COMPLAINT

The prospective buyers pointed out that significant material information was missing from the agent’s online advertisement of the property – namely, an omission to disclose a basement at the property, which they later learnt about when viewing the property for the first time in person after they had already committed themselves to their purchase. 

The issue led to their withdrawal from the transaction, having already incurred significant costs, after satisfactory responses to their enquiries over the matter were not forthcoming from the seller. Following the agent’s responses which did not resolve the issue, the buyers referred the matter TPO seeking compensation for the costs they incurred.

INVESTIGATION

The buyers explained that the property was marketed as a ‘readymade investment’ (as it was already tenanted and offered with a 3-year lease to a housing association set to yield £19,200 per annum in rental income). They also explained that they were required to pay the agent a non-refundable ‘Exclusivity Fee’ of 2% (inclusive of VAT) of the agreed sale price (of £240,000 – therefore, a fee of £4,800) in order to enter into the transaction and secure the property for the ‘Exclusivity Period’ of 56 days from receipt of draft contracts from the seller’s solicitor. Furthermore, they were required to complete their purchase of the property by the end of that period. 

The buyers said it was not possible for them to view the property in person until after they had paid the fee but decided to proceed regardless.  They arranged for a physical viewing the day after receipt of the draft contracts. However, upon viewing the buyers were not expecting to find a basement at the property and certainly not one that was waterlogged with a centimetre of water, watermarks on the wall, and exposed pipes and wires. The buyers provided photographs taken that day as evidence. 

The buyers said that they raised the issue that same day and the response they later received from the agent when issuing their final viewpoint letter was that ‘the vendor advised there is not a waterlogging issue he is aware of but simply just some water from works carried out recently’. They added that, after waiting three weeks, the seller’s response did not provide any explanation for the omission nor any assurances that the waterlogging issue would not recur. They also added that they took advice from ‘professionals’ at the time who advised that the most likely explanation was seepage from the basement walls and floor following the recent wet winter. 

The agent vehemently denied the buyers’ claims saying that they strongly advised them to view the property prior to entering into the Exclusivity Agreement; however, they say the buyers advised that they were happy to proceed regardless.  

The agent stated that they had strict processes in place and procedures for explaining the implications of entering into an exclusivity agreement through them and said that they advised the buyers: 

a) to carry out a viewing before entering into the agreement;

b) to carry out a survey before entering into the agreement; and 

c) that the agreement was unconditional, and the Exclusivity Fee was non-refundable. 

The agent said that they advertised all of the information that they were provided with and that was approved by the seller and emphasised that they were not informed about the basement, or any alleged issue with it. The agent added that the buyers were free to view the property and/or instruct a survey before offering for the property.
The agent said that the seller was so confident that there was no issue with the basement that he asked them to advise the buyers to arrange for a timber and damp report in order to demonstrate this, but the buyers chose not to do so. 

OUTCOME

When marketing the property for sale, by law and under Paragraph 7i the TPO Code of Practice for Residential Estate Agents (the Code), the agent had an obligation to comply with the Consumer Protection from Unfair Trading Regulations 2008 (the CPRs), by disclosing all material information that they were aware of or should have been aware of. 
All reasonable steps should have been taken to ensure that statements made about the property (whether oral, pictorial or written) were accurate and not misleading and to not omit any information that the buyers needed to make an informed decision.
Having considered the property’s advertisement, which also included a link to a virtual tour, the Ombudsman did not accept that the agent was unaware of the existence of the basement. In the video, each room and the outside area was depicted in full, but the basement was not filmed, despite the video reaching the open door from the kitchen area to the stairs leading down to the basement. 

The ‘Assured Advice’ relating to the production of video/virtual tours, which is published on the TPO website, states “A video viewing should include all the information that a physical one would.” Therefore, The Ombudsman determined that the basement was purposely omitted from the video tour leading to the buyers being misled into agreeing to purchase the property through their material omission.

The Ombudsman concluded that the buyers were entitled to withdraw from their purchase without penalty when the issue was later identified, irrespective of the non-refundable nature of the Exclusivity Fee.  

The Ombudsman made an award to compensate the buyers for the proven financial loss caused as a result of the agent’s non-disclosure of the basement. The agent was directed to cover the buyers’ transaction losses, which were broken down as: £459.50 for solicitor’s fees and £299 for the mortgage application fee, £758.50 in total, as well as the ‘Exclusivity Fee’ of £4,800. 
A total award of £5,558.50 was made in compensation to the buyers.