There is an unmistakable shiver of dread that runs through you when a client calls and announces they have bought at auction and now need you to take the reins and see it through to completion. You hold your breath as you devour the legal pack, praying and hoping there is nothing too nasty that your client skimmed over in a overly optimistic frenzied bidding state.
This was the situation our own Kristina Biddlecombe, Senior Licensed Conveyancer in our Commercial Property Team, found herself in in the lead up to Christmas 2021. A long-standing client had ‘taken a punt’ on some land for development and was rather pleased with it. Immediately Kristina spotted there was overage on the land. There were no special conditions or any mention of it on the auction papers, a query was raised immediately on receipt of the papers, but a reply was never received despite several attempts to engage with the seller’s solicitor.
Last month the decision in SPS Groundworks and Building Ltd v Mahil [2022] EWHC 371 (QB) was hotly discussed. The facts of that case were similar to our matter. In February 2019, a plot of land was sold at auction. In that case the land was subject to an overage clause contained in a deed of covenant dated 21 December 2017. The legal pack prepared for the auction sale included a copy of the deed, and the deed was referred to in a restriction in the proprietorship register of the title. There was no reference to the overage covenant in the auction brochure and no oral reference was made to it by the auctioneer who conducted the auction. It was agreed that the overage provision constituted a defect in title.
It is well established that:
- A seller is under an equitable duty to disclose all defects in title and encumbrances of which they are aware.
- An imprudent buyer who does not make enquiries does not relieve the seller of the duty of disclosure.
- In the absence of specific reference to a defect, a buyer can assume that entries on a property register or in other relevant documentation would be the usual sort of entries that would not significantly affect value.
- In the absence of proper disclosure, the seller cannot rely on contractual conditions. A clause deeming the buyer to have knowledge of the defect does not circumvent the equitable principle of disclosure.
The High Court held that the seller had not complied with its duty of disclosure; references in the auction brochure and by the auctioneer to the need to read the legal pack were insufficient for a seller to have complied with its duty to disclose a defect in title.
In Kristina’s case Nockolds had taken the view that the seller was not ‘ready, willing and able’ to complete given they had not disclosed a defect in the title. In the end the defect was resolved but, had it not been, our client would have been well within his rights to refuse to complete.
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