In a contract for sale of land, the vendor is under a duty to disclose title defects and if a material defect is not disclosed, the purchaser may rescind the contract. This principle has been underlined by the High Court in SPS Groundworks & Building Ltd v Mahil [2022] EWHC 371 (QB).
The case concerned a sale by auction of land in Stoughton, Leicestershire owned by SPS Groundworks, the respondent. The land register contained a restriction on the disposition of the land without a certificate confirming that the terms of an overage clause – which provided for payment of 50% of the uplift in the value of the land attributable to obtaining planning permission – had been complied with.
The auction particulars stated: “There is excellent scope for development subject to any required planning permissions, making a superb investment opportunity.” However, the respondent knew not only of the existence of the overage clause, but also that 80% of the land was registered as local green space and protected from development, and that a recent case in Stoughton had stated that any further development in the village was unsustainable. A letter setting out these details was also sent to the auctioneer by a member of the local council prior to the auction.
Satvinder Mahil, the appellant, was the highest bidder for the property. Prior to the auction she had visited the property, but she was unable to download the legal pack. She wanted the property to build a family home and understood that planning permission would be needed, but as there were houses either side of the land, she did not think it would be a problem. It was only after the sale had concluded that she discovered that it would not be possible to build on the land. She refused to complete the transaction, claiming that she was induced to enter into the contract by misrepresentation and that the overage clause was a defect in title which should have been disclosed. The respondent sought from her the shortfall between the sum she had agreed to pay and the sale price achieved at a second auction.
At first instance the respondent succeeded. The overage clause was a defect in title but it was in the legal pack, the appellant was on notice that the legal pack was a vital document and she should have studied it before bidding – caveat emptor. The misrepresentation claim was dismissed because the appellant was determined to buy the land in any event.
The High Court allowed the appeal. Caveat emptor does not apply to title defects. A vendor is bound to give a purchaser full, frank and fair information about any defect and is not relieved if a purchaser fails to make enquiries. A purchaser may assume, in the absence of specific reference to a defect, that entries on the register or in other documentation are entries which would not significantly affect the value of property. Contractual conditions cannot be relied on in the absence of proper disclosure. The references in the brochure, and by the auctioneer, to the need to read the legal pack were insufficient to comply with the duty of disclosure.
Louise Clark is a property law consultant and mediator
