Previously, as soon as the property buyer made a final transaction, the agent and builder could finally breathe easy as their case was closed. Even if the property owner discovers problems in the house later, there is nothing else they can do about it. That principle is what people call caveat emptor, a Latin phrase that roughly translates to "let the buyer beware."
What Is Caveat Emptor in Real Estate Language?
In terms of properties, caveat emptor simply means that the buyer is responsible for doing their due diligence before deciding to proceed with their final step. Should they find any surprising elements about the property, the seller is free from any obligation under such circumstances.
It applies when the buyer inspects the property as thoroughly as they can but can find no issues. Should issues actually arise that were missed in their inspection, the buyer would be responsible.
Challenging the Caveat Emptor Principle
The times and needs of people are changing, so the principle also needs updating. Many cases arose that challenged the already existing law. Here are some of the notable ones:
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In Miller v Cannon Hill Estates Ltd [1931] 2 KB 113
In this case, it was established that any property bought while still in construction should always end up being a livable property. It was and always will be an implied agreement between the two parties.
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In Jennings v Tavener [1955] 2 All ER 769
There was a breach in this implied warranty in this case. The property owner discovered minor defects such as cracks and a weakened foundation. However, these defects did not make the house "uninhabitable" in any way.
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In Hancock v BW Brazier (Anerley) Ltd [1966] 1 WLR 1317 Lord Denning MR 1 WLR 1317
It was in this case that it was established that there is a three-fold warranty implied whenever a property buyer purchases a house from a builder:
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The builder will finish quality work on time as expected
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The builder will use quality materials for the whole project
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The finished output will be a house that is up to the living standards
However, this implied warranty only acts as collateral to the contract of sale, which means it can be absolute or conditional. It does not, in any way, merge with the contract upon completion. Contractual provision or expressed agreement is still necessary to set everything in stone.
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In The Mayor and Commonalty and Citizens of the City of London v Various Leaseholders of Great Arthur House [2021] EWCA Civ 431 ('Great Arthur House') at [50]
Recently, the warranty has been clarified and limited to homes purchased during construction and to those finished homes that are highly defective end up being uninhabitable.
Why Is Caveat Emptor Still Practiced?
When looking at the situation from an outside perspective, you may have also thought it is essential to conduct a thorough property survey and inspection before property buyers decide to exchange contracts with the property builder and owner.
What Is a Property Survey?
A property survey is a process of confirming the property's legal descriptions and boundary lines. The end output is the survey that includes a written detailed description of the properties. It consists of the complete street address, the nearby properties, and any improvements that the new homeowner can make to their property.
However, when placed in the situation, most homebuyers looking into new buildings cannot help but assume there is no need to carry out a property survey, primarily due to four reasons:
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Faith in Constructor's Integrity: Since the building is made from scratch and considered brand new, they assume that the builder used the best materials to make it livable. Otherwise, it would also be a waste of money from the other party's end if they settle for less.
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Belief in the NHBC's Protection: Property buyers also believe that they will benefit from the NHBC scheme. Therefore, there is no need to proceed with a survey.
What Is the NHBC?
The NHBC stands for The National House Building Council. It is the UK's leading independent standard-setting body that provides warranty and insurance for new homes. Their main objective is to raise the construction standards of new homes in the country.
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The Survey Limits: Another reason is how limiting a property survey is. After the areas of concern are highlighted in the property survey, what else can they do?
Furthermore, the survey is also done per property or flat if in a building. It would be difficult to survey the whole building nor assess its construction based on one building alone. It would be impossible for anyone to pay for the survey of the entire structure to decide whether they should give the room a chance or not.
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The Survey Timing: There is also a challenge when purchasing a property during the construction period: There is no way for an interested homebuyer to survey the place while the construction is going on.
Usually, property developers do not allow this. In the few times, they are permitted, it would also be challenging to observe since construction is ongoing. Another concern is how, in most properties, you can only do the survey once the unit is finished, and only in the unit or flat they are allowed to.
In short, you can only survey once you have bought it and once the construction is complete. It would be impossible to track every material they use and how the inspection can work better for their benefit.
The challenge arises because many homeowners today purchase homes during the pre-selling stage or as the construction goes. It is simply faster and more affordable that way. However, they lose their chance of securing a more reliable and secured home because of this.
How They Deal With This Concern
In 1988, the Law Commission's Conveyancing Standing Committee proposed that every property developer disclose all material facts about the property they plan to sell. That will give opportunities to home buyers to learn a bit more about the construction process instead of not having any knowledge at all. This proposal alone could reverse a significant extent of the caveat emptor principle.
The committee also suggested that the developers be transparent about any defects they made during construction, especially if it would endanger people's lives. However, it was later rejected. Other reforms were put in place as a replacement for the rule later on.
The latest attempt to improve the condition is from the HIP (Home Information Packs). They asked the property developers to provide complete property information upfront to the buyers. It was also rejected. Since property developers are producing property reports, they might not release transparent or impartial information.
Eventually, The Conservative Party Manifesto 2017 decided to modernise and reform the actual homebuying process to make it more efficient. Several schemes were introduced and proposed, including the TA6 Property Information Form that helps gather crucial details about the property.
Conclusion
Buying a property is a once-in-a-lifetime opportunity for many, and it is not an easy process. The last thing any homebuyer wants to know after sacrificing so much is that they bought a house not properly constructed, or worse, not liveable at all.
Let this article remind you not to relax just because you are purchasing a newly built home. You still have to go through the process of inspection and all other paperwork to make sure that you do not miss anything.
The best conveyancing solicitors can take care of the minor yet essential details for you. If you are looking for a conveyancer, make sure to hire a trusted professional at an affordable price. Conveyancing Calculator provides you with trusted and accurate computations that you can use when buying a house, selling a house, moving homes, and more. All our prices are direct from UK-regulated SRA property solicitors or CLC-licensed conveyancers. Contact us to learn more!
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