Misrepresentation in a Property Transaction

25th October 2017 | Written by Oliver Bussell

A client of mine recently pulled out of a commercial property purchase following clear misrepresentations made by the seller’s solicitors. These related to unpaid rents and substantive breaches of the lease to which the land was subject. I found out about this only on the day of exchange when the seller blithely passed across a completion statement including substantial rent arrears!

Not a very happy episode – but my client was spared the dubious prospect of paying almost £1m for property with a bad tenant. He walked away from the transaction – with thanks to me for spotting.

But what options would have been open to him if we had already exchanged by the time the misrepresentation came to light?

The case of Greenridge Luton One Limited v Kempton Investments Limited [2016] EWHC 91 sheds some light on this. The property in this case was subject to a lease; the tenant had objected to the service charge, had withheld the service charge – had even notified the landlord of this in writing. When the landlord decided to sell the property it claimed there were no arrears. But here the misrepresentation only came to light after exchange. Naturally the buyer refused to complete and started proceedings to recover its deposit plus damages.

The Court found that the seller’s representations were untrue and were either made recklessly or else fraudulently. Damages were awarded to the buyer to cover what it had spent on surveys, reports, legal and other fees. He also got his deposit back.

My client was “lucky” because I spotted the mischief before we exchanged. But it’s reassuring to know that even if misleading replies are given the courts are willing to take a firm line when the point is litigated: buyers can be entitled to damages for the deceit – as well as return of deposit.

For more information or advice on this subject please contact Oliver Bussell, Partner in our Commercial Property team at Rix & Kay on 01732 448050 or email OliverBussell@rixandkay.co.uk.