COVID-19 - UK: Virtual Sanity: On video viewings & caveat emptor

With the continued need for self-containment as a result of COVID-19, residential property agents are going online in a bid to continue ‘business as usual’ and there have been a surge in virtual viewings and live walk-through video tours of properties.

Irrespective of whether properties are viewed by prospective purchasers in person; via an online sales brochure; or via a ‘virtual viewing’ by video, the fundamental legal principle that underpins the sale of property in England and Wales is caveat emptor meaning “let the buyer beware”.

The effect of the maxim “caveat emptor” is that the seller has no duty to disclose problems voluntarily. If one party is labouring under a misapprehension there is no duty on the other party to correct it. A well-advised purchaser will therefore seek to find out as much as possible about the property to ensure that it is getting what it bargained for with no hidden surprises.

Most purchasers will commission a survey of the property and will obtain the majority of factual information via searches conducted by their conveyancers. However, there are usually a number of important matters that are only known by the seller, such as third parties issues and whether disputes with neighbours have arisen.

Sellers must take care when making representations about the property during pre-contractual discussions. If a seller (or an agent authorised on its behalf) makes a false statement of fact relating to a property; and that statement is relied upon by a purchaser causing it loss, the seller can be said to have made a misrepresentation.

A misrepresentation can be:

• innocent (where the seller had reasonable grounds for believing the statement was true);
• negligent (where a statement is made carelessly or without reasonable grounds for believing its truth); or
• fraudulent (where it is made knowingly, or without belief in its truth, or recklessly as to its truth).

Where fraud or negligence is proved, the purchaser’s remedies include rescission (treat the contract as not existing) and/or damages. The measure of damages is that which will put the purchaser into the position it was in before the misrepresentation took place. Unlike most damages claims, the recoverable losses for misrepresentation are not restricted to those that are reasonably foreseeable (which means losses caused by a fall in the market are recoverable). If the misrepresentation is found to be innocent, the purchaser may only seek rescission although the court can award damages in lieu of rescission (the purchaser cannot be awarded both rescission and damages).

Representations made outside of the conveyancing process may also be relied upon. This includes statements made by the seller and its agent, whether in the sales particulars or otherwise.

Could a video be considered a statement of fact? There is no case law directly on point. However, in St Marylebone Property v Payne (1994) 45 EG 156, the use of a photograph taken from the air, printed with arrows (misleadingly) indicating the extent of land boundaries, was held to convey a statement of fact which amounted to actionable misrepresentation. The court held that the purchaser was entitled to rescind the contract. By extension, there is a risk of inaccuracies in ‘virtual viewings’ giving rise to a misrepresentation claim if a purchaser relies upon the video when entering into the contract.

To minimise the scope for disputes:

• Agents and sellers should ensure that a ‘virtual viewing’ provides an accurate and fair representation of the property.
• Purchasers should supplement the standard enquiries with specific questions on matters about which they are concerned.
• Sellers should think carefully about any representations made in sale particulars, during viewings and throughout the conveyancing process.

If a purchaser thinks it has a claim for misrepresentation it should take legal advice immediately as its remedies can be lost if it does not act quickly or if it inadvertently take steps to affirm the contract.

This article was first published by PrimeResi on 31 March 2020