Sellers Beware: Fraudulent misrepresentations in pre-contract enquiries

March 14, 2016

In the very recent case of Greenridge Luton One Ltd & Anor v Kempton Investments Ltd [2016] EWHC 91 (Ch) (22 January 2016) the buyer rescinded the property contract shortly before completion after discovering fraudulent misrepresentations in the seller’s replies to enquiries (CPSEs).

The Court found that (i) the replies to the CPSEs provided to the buyer were inaccurate and contained misrepresentations by stating that there were no service charge arrears, when in fact there were; (ii) the buyers had relied on the misrepresentations and been induced to enter the contract; and (iii) the representations had been made recklessly or fraudulently.

In the circumstances, the rescission of the contract was valid and the buyers were entitled to return of the deposit together with damages for deceit in the sum of £395,948. The ruling serves as an essential reminder that sellers and/or their advisors should always ensure that:

Replies to enquiries are compiled with appropriate care and attention so that information which should be disclosed is, in fact, disclosed and not concealed;
Buyers are provided with up-to-date replies to enquiries and kept informed of any change in circumstances that will affect the accuracy of the replies. This is particularly important in circumstances in which a sale becomes protracted or replies to CPSEs are issued to an alternative buyer; and
When asked for clarification of responses or further supporting documentation, those requests are complied with.
Kathryn Collie, Director and Natasha Jordan, Trainee Solicitor, Property Department