What does 'Caveat Emptor' actually mean?
This phrase is a Latin maxim that translates to ‘let the buyer beware’ and is a fundamental principle in a property purchase transaction. A buyer is said to purchase a property ‘warts and all’, and in general a seller is not liable for any defect that the buyer had failed to spot. If issues arise after exchange of contracts, when the contract is legally binding the buyer cannot withdraw without serious consequences. This could include losing their deposit.
How is this risk approached in practice?
A buyer’s solicitor will investigate the property in detail to determine whether any underlying issues exist. This is usually satisfied in two ways: by conducting searches and raising enquiries.
The seller has an obligation to deduce, or prove, their ownership of the property to the buyer, which includes disclosing details of any rights and covenants that exist over the property. It is likely that these will be binding on the buyer once they have moved in. They will also complete standard forms relating to the property, known as Law Society Transaction Forms. For a leasehold property, information on the management of the block will be included. It is this information, along with a Contract and any other relevant documents, upon which the buyer’s solicitor will base their initial enquiries.
The relevant searches will depend on the location of the property. For example, a coal mining search is often carried out if the property is in Yorkshire, whereas this would not be necessary for a property in central London. There are four crucial searches that will be carried out in any purchase though, which are as follows:
- An Environmental Search
This will evaluate the historical use of the land to determine whether there exist any environmental risks to the property. These risks include flooding, ground instability, land contamination and radon levels.
- A Drainage and Water Search
This search is carried directly with the water authority that serves the property. Whether the property is connected to the mains water supply and drainage system, the charging basis for water and the location of nearby drains and water mains are points that are covered by the search.
- A Local Authority Search
Local authorities are required to hold certain information relating to properties within their jurisdiction. This includes details of historic planning and building work, whether the roads that serve the property are owned by the local authority (otherwise they will be private), and any charges registered against the property, such as a Tree Preservation Order. Often, the breach of a planning designation imposed by the Local Authority can constitute a criminal offence.
- A Plan Search
This is supplementary to the environmental and local authority searches and highlights the present use of the land surrounding the property, and any proposals for alterations to the existing use.
Are these searches absolutely necessary?
If a buyer is buying with the help of a mortgage, the searches will be required. A solicitor will also be acting for the mortgage lender, so they will have a duty under the Council of Mortgage Lender’s guidance to also act in the best interests of the lender.
If a mortgage is not required, the buyer is free to decide which searches, if any, they would prefer to be carried out. However, it is always advisable to conduct all the usual searches in any event, because any defects that are not identified will of course be binding once the buyer has moved in. If a future buyer’s search discloses an adverse entry, the property could lose value or become unsaleable.
How are searches carried out, and how long will they take? Searches are carried out online in almost every case, through a ‘search provider’. This provider will receive and distribute a single payment, instruct the searches with third parties such as the water and local authorities, and return the results by email as soon as they are available.
Some searches can be produced and returned the same day, whereas others take up to three weeks during peak times, such as during the summer and before Christmas.
If you have any questions about the investigations that should be carried out on a property that you are intending to purchase, or if you have any questions or concerns about the conveyancing process in general, please do not hesitate to get in touch with a member of our Residential Property Team on 01279 755777.