You would think that where you enter into a contract to buy a property because you have relied on a statement or statements made by the vendor that turn out to be incorrect, you would have a very good case for compensation – but this is not always the case.
A vendor of land is commonly represented by an agent and the representations about the land are often made by the agent, not the vendor. As well as the issue of who made the representation, it is also common for sale agreements to limit the liability of the vendor for misrepresentation. There are various means by which this can be done and be enforceable if the clause is reasonable.
In a recent case, which ended up in the Court of Appeal, a contract between property vendors and buyers contained a clause limiting the vendors' liability in the event of misrepresentation. The property was farmland containing a disused barn. The barn had planning permission for conversion to a residential property. The vendors claimed that it could also be extended, although an application for an extension had been refused.
The buyers discovered the correct planning status only after they had purchased the property. They claimed against the vendors for the difference in value between the property with the planning permission they thought it had and the permission it did in fact have. The claim was for £55,000.
The contract for the property sale contained a clause which stipulated that the buyers had entered into the contract based only on their own inspection of the property. When the usual enquiries were made about planning permission, the vendors made no representation that planning permission had actually been granted for the extension. Furthermore, a planning consultant retained by the purchasers advised them that she could find no record of planning permission having been granted for the barn extension.
The Court ruled that although there was a misrepresentation, the limitation clause was effective. The buyers could not claim against the sellers.