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The Importance of Being Earnest - Damages for Misrepresentation

on Monday, 22 February 2016.

The recent case of Greenridge Luton One Ltd v Kempton Investments Ltd demonstrates the importance of honesty and accuracy in property transactions.

The Facts

Kempton Investments had been trying for some time to sell offices near Luton Airport. It had prepared responses to the standard enquiries that buyers were likely to raise, and these included statements to the effect that there were no outstanding disputes in respect of the property and no service charge arrears.

Some time later, the seller became embroiled in a heated exchange with a tenant who was withholding £95,000 due toward the service charge. The seller did not update its standard responses.

Unaware of this and in reliance upon the seller’s statements, the buyer contracted to purchase the property for £16.25million and put down a deposit. Once the buyer became aware of the dispute and the service charge arrears it sought to rescind the contract and demanded that its deposit be returned.

When the seller refused, the buyer brought an action against it for deceit, and was awarded £1.16million, comprising both its deposit and a further £350,000 in damages for other losses.

Comment

If a buyer can show that it has relied upon a seller’s false statement, it falls to the seller to prove that it had a good basis for believing it to be true. If the seller cannot, the buyer is entitled to recover any losses caused by the misstatement, whether foreseeable or not.

As this could include losses caused by unexpected changes in the market, and any fees incurred by the buyer in raising finance or instructing advisors, the consequences for sellers can be particularly severe.

It is therefore vitally important, as this case demonstrates, to respond accurately to buyers’ enquiries, and to keep answers up to date in the run up to any exchange of contracts. Failure to do so may turn out to be a very costly oversight.


If you’re thinking of buying or selling property, please contact one of our Solicitors in our Commercial Property Law Team.