Insights

Buyer Beware

October 6, 2021

This article was first published in Rural magazine.

It is an exciting moment when you are handed the keys to your new home. However that excitement can quickly fade if you later discover that there was a defect with the property which the seller was aware of, but failed to tell you about.

The Royal Court has previously ruled that where a seller has given misleading information a buyer may have some recourse against the seller. This decision has led to buyers asking many more questions of sellers – sometimes running to over 70 queries.

Obligations of the seller

To streamline the process law firms now use a Law Society of Jersey standard ‘Questionnaire’ for freehold purchases. This then forms part of the seller’s contract of sale, binding them to their answers. The Questionnaire asks a limited number of questions. Any additional queries should be raised through the estate agent rather than a lawyer. The Questionnaire sets out in clear terms the obligation on the seller to be truthful and the ability of a buyer to rely upon the answers.

A seller is not expected to carry out surveys or inspections in order to answer the questions. However, giving a false answer may lead to a claim being made against the seller. Such claims can be made up to three years after completion.

What should buyers be aware of?

Whilst the Questionnaire is helpful, it is still largely a case of ‘buyer beware’. The Questionnaire is not a substitute for a buyer carrying out their own enquiry by way of a survey. It may be that a problem with a property is not actually known to the seller but could have been discovered if a survey had been carried out.

Banks lending a mortgage will invariably have a valuation carried out. This is not a survey. A valuation is an assessment a bank carries out to make sure a property meets its criteria for advancing the loan. It is really to assess the risk faced by the bank in relation to the value of the property in the case of default on the mortgage repayments. The valuation report may only be a couple of pages. It will list all the main details about the property, the recommended valuation and comparable evidence to support that valuation. It is a ‘tick box’ valuation, nothing more.

Whilst a buyer will probably have paid for the bank’s valuation it may not be of any use to the buyer because it is addressed to (and prepared for) the bank. A buyer is unlikely to be able to use the report to bring a claim against a seller.

In order to have certainty over the condition of a property a buyer should consider having one of the reports offered by the Royal Institution of Chartered Surveyors (RICS) carried out for their benefit, such as the Condition report, Homebuyer report or Building survey. The detail and cost of each report varies depending upon the work involved.

How does this benefit buyers?

RICS Surveys are for property buyers who wish to understand their property and the costs associated with the repair, maintenance, and upkeep, in addition to how the property is likely to perform in a future market resale. It is possible to use these reports as a tool to renegotiate the purchase price or agree that a seller will make good on any repairs as part of the sale contract. All of these reports will give a buyer information needed to make informed decisions about a purchase. The surveyor is acting for the buyer and not the lender and so is available to discuss their findings and offer advice if necessary.

The Questionnaire is currently only available for freehold property contracts. The Law Society is currently working on similar questionnaires for share transfer and flying freehold properties. Pending the new questionnaires being launched, buyers continue to rely upon enquiries made by their lawyer of the seller. A share transfer buyer has protection for three years in the terms of their purchase agreement which covers pre-contract responses to enquiries. A flying freehold buyer would need to rely upon the case referred to above in bringing a complaint against a seller for failure to disclose.

Anyone buying a new house wants to be able to enjoy it and spend their money making it into a home they love. A buyer does not want to have to spend money on expensive repairs which they could have found out about before they bought and made a decision whether to buy with the information they needed.

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