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Non-disclosure of facts could be mis-selling

Q: When is a top-floor flat not a top-floor flat? A: When a developer wants to build a floor on top of it... says Katrine Sporle, The Property Ombudsman.

Katrine Sporle
COMPLAINT

New building development imageA case that The Property Ombudsman (TPO) was asked to review came from a potential buyer concerning the attempted purchase of a flat in a new build development.

The buyer explained that they had paid a £1,000 fee to the developer in order to reserve a top-floor flat in a four storey block of apartments.

The buyer explained that they decided to do some research during the conveyancing process which led them to discover that the developer had submitted a planning application to build a fifth floor on the development.

The buyer was only interested in purchasing a top floor flat, so they withdrew from the purchase.

The buyer believed that the agent was aware of their wish to only purchase a top-floor flat and was also aware that the developer had plans to build an extra level. They thought that the agent mis-sold the property to them.

INVESTIGATION

Under Paragraph 7i of the TPO Code of Practice, the agent was obliged to ensure that they complied with the Consumer Protection from Unfair Trading Regulations (CPRs). The CPRs required the agent to disclose any information of which they were aware or should be aware of in relation to the property in a clear, intelligible and timely fashion and to take all reasonable steps that all statements they made about the property, whether oral, pictorial or written, were accurate and not misleading. In addition, the CPRs also required the agent to ensure that all material information was disclosed and that they made no material omissions which may have impacted the buyer’s transactional decision.

The agent didn’t know of the developer’s plan to develop a fifth floor. The first they knew of it was when the buyer found out and told them.

The Ombudsman did not dispute that the developer’s decision to apply for planning permission to build an additional floor was material information, particularly as the buyer was only interested in purchasing a top-floor flat.

Katrine Sporle image

Katrine Sporle

In order to find out whether the agent had adhered to the Codes of Practice in respect of this issue, the Ombudsman had to determine whether there was evidence to show that they did in fact know about the developer’s decision to apply for planning permission to build a fifth floor on the development.

When the developer instructed the agent to market the development, they provided them with an artist’s illustration which clearly showed that there would be four floors in total, including the ground floor.

Glossy marketing brochures were produced using the artist’s impression, so it was clear that it was not the developer’s initial intention to build five floors.

Given that the developer did not submit the planning application until nearly six weeks after the buyer’s offer was accepted, the Ombudsman was satisfied that the agent was not aware of the developer’s intention.

Paragraph 12a of the Codes of Practice state that after the acceptance of the offer by the seller, and until exchange of contracts, the agent had no direct influence on matters such as the conveyancing process or the mortgage lending process. The agent’s obligations were primarily to the seller and these were to monitor progress; to assist where possible, and as asked, and to report information deemed helpful to bringing the transaction to fruition, whilst also being obligated (under Paragraph 2a) to treat all those involved in the transaction fairly.

The Ombudsman would not have expected the agent to keep up-to-date with any continued planning applications made by the developer after they had been instructed to market the flats in the block. Their role after the offer was accepted was to monitor progress and relay information between the parties and their legal representation in order to help the sale complete. Any planning applications that may have affected the buyer’s decision to proceed should have been picked up during the conveyancing process. It was not clear why this did not happen.

The agent said they had no knowledge of the developer’s plan. The first they knew of it was when the buyer found out and told them. Evidence provided in their company file supported this and showed that they were unaware before this time.

OUTCOME

Whilst the buyer was caused some aggravation, distress and inconvenience, it was clear that it was due to the developer’s actions and not the agent.

Therefore, the Ombudsman did not support this complaint and considered that the circumstances did not merit an award in compensation.

January 22, 2018

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