How revealing? Don't leave holes in your replies to enquiries
SH Real Estate Briefing – May 2025
Sticky market
You're looking to sell a secondary office building in what remains a difficult market. Your agents have done a great job and have found you a buyer.
In the normal way, you've been asked to answer some detailed "standard enquiries". You know that the property has had a number of problems in the recent past, and they won't be obvious when the buyer looks around. You also know that there is a lot of supply in the market and you're keen not to put the buyer off – or invite a price chip. So, you plan to keep quiet about some of the problems – after all what could possibly go wrong?
Sold as seen?
You’ve been told in the past that the principle of "buyer beware" applies when selling property, so surely being economical with the truth is OK, right?
Wrong.
If you wanted to, you could refuse to answer any enquiries at all and that would mean that you'd be unlikely to have any liability (except in relation to statutory obligations to disclose or so called "latent defects" in title).
Of course, the catch with refusing to answer questions is that most buyers will, justifiably, be suspicious and will refuse to buy on that basis. So, most sellers do agree to provide replies to enquiries and, to avoid problems down the line, replies should be honest and clear.
"Not so far as the seller is aware …"
OK, but can you just bend the truth a little? Perhaps by saying that you're not aware of any problems, but that the buyer should rely on its own enquiries?
No. If you're really not aware of anything relevant, then it is, of course, fine to say that. But you certainly shouldn't be representing that you're not aware of something when you are. You should also be careful that you haven't "conveniently" forgotten things from the recent past. For example, did you commission a report into something a few years ago that highlighted problems that you decided to overlook because you were planning to sell? If so, depending on the nature of the reports, you may need to provide copies to the buyer – or at least tell them that they exist and that you're not disclosing them. Get advice if you're not sure what needs to be disclosed.
What could go wrong?
OK, that's all understood, but you're not convinced that the benefits of keeping schtum don't outweigh the risks.
That is an approach that some sellers take – but the courts will not shy away from penalising that behaviour and you'll likely have seen some of the press coverage from a big case (Patarkatsishvili v Woodward-Fisher) covering exactly this topic earlier in the year (details below).
The most significant risk is that the buyer will bring a claim against you if they rely on your replies and later suffer loss as a result of your inaccurate replies. The claim would likely be for misrepresentation. There are three types of misrepresentation: fraudulent, negligent and innocent. Which applies depends on the state of your knowledge at the time you made the representation.
For the purposes of this article, we'll focus on fraudulent misrepresentation. You can be guilty of fraudulent misrepresentation if you either know that a "representation" in a reply is false, or you suspect that it is false and you don't make enquiries to check this out. If the buyer relies on your fraudulent misrepresentation and suffers loss it may be able to claim a number of remedies, most notably damages to cover its losses and/or "recission" – which means that the contract is effectively unwound and terminated. That is what happened in the Patarkatsishvili case earlier this year, when the High Court allowed a claim for rescission based on fraudulent misrepresentation when the seller failed to disclose a severe moth infestation in wool-based insulation. Subject to any appeals, the seller in that case will effectively have to take the property back, repay the £32.5 million sale price and compensate the buyer for related losses, like wasted SDLT. Ouch.
Moral
When giving replies to enquiries, it pays to give accurate and honest answers and to take the time to check that the replies are correct. Remember to update the replies before exchange. Don't say you're not aware of something if, with a reasonable amount of checking, you clearly are. If in doubt, give us a call to discuss your concerns; the right approach may not be immediately obvious and our expert team can help ensure that you're properly protected.
For further information please contact Catriona Berman or your usual real estate contact at Stephenson Harwood.
