy requires the party who made the misrepresentation to fulfil their obligations as originally agreed in the contract. It is more typical in situations where monetary compensation is inadequate to remedy the harm caused by the misrepresentation.

Reformation

Reformation, or contract modification, is another potential remedy, though it’s more common in cases of mutual mistake than misrepresentation. The contract is rewritten to accurately reflect what the parties intended, correcting the misrepresentation. This remedy aims to enforce the contract in a way that is fair and consistent with the corrected information.

How can Expert Commercial Law assist?

If you believe you have been a victim of misrepresentation, please contact us today. We will put you in contact with a solicitor who can assist with your case. 

Our team takes the stress out of finding you a solicitor to assist with your misrepresentation claim. Our panel of commercial solicitors has a strong track record of successful outcomes.

All of the solicitors on our panel have the experience and expertise required to take on your case. Each solicitor is vetted before being allowed onto our panel, and we only select the best in the business. All of our solicitor firms are authorised and regulated by the Solicitors Regulation Authority (SRA).

Our commercial litigation lawyers also help with other commercial claims and dispute resolution, such as director disputes and CCJ removal.

Please note we are not a law firm of solicitors; however, we maintain a panel of trusted and regulated legal experts. If you contact us in relation to a case, we will pass your case on to a panel firm in return for a fee from our panel firms. We will never charge you for passing on your case to a panel firm.

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Please note, we are not a firm of solicitors; however, we maintain a panel of trusted and regulated legal experts. If you contact us in relation to a commercial law case, we will pass your case onto a panel firm in return for a fee from our panel firms. We will never charge you for passing on your case to a panel firm. 

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