Buyers – And Sellers – Beware

An appeal arising from the 2009 downturn brings into focus a non-reliance clause and claims against sellers for oral misrepresentation.

Appeal arising from events in the property downturn of 2009 has current relevance. In Lloyd and other v Browning and another [2013] EWCA Civ 1637, the buyers were keen to exchange contracts quickly. Had the buyers taken more time to nail down every last point from their due diligence, they may not have exchanged contracts at all. Once the buyers had full knowledge of the facts they made a claim against the sellers for oral misrepresentation. The sellers were protected by a boilerplate clause in the special conditions of sale.

The contract was on Standard Conditions of Sale, 4th edition.

As usual the parties' solicitors had agreed special conditions to supplement the standard conditions. Special Condition 8 was a non-reliance clause which provided that 'the buyer hereby admits that he has inspected the property and he enters into this contract solely as a result of such inspection and upon the basis of the terms of this contract, and that in making this contract no statement made by the seller or his agent has induced him to enter except written statements, if any, made by the seller's conveyancers in replies to enquiries raised by the buyer's conveyancers or in correspondence between the parties' conveyancers'.

The facts were that the sellers were disposing of a barn within the green belt with planning permission for residential use. The planning consent was limited to the current footprint of the barn, but at three separate meetings the buyers were shown plans by the sellers which included an extension to the barn. These plans were an earlier version, and the planning permission actually granted did not include the extension. The buyers' solicitors were instructed that the planning permission had been dealt with by the principals direct.

In terms of due diligence:

The pre-contract enquiries did not cover planning permission; The planning permission itself did not make express reference to any plans; The local planning authority's files had the earlier version of the plans which still showed the extension; and The buyer's planning consultant noted that the minutes of the planning committee report did not refer to the extension. The buyer's planning consultant did not know what the buyer's solicitors were doing, or instructed to do. Nor did the lawyers know what the planning consultant was doing. The...