08 July 2016

'Buyer Beware' - Is this no longer the case?

Rachael Dicken Partner & Head of Commercial Property

Businesses dealing with the sale of residential property are being urged to consider the recently amended Consumer Protection from Unfair Trading Regulations 2008 (CPRs), which prohibit businesses from engaging in unfair commercial practices with consumers.

The CPRs were originally introduced to implement a European Union directive on unfair commercial practices by ‘traders’, but as a result of the most recent amendment this now covers immoveable property, and therefore conveyancing transactions.

It is important to note that the regulations apply only to dealings with 'consumers' who are defined as 'an individual acting for purposes that are wholly or mainly outside that individual's business'. This would, therefore, cover the situation of a house builder selling a newly built property to a purchaser, but would not affect a transaction between two companies.

The essence of the regulations are that an unfair commercial practice is not to be adopted which 'distorts the behaviour of the average consumer'. You must not withhold or fail to disclose information which would have an effect on whether or not the buyer proceeds with the transaction. This could cover incorrect or ambiguous information in replies to pre-contract enquiries.

The consequences in failing to comply with the CPRs could include the ability for the buyer to pull out of the transaction. In addition to this, criminal offences may be committed by the trader indulging in unfair commercial practices, and their professional advisers, (including solicitors) which can lead to criminal sanctions of a fine or up to 2 years imprisonment.

It is unclear in practice how the CPRs will affect the solicitor/ client relationship where a client is reluctant to disclose unfavourable information. However, all solicitors and their selling clients are advised to be as open, candid and honest as possible and reveal as much information about the property and any difficulties, at the earliest stage possible.

So in this case, the long been established principle of ‘let the buyer beware’ in conveyancing transactions, may not now be so important, but buyer clients are still strongly advised to carry out all usual searches and enquiries. Naturally, if you would like further information about this, please contact me or a member of the commercial property team.

This article first appeared in Business Intelligence magazine.

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