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Failing to mention a bar in the basement

"A bar in the basement? Some may be delighted, but the agent should have told the buyer, says Katrine Sporle, The Property Ombudsman."

Basement bar image

COMPLAINT

A case that The Property Ombudsman (TPO) was asked to review came from a potential buyer concerning information provided by the agent when marketing a property for sale.

Katrine Sporle image

Katrine Sporle

The property in question was in a disused warehouse which was being converted into residential apartments. The buyer believed that the agent failed to disclose in the sales particulars and during the viewing, that the basement of the building was used as a nightclub.

The buyer explained that the entrance to the nightclub was concealed from view so she was unaware that the basement was used for this purpose until she received the mortgage valuation survey. She said that she was unable to obtain mortgage funding for the apartment due to this commercial aspect and was forced to withdraw from the purchase. The buyer wished to recover her £5,000 reservation fee for the property.

It was also clear that the entrance to the bar had been concealed… access was gained via a telephone box!

INVESTIGATION

When marketing the property, the agent had an obligation by law under Paragraph 7i of the TPO Code of Practice to comply with the Consumer Protection from Unfair Trading Regulations (CPRs). CPRs required the estate agent to disclose any material information of which they were aware in relation to the property in a clear, intelligible and timely fashion. All reasonable steps should have been taken to ensure that all statements made about the property were accurate and not misleading. The agent also had a duty not to mislead the buyer by failing to give the information she needed to make an informed decision. This might have occurred if the agent left out or hidden material information.

Information about the premises on the internet showed that the unit housed a bar rather than a nightclub. A commercial bar in the basement of a residential property constituted material information which could have influenced the buyer’s decision to make an offer on the flat.

The close proximity of the bar could have posed issues for residents due to noise disturbance. Whilst the Ombudsman did not consider that the presence of the commercial unit would deem the residential property un-mortgageable, it may have been a problem for any mainstream mortgage lender. The agent had an obligation to ensure that all prospective buyers were aware of the bar, before they were financially committed to the transaction and, as best practice, should have stated in their marketing that the basement contained a commercial unit, used as a bar.

It was also clear that the entrance of the bar was concealed. It appeared that access was gained via a telephone box, not easily identifiable to prospective buyers.

If information about the bar was not included in the marketing materials they should have highlighted the fact during viewings. The agent claimed that they did, but the buyer said that this was not the case and they did not find out about the bar until she received the mortgage survey. In cases where parties provide different accounts of an event, the Ombudsman makes a judgement on balance of written evidence present, the agent’s obligations and what is considered to be fair and reasonable in the circumstances.

The onus is on the agent, as a TPO member, to demonstrate that they acted in accordance with best practice and their obligations under the CPRs. If the agent had informed the buyer about the bar during the viewing, they should have also confirmed the information in writing. There was no evidence that they did so. Paragraph 1h of the Code of Practice requires the agent to keep a written record of the transaction and produce it upon request by TPO.

OUTCOME

The Ombudsman supported this complaint and considered that the circumstances merited an award in compensation for the undue and avoidable aggravation caused by the agent’s failure to demonstrate that they acted in accordance with best practice and their obligations under the CPRs. However, it did not appear that the presence of the bar was an immediate concern for the buyer as she had investigated funding the purchase via another means before withdrawing from the transaction. The buyer’s preferred lender was unwilling to provide mortgage funding, but there was no evidence to substantiate that the property was unmortgageable. The buyer signed a reservation form which clearly stated that the reservation fee was non-refundable if she withdrew, and was aware of these terms at the time she was financially committed to the transaction. The agent did not hold these deposit funds. The Ombudsman did not direct the agent to refund the reservation fee; a request for a refund would have had to be directed to the developer.

Accordingly, an award of £500 in compensation was made in full and final settlement of the dispute.

November 3, 2017

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