This section is from the book "Dart's Treatise On The Law And Practice Relating To Vendors And Purchasers Of Real Estate", by J. Henry Dart . Also available from Amazon: A treatise on the law and practice relating to vendors and purchasers of real estate.
It is the duty of the vendor to disclose all that is necessary to protect himself, and not the duty of the purchaser to make inquiry before entering into a contract (o). A vendor, on a sale of leasehold property, whether by auction or private contract, must disclose the existence of onerous and unusual covenants, or at least afford the purchaser an opportunity of inspecting the leases (p), even though the contract contains a stipulation that the vendor's title is accepted by the purchaser (q), and the opportunity of inspection allowed must be reasonable (r); but under certain circumstances the purchaser may still be affected with notice of the covenants (s).
(m) Edwards v. M'leay, (1815) G. Coop. 308; and see Gibson v. D'este, (1843) 2 Y. & C. C. C. 542; Sug. 14th ed. 246.
(n) 1891, 2 Ch. 109.
(o) Reeve v. Berridge, (1888) 20 Q. B. D. 523; 57 L. J. Q. B. 265; Molyneux v. Hawtrey, 1903, 2 K. B. 487.
There must, of course, be no misrepresentation (t), nor any artifice to divert attention; and if the vendor of leasehold property be informed by the purchaser of his object in buying, and the lease contain covenants which will defeat that object, mere silence may in Equity be equivalent to misrepresentation (u); unless, indeed, the purchaser enters into the contract after having actually examined the lease (x); and an innocent misrepresentation as to the effect of the covenants by the vendor's agent may entitle the purchaser to rescission of his contract (y). But even in the case of a fraudulent misrepresentation, the purchaser may waive his remedy by continuing, after discovering the fraud, to deal with the property as owner (z). But, in general, although, in a particular case, there may not be enough to induce the Court to rescind a contract, there may still be sufficient to prevent the Court from enforcing it (a).
(p) Re White and Smith, 1896,1 Ch. 637; 65 L. J. Ch. 481; Allen v. Smith, 1924, 2 Ch. 308. Cf. Earl of Derby and Fergusson's Contract, 1912, 1 Ch. 479.
(q) Re Haedicke and Lipski's Contract, 1901, 2 Ch. 666; 70 L. J. Ch. 811.
(r) Brumfit v. Morton, (1857) 3 Jur. N. S. 1198; and see Hyde v. Warden, (1877) 3 Ex. D. 72, 80; 47 L.. J. Ex. 121; Cossery. Collinge, (1832) 3 My. & K. 283; 1 L. J. N. S. Ch. 130; Sank of Ireland v. Brookfield Linen Co., (1884) 15 L. R. Ir. 37; Dougherty v. Oates, (1900) 45 Sol. J. 119.
(s) See Re White and Smith, 1896, 1 Ch. at pp. 642, 643; 65 L. J. Ch. 481; Molyneux v. Hawtrey, 1903, 2 K. B. 487; 72 L. J. K. B. 873; Earl of Derby and Fergusson's Contract, 1912, 1 Ch. 479.
(t) See Van v. Corpe, (1834) 3 My. & K. 269, 277; and the judgment in Pope v. Garland, (1841) 4 Y. & C. 401, 402; 10 L. J. N. S. Ex. Eq. 13, and cases cited; and see Baskcomb v. Phillips, (1860) 6 Jur. N. S. 363; 29 L. J. Ch. 380; Re Banister, (1879) 12 Ch. D. 131; 48 L. J. Ch. 837; Re Marsh and Earl Granville, (1883) 24 Ch. D. 11; 53 L. J. Ch. 81.
(u) Flight v. Barton, (1832) 3 My. & K. 282.
(x) Morley v. Clavering, (1860) 29 Beav. 84.
(y) Wauton v. Coppard, 1899, 1 Ch. 92; 68 L. J. Ch. 8.
(z) Campbell v. Fleming, (1834) 1 A. & E. 40; 3 L. J. N. S. K. B. 136; and see Re Duncan, 1899, 1 Ch. at p. 391; Law v. L., 1905, 1 Ch. 140.
It is conceived, that upon the purchase of an estate in possession, those facts only are so far material as to render their disclosure obligatory upon the vendor, which affect his power to give to the purchaser that which he has contracted for; and that, if he buy subject to a known risk, circumstances which increase the amount of risk need not, in general, be stated. Thus, it has been held that the grantor of a personal annuity, or his agents, though bound to give honest answers to all relevant questions put by the intended grantee, need not voluntarily disclose the fact of his being already under large pecuniary liabilities (b); for it may be presumed that a person, who is obliged to raise money by granting annuities, is more or less involved. In sales of property in consideration of an annuity the Court will inquire with some jealousy as to the fairness of the transaction, and the state of health of the annuitant is very material (c).
If a vendor describe the property as let upon lease under certain specified covenants, beneficial to the reversion, but which he knows could not be enforced, this would probably be considered delusive (d); so, if he say that there are no unusual covenants, or none which would prevent the property from being used for the purposes for which it is purchased, and the Court considers the statement incorrect, the vendor cannot insist upon specific performance (e).
Delusive reference to covenants.
A vendor's solicitor "should be cautious not to obtain any undue advantage of the purchaser behind his solicitor's back." Such an advantage cannot be retained, and if fraudulent, both the vendor and his solicitor may be liable (f).
Misrepresentation by vendor's solicitor.
(a) Be Banister, (1879) 12 Ch. D. at p. 147; 48 L. J. Ch. 837; Beyfus v. Lodge, 1925, Ch. 350.
(b) Adamson v. Evitt, (1830) 2 Russ. & M. 66; 9 L. J. O. S. Ch. 1.
(c) Davies v. Cooper, (1840) 5 My. & C. 270.
(d) Flint v. Woodin, (1852) 9 Ha. 618; 22 L. J. Ch. 92.
(e) Andrew v. Aitken, (1882) 22 Ch. D. 218; 52 L. J. Ch. 294; Wauton v. Coppard, 1899, 1 Ch. 92; 68 L. J. Ch. 8.
Under the L. P. Act, 1925, s. 183 (which takes the place of s. 24 of the Law of Property Amendment Act, 1859, as amended by s. 8 of the Act of 1860 (g)), any vendor or mortgagor, or his solicitor or agent, who conceals any settlement, deed, will, or other instrument material to the title, or any incumbrance from the purchaser or mortgagee (h), or who falsifies any pedigree, on which the title does or may depend, in order to induce him to accept the title, with intent to defraud, is guilty of misdemeanour, and also liable to an action for damages, at the suit of the purchaser or mortgagee; but no prosecution is to be commenced without the sanction of the Attorney-general.
His liability under L. P. Act, 1925, s. 183.
A purchaser suspecting that a third person has a claim on the estate, should (i), in the presence of witnesses (who may take notes of what passes) (k), inquire of him whether such be the fact, and the amount of the claim; at the same time stating his own intention to purchase (l); and if such person deny the existence of the claim, or assert-that it is confined to a special sum, he will be bound by his denial or assertion (m): but, though bound to answer truly, if at all, a mortgagee, it would appear, may decline to answer, unless the intending purchaser offer to redeem him (n). But it would seem that where property cannot be obtained, without a particular person saying whether he claims it or not, it is not sufficient that he should hold his tongue; he should state expressly whether he claims or not (o). It is the vendor's duty to disclose adverse claims which are not idle or frivolous (p).
Inquiries, adverse claimant.
(f) Sug. 14th ed. 6; Arnot v. Biscoe, (1748) 1 Ves. sen. 95; Berry v. Armistead, 2 Ke. 221, 229.
(g) See Re Ford and Hill, (1879) 10 Ch. D. 365, 370; 48 L. J. Ch. 327.
(h) As to whether the concealment of an incumbrance prior to the stipulated commencement of title is within the Act, see Smith v. Robinson, (1879) 13 Ch. D. 148, 151; 49 L. J. Ch. 20.
(i) Sug. 14th ed. 7; Ibbottson v. Rhodes, (1706) 2 Vern. 554.
(k) Doe v. Perkins, (1790) 3 T. R. 749; Burrough v. Martin, (1810) 2 Camp. 112; Wood v. Cooper, (1845) 1 Car. & K. 645.
(l) Ibbottson v. Rhodes, sup.
(m) Pearson v. Morgan, (1788) 2 Br. C. C. 388; and see Evans v. Bicknell, (1801) 6 Ves. at p. 183; and Ex p. Carr, (1814) 3 V. & B. p. 111.
If the interest contracted for be merely equitable, the purchaser should make inquiries as to incumbrances and after completion give notice to the trustees in whom the legal title is vested or, in the case of settled land, the S. L. Act trustees (q). And where an interest held under a derivative trust is purchased, the inquiry and notice should also be made of, and given to, the trustees of the derivative trust (r). The notice must be in writing (s). Prior to 1926, no priority was obtained by giving notice, in the case of the purchase of an equitable estate in land; but this rule has been altered by s. 137 (1) of the L. P. Act, 1925.
Inquiry and notice on purchase of equitable estate.
A trustee is not bound to answer inquiries as to incumbrances in order to enable a dealing by a cestui que trust with his interest to be carried out. If he does give an answer, he will not be liable for an honest mistake, unless the case is one raising an estoppel (t).