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Buying a house – deposits & importance of a survey

Buying a house – deposits and the importance of getting a survey

Contracts for the sale of property and land commonly include a standard condition that the buyer accepts and agrees to pay for the property based on its state of repair at the date of signing.  The onus is on the buyer to find out what they need to know about a property before they agree to buy it.  The principle of ‘caveat emptor’ (‘let the buyer beware’) applies.

The case of ‘Hardy v Griffiths’ involved a leading barrister and his wife, who agreed to buy a country manor house in East Sussex for £3.6 million.  They did not obtain a survey for the property before exchange of contracts, instead relying upon their own visits and upon what they alleged they had been told by the seller.  A survey carried out following exchange of contracts (and following payment by the buyers of a part deposit) revealed rising and penetrating damp and dry rot.  The buyers ultimately sought to pull out of the purchase before completion, alleging misrepresentation on the seller’s part.

The seller sued the buyers in order to retain the sum already paid by way of a deposit and for damages to ‘top up’ the deposit payment to the full 10% of the purchase price, as stipulated in the contract.  Although the seller could not prove a loss as a result of the buyers’ failure to complete (he had been able to re-sell the property to a different buyer for the same price a year later) his claims succeeded.  The High Court concluded that there was no evidence that the buyers had relied upon what the seller had told them and that in any event, this was a clear case of caveat emptor.  The buyers should have obtained a survey before committing themselves to buying but had not done so.  All of the money for which they were liable by way of deposit (£395,000) was accordingly forfeit.  The Court concluded that there was nothing special or exceptional about the case which would justify returning the deposit to the buyers.

The case highlights the importance of arranging for a survey before exchanging contracts, as close to exchange of contracts as possible.

Dispute Resolution Team