Lack of survey costs buyers many thousands

Buyers who contracted to purchase a £3.6million property in Sussex without having a survey done got a rude shock when damp and rot were later discovered. They even tried to get out of completing the purchase.

However, the judges have now held that they were not entitled to pull out of the purchase and must pay damages to the sellers.

Buyers thinking of going ahead without a proper survey should heed the words of the judge, who said:

For reasons best known to themselves, the Defendants entered into the Contract without any professional advice from a surveyor and, having done so, they cannot now complain that they contracted to buy a house that suffered from rising damp and rot.

Why buyers must remember the ‘caveat emptor’ or ‘buyer beware’ rule

This case graphically demonstrates how the “caveat emptor” rule works in property contracts. Caveat emptor is an old Latin phrase that translates as “let the buyer beware” – in other words, buyers must look out for themselves. This is spelled out in the Conditions of Sale incorporated in most property contracts, which state “the buyer accepts the property in the physical state it is in at the date of the contract.”

So if buyers agree to buy without having a survey done, then they can’t go back on the contract unless there has been misrepresentation. Laughton Manor is a substantial mansion-house set in several acres of Sussex countryside. It had originally been built in the mid-1800s as a private residence by Sir James Duke. Between 1930 and 1990, it had been used as government offices before being restored as a private house by the sellers, Mr and Mrs Hardy.

Mr and Mrs Griffiths inspected the property twice and made an offer. They then had second thoughts about the amount of their original offer and made a lower offer that was not initially accepted. However, there were further negotiations and eventually a figure of £3.6 million was agreed. Mr and Mrs Griffiths instructed solicitors, but they did not arrange for a surveyor to inspect the property.

Their solicitors made the usual enquiries before contract, which did include an enquiry as to whether the property had been subject to rising damp, dry rot, wet rot or any other rot. The sellers’ solicitors replied in answer to this enquiry:

The Sellers are not aware of any such issues but as you will appreciate this is an old property and therefore this reply cannot be taken as a warranty as to condition.”

Contracts were exchanged and a deposit of £150,000 (i.e. less than the customary 10 percent of the price) was paid to the sellers’ solicitors. A completion date was also agreed. Mr and Mrs Griffiths had to sell their existing two properties and were experiencing delays with this. As a result ,they asked the sellers to agree a postponement of the completion date, which was agreed subject to certain conditions. It was also agreed that the deposit could be released to the sellers.

Rising damp and wet and dry rot only discovered after exchange of contracts

The Griffiths also decided that they needed a mortgage, and so a valuation survey was carried out in connection with the mortgage application. This indicated there was evidence of rising damp and wet and dry rot in the property. When the Griffiths failed to complete on the agreed date and demanded a further postponement, the sellers had had enough. So their solicitors served formal Notice to Complete in accordance with the contract conditions.

They also wrote to the Griffiths’ solicitors pointing out that the balance of the deposit was payable under the contract and should be paid immediately. The Griffiths’ solicitors then responded that their clients objected to paying the balance of 10 percent of the deposit, said they could not retain the deposit that had been paid and alleged that the Contract had been repudiated by reason of the Hardys’ “… false representations” as to the true condition of the property.

Needless to say Mr and Mrs Hardy issued a claim against the Griffiths, who in turn counter-claimed for return of the deposit and damages for misrepresentation, as well as other remedies. These were the penalties for failing to complete – and not getting a property survey done earlier.

The High Court judge decided there had been no misrepresentation about the condition of the property and that Mr and Mrs Hardy were entitled to retain the £150,000 deposit paid on exchange. They were also entitled to be paid £210,000 as the balance to make the full 10 percent deposit and various other damages for the failure to complete in accordance with the contract.

Anyone buying a home, even if it is just a small terraced house and not a multi-million pound mansion, should carefully consider the judge’s full statement:

The Defendants [Mr & Mrs Griffiths] accepted Laughton Manor in the physical state it was in at the date of the Contract. That is the effect of standard condition 3.2.1 which gives effect to the basic common law rule of caveat emptor. Defects of physical quality are regarded as patent defects which prima facie a vendor of land is not required to disclose. The responsibility for their discovery is placed by the law on the purchaser and it is for that reason purchasers commonly obtain a professional survey of the land before entering into the Contract. For reasons best known to themselves, the Defendants entered into the Contract without any professional advice from a surveyor and, having done so, they cannot now complain that they contracted to buy a house that suffered from rising damp and rot.

Many buyers think they can rely on a mortgage valuation survey to reveal any defects, but this can be dangerous. Mortgage surveys are often little more than a valuation with a quick inspection of the property (sometimes just a drive-by) and will not necessarily discover serious defects. So the best advice must be for all buyers to have their own survey carried out.

Post Author: Frances Traynor