Property Vendors Beware! Don’t Gild the Lily!

Holborn Gate Office BlockIn a cautionary tale for property vendors which underlined the need for absolute honesty in replying to pre-contract inquiries, an office block owner who failed to disclose the existence of service charges arrears to prospective purchasers was ordered by the High Court to repay the latter’s deposit and almost £400,000 in damages for deceit.

The purchasers had agreed to pay £16,250,000 for the block and paid a deposit of £812,500 on exchange of contracts. However, they withdrew from the sale prior to completion on learning that the vendor was in dispute with the block’s principal tenant in respect of service charges and that the same were substantially in arrears.

The purchasers argued that they were entitled to rescind the contract and sought return of their deposit and damages in respect of the wasted costs involved in the abortive sale. The vendor submitted that the purchasers had themselves repudiated the contract and were thus entitled to no relief.

In ruling in the purchasers’ favour, the Court found that the vendor’s response to pre-contract inquiries was misleading. The statement that there were no service charge arrears was untrue and ‘at least reckless’. The deposit was thus returnable in full and the purchasers were entitled to damages of £395,948 in respect of the vendor’s deceit.