A recent High Court decision has highlighted the importance to buyers of only proceeding to exchange of Contracts after their building survey has been reviewed and understood.
Mr and Mrs X exchanged Contracts on their purchase of a multi-million pound property. The couple did not wait to first receive and review the survey report on the property’s structure and condition.
Mr and Mrs X subsequently received the survey report and discovered that the surveyor had identified areas of rising damp and wet and dry rot at the property. The costs of remedying these areas was quoted to be in the hundreds and thousands of pounds.
Mr and Mrs X tried to rescind the purchase Contract on the basis of the issues identified by the survey report. The couple argued that their seller had misled them about the property’s structure and condition, so they should therefore be entitled to withdraw from the transaction.
The legal position
A fundamental legal principle in conveyancing is caveat emptor, which translates to: “let the buyer beware”. If you are buying a property, it is your responsibility to investigate the property. There is no general obligation on your seller to ensure you have all the relevant information about the property before committing to buy it.
The purchase Contract commonly states that the property is accepted by the buyer in the condition it is in as at exchange of Contracts. If the buyer only discovers issues with the property after exchange, the buyer must buy the property subject to these issues. The buyer is not entitled to withdraw because the issues were discovered after exchange.
The High Court therefore concluded that Mr and Mrs X breached the purchase Contract by withdrawing from the transaction after exchange. It was Mr and Mrs X’s fault that they had exchanged Contracts before receiving and reviewing the survey report. Not only did Mr and Mrs X lose the deposit which they had paid on exchange of Contracts, the couple were also ordered to pay their seller damages as a result of breaching the purchase Contract.
Although this case involved a multi-million pound property, the relevant legal principle applies to all conveyancing transactions. Before committing to exchange of Contracts, the buyer should ensure that, if a survey has been arranged, the report is received, reviewed and understood. The buyer should refer any queries on the report’s contents to their surveyor and solicitor. This will reduce the buyer’s risk of being bound to purchase a property with issues, which may be costly to resolve.