Answer with care – the fateful case of the moths in the wardrobe
As we know, during the process of buying and selling a house the Seller is required to answer standard questionnaires.
A case made the headlines this week which emphasises the great deal of care that needs to be taken when answering those questions.
A misrepresentation is a false statement of fact made by one party to another. If, during negotiations for the purchase of a property, a Seller makes a false statement which the Buyer relies on – even in part – when deciding whether or not to purchase the property the Buyer may have a remedy against the Seller after completion. Usually damages (financial compensation) will be the appropriate remedy but in rare cases a Claimant can ask for the Court to rescind the contract. Recission is, in essence, the cancellation of the contract.
In the subject case, the daughter of a Georgian billionaire and her husband, bought a seven-bedroom house in Notting Hill in May 2019 for £32m.
Days after completing the purchase the couple spotted signs of an infestation that proceeded to destroy items of their clothing and ruin their wine.
During the course of the conveyancing the Seller had failed to disclose the infestation and, as a result, the Buyers sued him. The Seller was a property developer who, the High Court found, had failed “honestly to disclose” the “serious infestation”.
The Seller argued that he had not tried to deliberately deceive the Buyers but that he had “simply wanted to sell the house and move on”. However an insect expert told that court that the house had “an infestation of extreme proportions … amounting to millions of moths”.
At the height of the problem the Claimants had to swat around 100 moths a day. The Judge found that the seller’s replies had been false when he denied knowledge of any infestation or hidden defects in the house.
In this case the Judge ordered the sale to be rescinded which meant that the Seller had to reimburse the Buyer the purchase price plus the £3.7m they had paid in Stamp Duty, less about £6m to represent the value that the Buyers had derived from occupying the property since the date of the purchase.
The case highlights the need to be sufficiently honest and open when responding to questions that address known defects. Any attempt to conceal those defects maybe construed as a misrepresentation which would result in a Buyer being able to claim damages and, in an extreme case such as that which hit the news this week, rescission of the contract.
