HOUSING MARKET: Beware Of What You Are Buying

Solicitor Luke Patel

In the current housing market where properties are being bought extremely quickly as buyers take advantage of the government’s Stamp Duty Holiday, the Court of Appeal case of Lloyd v Browning serves as a cautionary reminder to both buyers and sellers of the effect of non-reliance clauses. It is common practice in contracts for the sale of land to include a clause whereby the buyer cannot rely on any pre-contract statements made by the seller and that only written replies between the parties’ solicitors can be relied upon.

In this case, the buyer entered into a contract to buy a barn believing that there was planning permission for both the barn itself and a proposed extension. This was due to the fact that in several meetings between the buyer and the seller prior to the exchange of contracts, the plans produced by the seller showed the extension. However, those plans related to an earlier planning application by the seller which had been refused and there was in fact no planning permission for the extension and it would not have been possible to obtain such permission as the proposed extension was contrary to local planning policy. The seller was aware that the buyer wanted to build an extension and that this was not covered by the planning permission.

The buyer wanted to exchange contracts quickly and told their solicitors that planning permission had been dealt with by their planning consultant and the buyer’s solicitors therefore did not include planning enquiries in their pre-contract enquiries.

The Court found that although the seller had made a misrepresentation and that it had induced the buyer into entering into the contract to buy the property, the contract for the sale of the property included a non-reliance clause limiting representations to those made in writing between the parties’ solicitors. The Court confirmed that had the buyer wished to rely on the pre-contractual statement made by the seller, they could have acquired written confirmation from the seller’s solicitors.

Contract law states that non-reliance clauses are only valid if they are fair and reasonable. The Court held that the clause was reasonable because both parties had been legally advised during the transaction, they had equal bargaining power, the clause could have been overcome by the buyer’s solicitors dealing with the point in correspondence and the buyer had been in a hurry to complete and had deliberately decided to proceed knowing that they had incomplete planning information.

This case highlights the need for buyers and sellers to advise their solicitors of any pre-contract negotiations to ensure that any significant issues are dealt with in correspondence between the solicitors. The case also shows the importance for buyers to undertake full and proper due diligence of properties before contracts are exchanged.

Although this case concerns the sale of land, non-reliance clauses can commonly be found in contracts for the sale of goods and services.

If you require assistance with any contractual dispute or on any COVID-19 related issue then please contact Luke Patel on 0113 227 9316 or by email at “LPatel@LawBlacks.com”.

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