A cautionary tale for sellers and their agents – disclosure of matters affecting title to property

In SPS Groundworks and Building Ltd v Mahil [2022] EWHC 371 (QB), the High Court held that 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 February 2019, a plot of land was sold at auction. 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.

Those references were made in respect of all 35 lots at the auction. Full and frank disclosure required the overage clause to be specifically brought to a potential buyer’s attention by description in the particulars, an addendum notice or specific reference by the auctioneer. The buyer was not put on notice of any unusual feature of the lot that they intended bidding for, and could not have been put on notice by inspection.

Case: SPS Groundworks and Building Ltd v Mahil [2022] EWHC 371 (QB) (23 February 2022) (Mr Justice Cotter).