With a contract for sale of a property, it is implied that the seller is selling it free from incumbrances. The dictionary definition of an incumbrance is any obstruction that impedes or is burdensome to the land. When we look at property specifically, a mortgage or right of way are good examples of incumbrances.
As a result of the above assumption, if it is the case that such incumbrances exist and have an affect the property being sold, the seller is under an obligation to disclose this to the buyer before contracts are exchanged.
Failing to do would give rise to serious repercussions to the seller. Not only will the buyer have a right to rescind the contract and claim damages, but the seller could also fall victim under Section 2 of the Fraud Act 2006 which is a criminal liability.
What must the seller disclose?
It is a common misconception that the principle of caveat emptor can be applied indiscriminately when selling property, however this is not the case. Caveat emptor is a Latin phrase which translates to buyer beware. The seller is under a duty to disclose latent incumbrances to the buyer, regardless of whether the buyer has raised enquiries about these or not.
A latent defect is one that is not apparent. It is a fault or issue with a property that could not have been observed and discovered upon inspection of the property prior to completion of the sale. Examples of latent defects include mould issues, water damage, damp, insect infestation such as woodworm, electrical issues, building regulations. A patent defect on the other hand is one that can generally be established by inspection. Examples here include cracking in plaster or obvious damage to a property. However, as seen under Yandle & Sons v Sutton, apparent defects such as a right of way, which would in theory be classed a patent defect can in fact, be classed a latent defect.
It is therefore crucial that a seller always think very carefully about the level of detail they disclose to the buyer. It is not uncommon for sellers to market their property in the best possible light however in doing so, they may be unnecessarily exposing themselves to misrepresentation.
How does the Law support what we have set out above?
Going back to the difference between latent and patent defects, one could argue that a defect is not latent, if a buyer is aware of it as set out under Section 198 of the Law of Property Act 1925. However, Section 24 of the Law of Property Act 1969 places an obligation on the seller to disclose matters which are registered against the property. In addition, you must also remember that although a buyer who enters into a contract with knowledge of an incumbrance, does so by agreeing to purchase the property as such, it is important as a seller to understand that just because they are revealed on a search, does not prevent the seller’s obligation to disclose.
What usually falls outside the duty of disclosure?
The seller’s duty to disclose sometimes extend to matters which even the seller might not be aware of. The Standard Conditions of Sale which forms the backbone of most conveyancing contracts generally attempts limit this liability (Condition 3).
There is no requirement to disclose to the buyer, those defects that are already known by them. The risk to the seller here is that assuming the buyer knows such information could be a mistake. It is therefore prudent to disclose such arrangements to the buyer even where these incumbrances are obviously noted.
Turning to matters which are readily observable by inspection, a patent defect; for instance the property not being habitable since the roof has collapsed does not necessarily need to be expressly disclosed.
Turning to physical defects, be it latent or patent, they do not generally need to be disclosed. It is widely accepted that such matters will require an expert to determine (such as a surveyor employed by the buyer). The buyer however could argue that such undisclosed physical defects are a result of misdescription, i.e. the seller has deliberately concealed a defect. Careful consideration must be given to this fact by both the seller and the seller’s conveyancing solicitor before forming a conclusion.
Lastly, similar to physical defects, planning matters have historically been deemed not matters of title. A recent court case (Thorp v Abbots 2015) has given cause for this practice to be questioned. It is therefore our view that is always good practice to disclose such matters.
Our conclusion –
The aim of this article has not been to scaremonger seller’s in the degree of disclosure they are required to offer. It has been written to offer a wider perspective of what information a seller should consider disclosing, especially where a seller has been under a misguided view of relief they could gain under caveat emptor.
Especially in light of the Law Society and Trading Standards direction in which they are expecting sellers to make far more detailed material information available even before a property is marketed would suggest to us that the scales are tipping in a direction far more friendlier towards buyers than it has ever been.
