Moths and misrepresentations

This article was written for and published as original content in the East Anglian Daily Times property section. Joanne Kelly of Thompson Smith and Puxon examines a recent judgment relevant to both residential and commercial property transactions which puts the “buyer beware” principle under scrutiny.

A recent judgment saw the buyers of a £32.5 million mansion successfully seek rescission of the sale contract, return of the purchase price and damages from the seller. The buyers alleged that the seller had made misrepresentations in the pre-contract enquiries and this had induced them to purchase the property.

The seller had renovated the property in 2012/2013 and part of this renovation included the installation of wool-based insulation in the internal walls and ceiling voids. The seller’s wife had subsequently noticed a problem with moths and instructed a pest control company who advised that the wool-based insulation should be removed.

The property was then put onto the market for sale. One of the pre-contract enquiries asked whether the property had ever been affected by vermin infestation. It was at this point the seller failed to disclose the moth infestation or to disclose the report previously prepared by the pest control company.

The buyers successfully completed on the property in May 2019 and quickly became aware of a dooming moth infestation. The buyers attempted to eradicate the moths by undertaking expensive remedial works at the property to address the issue. The buyers then discovered that the seller had in fact already instructed a pest control company to undertake treatment for a moth-related issue at the property prior to the sale. Once this discovery was made, the buyer’s solicitor proceeded to pursue a claim for fraudulent misrepresentation.

The court held that the definition of vermin extended to both insects and animals in this context. The seller was reckless about the truth through them knowingly making false statements regarding the moth issue. As a result, this lead to the judgement of fraudulent misrepresentation.

This judgment is relevant to both residential and commercial property sales because, whilst the principle of “buyer beware” governs property transactions, this case highlights that the seller cannot rely on this principle if a failure to disclose would make information given to a buyer misleading or incomplete. A seller should always provide full and honest replies to pre-contract enquiries and should not actively conceal defects or give misleading replies to enquiries. If this guidance is not followed, the seller risks legal action and potential financial loss.

If you have any queries on the issues covered above, or on a related issue, please contact our commercial property experts on 01206 574431 or via enquiries@tsplegal.com.