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Tuesday, 17 February 2015

Buying Property? Get a Survey and Ask Questions

This might seem obvious, but a recent case* has underlined the importance of carrying out a survey and raising formal enquiries about anything which causes concern before exchanging contracts to buy a property.

The seller may be entitled to issue a notice to complete and, if completion doesn't take place, forfeit the deposit  if the buyer becomes aware of matters after exchange of contracts that it could have found out before which mean it doesn't want to proceed.

This case concerned a large Victorian country house which was substantially renovated by the seller before they agreed to sell it to the buyer for £3.6m, with an initial deposit of £150,000.

The contract for sale incorporated the Standard Conditions of Sale (Fourth Edition) and also contained a fairly usual special condition excluding reliance on any representations made by or on behalf of the seller, oral or written, save for representations made by the seller's conveyancers in writing before the date of the contract.

The completion date was put back twice, by collateral agreement, but when the buyer failed to complete on the finally agreed date the seller served notice to complete and claimed the balance of the 10% deposit.

The buyer argued that the seller had misrepresented the condition of the property as it suffered from damp and rot.

The buyer sought an order to rescind the contract and for return of the deposit with damages for misrepresentation. 

The court found in favour of the seller, and ruled the buyer had no grounds to rescind the contract.

The non-reliance clause was held to be "fair and reasonable".

The buyer accepted the property in the physical state it was in at the time of the contract in accordance with the Standard Conditions of Sale.

This is an example of caveat emptor (buyer beware) - a basic common law rule that was incorporated into the contract by the standard conditions.

"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."

For the caveat emptor principle to be overturned, there would need to be a specific warranty from the seller as to the condition of the property - which in this case there was not.

The non-reliance clause excluded all oral representations made by the estate agent, statements contained in the brochure, the particulars of sale and other articles.

The court also found there was no evidence the buyer had read the replies to enquiries and could not therefore be said to have "relied on them" when they entered into the contract.

There were no actionable representations on which the buyer relied before exchanging contracts.

The lesson from this case is that a buyer should always commission a survey well before exchange of contracts so that issues such as damp and rot can be discovered and properly assessed by professionals.

Acting through its solicitor, a buyer should then formally raise enquiries on any matters arising from its survey which cause concern, again before exchanging contracts.

After contracts have been exchanged, unless there has been a proven misrepresentation, it's too late.

I understand there may be an appeal, so it will be interesting to see what further arguments are advanced on the buyer's behalf and whether they turn on any special facts of the case.

Wednesday, 28 January 2015

Criminal Trespass Supports Adverse Possession Claim

The Court of Appeal has ruled* that criminal trespass does not prevent a trespasser acquiring title by adverse possession.

Section144 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 made it a criminal offence to trespass by living in a residential building (although not a commercial building).

This was an appeal brought by the Land Registry against a High Court judgement with the same effect, as the LR was concerned a trespasser could unjustly benefit from criminal conduct.

The Court of Appeal has confirmed the High Court's view that, in enacting section144, Parliament didn't intend to produce any "collateral effect" on the settled law of adverse possession for either registered or unregistered land (which have different rules for acquiring title through adverse possession).

Adverse possession is in any case founded on the tort of trespass to land.

The public interest in having land put to good use, and in having clear rules to govern acquiring tile to land that has been abandoned, has over the years overridden concerns that a person shouldn't benefit from their unlawful actions.

The intervention of criminal law in this area was not held to make a difference to the balancing of these competing interests.

The old maxim ex turpi causa non oritur actio (no claim arises from a disgraceful cause) was excluded from the adverse possession legislation (Land Registration Act 2002) notwithstanding any criminal conduct under section 144.

Section 144 itself makes no reference to adverse possession.

The Court of Appeal has now clarified that section 144 and LRA 2002 operate independently of each other.

Tuesday, 27 January 2015

Government Ditches Reform of Electronic Communications Code

The government has dropped proposed amendments to the Infrastructure Bill that would have introduced a reformed Electronic Communications Code.

The Code was enacted in 1984 (as part of the Telecommunications Act 1984) to regulate land line telephone provision, but has since applied also to infrastructure forming networks which support broadband, mobile internet and telephone, and cable TV.

The Law Commission outlined recommendations for reform of the Code in February 2013, which fell short of producing a revised form of Code.

The government  took everyone by surprise when at the end of 2014 without warning or consultation it produced a last minute amendment to the Infrastructure Bill to incorporate an entirely new Code.

The British Property Federation however has voiced its frustration at the sudden withdrawal of the new Code.

Despite harbouring concerns about some provisions within the new Code, the BPF praised it for being broadly very sensible, and would now like to see it subjected to a full period of consultation before being drawn up and enacted.

The government has not said whether it will consult on the proposed reforms to the Code in the future.

For now, the Code will remain in its current form.

Thursday, 22 January 2015

Chancel Repair Liability - No Change Imminent

The first reading of a bill introduced last year to abolish chancel repair liability (CRL) in England took place in the House of Lords last week.

The bill states “No person shall after the commencement of this Act be liable as lay rector for the repair of the chancel of any church or chapel.”

CRL is an ancient law that can force homeowners to pay for ancient Anglican parish church repairs - you can read more about it on this blog.

Anyone hoping for a swift change in the law before the General Election however is in for a disappointment.

Following a short debate, in which several members of the Lords spoke eloquently in favour of abolishing CRL - and told some interesting stories of the struggles of many people deemed lay rectors to have the liability removed from their properties - Lord Ashton made it clear the government has no current intention of reform.

Here are extracts from Lord Ashton's short reply:

I listened carefully to the concerns expressed about chancel repair liability and I am sure that the Ministry of Justice will consider them in detail, but I must make clear—I trust that this will not come as too much of a shock to noble Lords, except, perhaps, to the noble Lord, Lord Kennedy—that the Government have no plans to change the law at present. None the less, it is because we take the concerns seriously that we are keeping the situation under review.

The present legal position is that chancel repair liability is an ancient but valid right that enables the owner, who, in England, is usually the PCC, to enforce the liability. This right can play an important part in the finances of the 5,000 or so churches with the benefit of the liability. In earlier times, the main problem was that the liability was sometimes difficult, if not impossible, for a prospective buyer to discover. Now, following the removal of its status as an overriding interest in October 2013, its existence is readily discoverable. This is a major improvement, as my noble friend Lady Wilcox said.

Practitioners will take issue with the phrase "readily discoverable".

The risk of CRL remains until a transaction is registered at the Land Registry, hence the continuing need for CRL insurance where a potential  risk has been identified by a CRL search.

CRL searches are not conclusive as that would require extensive research of ancient archives.

And where properties have not changed hands since October 2013, the possibility of CRL liability also remains.

Where the Church has registered its interest, properties are blighted forever.

Where the Church hasn't registered its interest, the risk remains until a new owner is registered at the Land Registry following a transfer for value.