Pre-contract enquiries: just own up

When a buyer or their representative makes pre-contract enquiries during the conveyance of property, accurate information must be given or damages for losses incurred by misrepresentations  will be payable if disclosure is not made; even if the market value of the property has gone up and insurance (here in the form of an NHBC guarantee) is in place. This is the finding in Alison Quilter v Hodson Developments Ltd [2016].

The case revolved around the purchase of an apartment by Alison Quilter. The apartment was managed by the developers, Hodson Developments Limited, who acted as vendor. The purchase price was £240,000 and the claimant sold the property for £275,000 two years later.

The apartment was situated in a gated community and all the apartments were serviced by a communal biomass central heating and hot water system. Before contracts were exchanged, Hodson was sent a standard form of pre-contract enquiries. Enquiry number 55 was: "Is the seller aware of any past or current dispute which relates in any way to the property, its use, or any other matter connected with the property and, in particular, regarding boundaries, easements, covenants or any planning matters? If so please give details." Enquiry number 56 was: "Is the seller aware of any circumstances which may lead to such dispute. If so, please give details."

It was alleged that Hodson’s response omitted certain important matters because it impliedly represented, by omissions, that it was not aware of certain disputes which affected the value of the property.

HHJ Saggerson, sitting in the Central London County Court, found that there were ongoing problems with the boiler and that there was a dispute with Hodson in relation to this which ought to have been disclosed. Hodson was therefore making a misrepresentation by implying that it was not aware of these matters. Having regard to the defects, the judge held that the property should have cost £225,000. He therefore gave judgment in Ms Quilter's favour of £15,000.

The judge then considered whether the subsequent sale of the property by Ms Quilter altered the position as to damages. He concluded that the claimant was entitled to take advantage of the market value increase. He noted that the profit she had made would have been £15,000 greater if she had paid the appropriate price for the apartment initially.

The case then went to appeal with Hodson arguing that there were no misrepresentations because there were no disputes. The developer also argued that, even if there were disputes, the measure of damages in this case did not accord with the principle of compensation as the purchaser had since been able to sell the apartment in 2014 for a profit at £275,000 (when the disputes still existed and were disclosed but were by then being addressed by the National House Building Council guarantee).

The Court of Appeal rejected the appeal, saying that the judge was right: there were disputes and misrepresentations had been made.  Furthermore, case law led the Court of Appeal to conclude that the purchaser was entitled to retain her profit associated with a rise in the market value of the property; and she was also able to benefit from the NHBC guarantee to reduce her loss.

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