UK: An End To Caveat Emptor?

Last Updated: 1 August 2016
Article by Gary Pickard

A recent practice guide by the Law Society has managed to drop a small bombshell on land law practice by suggesting that consumer protection laws might affect a significant number of everyday transactions by imposing on solicitors a direct requirement to disclose defects with a property.

Consumer protection has long been one of the pillars of EU law. The Unfair Contract Terms Act 1977, a key early act, has steadily been extended, including major changes via the Consumer Protection from Unfair Trading Regulations 2008 ("the 2008 regulations"), which replaced many earlier acts and created new offences. The Consumer Protection (Amendment) Regulations 2014 ("the 2014 regulations") changed the landscape by creating a number of private law remedies for consumers where there are breaches of the 2008 regulations' prohibited practices.

It is the 2014 regulations which are causing such consternation for, as well as introducing the new private law actions open to consumers, it also changed a number of definitions.

The law outside of the regulations

The 2008 regulations were designed for the state control of offensive trading practices (eg pressure selling tactics) and the 2014 regulations added direct remedies for consumers. What neither did is remove other legal remedies; however, the 2014 regulations do prevent a duplicated claim for the same loss.

Most people have heard of the saying caveat emptor (or "buyer beware"), which is the classic position for land contracts in England and Wales: it is up to the buyer to make proper enquiries and inspect as they will be deemed to take the property as is. This is far from the whole position and there are a number of significant exclusions:

  • Latent defects: technical defects in the quality of the legal title to a property that are not reasonably discoverable by looking at the paperwork or from inspecting the property, eg an undisclosed restrictive covenant. If they exist, their presence may allow the buyer to walk away from a transaction.
  • Fraud: for example, a buyer removing various paving slabs from around a listed building for use elsewhere and denying they were part of the listing of the building (Taylor v Hamer [2002] EWCA Civ 1130[2003] 1 EGLR 103).
  • Misrepresentation: incorrect replies to enquiries that cause damage to the buyer/tenant can lead to a claim. A misrepresentation is not only an out-and-out incorrect answer but also overly rose-tinted views of the position. For example, playing down a tenant not having paid the service charge because there were "historical issues" rather than the more correct position that there was a pending dispute gave rise to an action in Greenridge Luton One Ltd and another v Kempton Investments Ltd [2016] EWHC 91 (Ch)[2016] PLSCS 26.

Key concepts

Two key concepts in the 2008/2014 regulations which are drawn upon time and again in how they regulate trader (business) and consumer relationships are:

  • Commercial practice: "...any act, omission... by a trader which is directly connected with the promotion, sale or supply of a product to or from consumers, whether occurring before, during or after a commercial transaction (if any) in relation to a product" (2008 regulation 2(1)).
  • Average consumer: "An individual acting for purposes that are wholly or mainly outside that individual's business" (2008 regulation 2(3)). As to "average", it may be assumed that the party is "reasonably well-informed and reasonably observant and circumspect, taking into account social, cultural and linguistic factors" (Office of Fair Trading v Purely Creative Ltd and others [2011] EWCA Civ 920). But "average" must also be considered in the context of the group that a product or service is targeted at. If that group is vulnerable then this will be reflected in the standard (2008 regulations 2(2)-(6)).

The 2008 offences

The 2008 regulations created the following offences with penalties of up to two years' imprisonment:

The 2008 regulations created the following offences with penalties of up to two years' imprisonment:

  • General prohibition (regulation 3(3)): carrying out a commercial practice that is unfair by contravening the requirements of professional diligence and materially distorting the economic behaviour of the average consumer. The regulations set out a number of such prohibited practices, eg false time-limited offers.
  • Misleading action (regulation 5): providing false information or presenting information in a way which deceives or is likely to deceive the average consumer and, as a result, causes or is likely to cause the average consumer to take a transactional decision that they would not otherwise have taken.
  • Misleading omission (regulation 6): omission or hiding of material information or providing material information in a manner which is unintelligible, ambiguous or untimely, or fails to identify its commercial intent and, as a result, causes or is likely to cause the average consumer to take a transactional decision that they would not otherwise have taken.

In addition to the criminal sanctions, the 2014 regulations also give consumers an assortment of claims against the trader, which can include: unwinding the transaction or claiming a discount; and damages (not only for financial loss but also for more general alarm, distress and inconvenience). It should be noted that these rights only affect transactions involving certain "relevant leases" (eg assured tenancies/assured shorthold tenancies) and are only usually enforceable as against a "trader" rather than their advisers.

Impact on advisers

While trader clients have been subject to the 2008 regulations for some time, the 2014 regulations crucially changed the definition of "trader" to include not only a person acting for the purposes of the person's business but also someone "acting in the name or on behalf" such a party. A solicitor will often act "on behalf" of a client in matters such as issuing replies to enquiries, so their action may directly affect the client.

It is also suggested by the Law Society that, as a solicitor is carrying out a commercial practice, then any dealing with a consumer on the other side could involve a trader-consumer relationship caught by the regulations – crucially this then opens up the 2014 regulations remedies to this non-client consumer. If this is correct, then all advisers in such a consumer deal could be caught by owing direct obligations to the consumer.

Doubt has been cast on this interpretation as this would generate a "trader" relationship for a transaction that was otherwise between consumers (eg a typical house sale and purchase). Such an interpretation also starts delving into the law of tort, which would typically govern such an indirect relationship, rather than staying in the field of controlling unsavoury practices designed to entice consumers into entering into unfavourable contracts, which the regulations are intended to control.

When looking at the nature of the potential "consumer" (either as a direct client or the other party to the transaction) then the test to be applied is "wholly or mainly outside that individual's business", so the skilled and experienced investment purchaser may still be a consumer.

Additionally, solicitors and other professions owe a number of professional duties, eg solicitors owe duties of:

  • honest and fair dealing under the Solicitors Regulation Authority code; and
  • confidentiality to their client.

The risk

The Law Society guidance seems pretty clear – solicitors need to advise their client in a potential trader-consumer deal to be open and honest. Anything less than this could open up both solicitor and client to possible claims under the 2008 regulations and, possibly, the 2014 regulations. If the client insists on acting in a prohibited manner, including if the adviser becomes aware of something that should possibly be disclosed and is told not to disclose, then it is likely the solicitor will have a conflict and must cease to act.

Where next?

Regardless of whether the Law Society note is overly cautious as to the effect of the 2014 regulations applying a direct relationship to agents, what it does is to remind the profession that it is not safe to issue vague or spun replies to enquiries where the facts are known to the seller/landlord or their lawyers. The Law Society guidance goes so far as to state that the solicitor professional standards of fair dealing and good practice require the disclosure of material information – this would throw caveat emptor out of the window.

Consumer protection is an area which is likely to increase in regulatory control (Wales has recently introduced a set of model short-term residential tenancies) and now is the time to put suitable processes in place to avoid issues in the future at Fieldfisher.

This article was originally published by Estates Gazette

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.