by Jamie McNish, Trainee Solicitor
When purchasing a house, concerns around the condition of the property are high on the buyer’s mind. These can be met to an extent by surveys and home reports, but often supplementary questions will require to be answered by the seller themselves.
The case of Anwar v Britton 2018 SAC (Civ) 27 looked at the implications of a seller making a misleading statement when answering such a question, and how this interacted with the missives of sale. It raised important considerations for sellers and their solicitors concerning the information which they give to potential purchasers.
The pursuers/purchasers in this case (Anwar) had agreed to purchase a house from the defenders, with missives for the purchase being concluded in August 2016. The initial offer had been conditional on a flood risk report. This was provided, and, while it indicated that the risk of flooding was low, it also suggested that the purchasers should check with the sellers whether the property had flooded recently. The sellers indicated, by email, that they had not experienced any such flooding.
It later came to light that the property had in fact flooded in November 2015, and that the sellers were aware of the garden flooding ‘from time to time’. Consequently, the pursuers raised an action for reduction of the contract, which was appealed to the Sheriff Appeal Court (SAC).
Scottish Standard Clauses
The appeal centred on the interpretation of two clauses, 27.1 and 2.1.3, in the Scottish Standard Clauses (Edition 2). The standard clauses, now in their third edition, are included in almost all residential missives of sale in Scotland. On both points, the defenders were unsuccessful.
Clause 27.1, a so-called entire agreement clause, provides:
The Missives will constitute the entire agreement and understanding between the Purchaser and the Seller with respect to all matters to which they refer and supersede and invalidate all other undertakings, representations, and warranties relating to the subject matter thereof which may have been made by the Seller or the Purchaser either orally or in writing prior to the date of conclusion of the Missives.
The defenders suggested that this had the effect of rendering the missives as the sole form of contract and agreement between the parties, and meant that their email indicating that the property had not flooded was superseded and could not be relied upon. They should not therefore be liable for any inaccuracy within it.
The SAC rejected this argument. There were standard ways in which clauses could be drafted so as to prevent parties from relying on misrepresentations, and these were not used in the drafting of this clause. Had the drafters intended to remove a remedy for misrepresentations they would have said so expressly.
Further, when looking at the rest of the standard clauses it could be seen that clause 26 had provided specifically for a limitation of liability and it was unlikely that the clause which immediately followed was also intended to have that effect by implication.
Clause 2 concerns the sellers’ awareness of circumstances affecting the property, specifically (in 2.1.3) awareness of the property being affected by ‘flooding from any river or watercourse which has taken place within the last five years.’
The defenders argued that they were under no obligation to disclose prior flooding if it was not having a continued effect on the property. The SAC again rejected the defenders’ argument, instead favouring what it called a ‘contextual’ (and the pursuers called a ‘commercial common sense’) approach. The court suggested it was unlikely that a purchaser would want a warranty that the property is not currently affected by flooding, this being something that their surveyor would be able to assess. On this basis, a seller was required to disclose any flooding which had occurred at the property in the last five years, regardless of whether or not it was currently affecting a property.
This case has both practical and regulatory consequences for the conveyancing process. The standard clauses themselves have been updated, with the Anwar case being directly referenced within the accompanying practitioner guide. Clause 2 has been amended so as to remove any doubt as to the intention around awareness of circumstances.
The other issue addressed in Anwar – representations made outwith the missives – has not been incorporated into the updated standard clauses. While the updates provide that documents such as the home report and property questionnaire should be considered in addition to the missives, and restrict the entire agreement clause in that manner, they do not make reference to representations made through the likes of emails, as discussed in Anwar.
Sellers must therefore ensure they are entirely honest and forthcoming in their representations as to the condition of the property, with the purchaser being entitled to rely on these, notwithstanding that they are not part of the missives. To avoid being caught out, the standard clauses should be interpreted in a common sense or contextual manner, and not in a strictly literal sense if this conflicts.