Commercial Property – Rescission of Contract

A Buyer may rescind a contract for the purchase of property following innocent misrepresentations made by the Seller.

Contracts for the sale of land usually incorporate Standard Conditions of Sale which provide that an error or omission in the information given to the Buyer will only entitle the Buyer to rescind the Contract where the error or omission is the result of fraud or recklessness on the part of a Seller.

In the recent Court of Appeal case of Cleaver v Schyde Investments Limited the Seller, having already provided the Buyer with replies to the Commercial Property Standard Enquiries, was notified of a planning application for the development of a medical centre on the property. The Seller failed to notify the Buyer who only found out about the planning application after contracts had been exchanged and therefore refused to complete.

The Court of Appeal upheld the decision of the County Court that the Buyer relied on the accuracy of the replies to the Commercial Property Standard Enquiries and would not have exchanged contracts had it known about the planning application. The Seller could not therefore rely on the Standard Conditions of Sale and the Buyer was entitled to withdraw from the purchase Contract and to the return of the deposit paid.

There is therefore a continuing requirement for a Seller to notify a buyer on becoming aware of anything that may cause any reply to enquiries to be incorrect. Failure to do so may result, as in this case, in the Buyer being entitled to refuse to complete.

Ian Wetherell of Blaser Mills, who acted for the Buyer in this case, commented:

“This case was always going to be an uphill battle given that the Seller was advised that there was no need to disclose the planning application and as such amounted to an innocent misrepresentation. The judgment underlines the principle that full disclosure of matters within the knowledge of the Seller should be made whether or not the Seller considers them to be significant or of relevance to the sale.”

For further advice and for all your commercial property requirements please contact us at commercial@blasermills.co.uk.