Court rejects notorious 'buyer beware' clause

Friday 29 June 2018

An infamous ‘buyer beware’ Jersey property contract clause has been dealt a serious blow by the Royal Court in a move that could see one purchaser score £1.5million in compensation.

In a judgement this week, the Court made a landmark ruling that the ‘warts and all’ clause – found as standard in all Jersey real estate contracts – doesn’t allow for sellers to get away with it if the buyer later discovers defects with their property.

The ruling by the Deputy Bailiff, Tim Le Cocq QC, came in the midst of a heated dispute between the buyer and seller of a large home on Beaumont Hill.

Buyer Linda Susan Mackie argued that St Christopher’s was misrepresented to her by seller Samantha Jane Scott. Ms Mackie says that Ms Scott painted the property in a misleadingly positive light, only for her to later discover hidden defects, for which she is seeking £1.5million in compensation.

In an email dated a little over a week before the property sale was passed in January 2014, Ms Scott’s legal advisers denied the property had ever been affected by issues ranging from structural defects, drain problems, damp and “hazardous” substances.

But this was not really the case according to Ms Mackie, who says that she ended up buying the house on the basis of this allegedly “false” information. Ms Scott denies the claim, however.

Pictured: The property in dispute, St. Christopher's, which is located on Le Vieux Beaumont.

The matter was due to go to trial before a judge and jurats, but Ms Scott tried to get the case struck out by drawing attention to the notorious clause within the contract – known in Jersey as the “vices cachés” (hidden faults) or “tout tel” paragraph.

“…The property was sold with all such other rights, appurtenances and dependencies ….in the state in which it was at the date of sale with all its apparent or hidden defects (vices cachés),” the sale contract read.

The section is effectively an agreement that the buyer is taking on the property “warts and all” – even if some of those ‘warts’ are discovered post-sale. In modern practice, it means that purchasers are responsible for carrying out all checks to verify whether even the most glittering properties really are worth their weight in gold. 

Before the 1980s, that wasn’t the case. But everything changed after the 1981 Kwanza Hotels v Sogeo Company courtroom battle, which saw the Court shift responsibility for hidden defects away from the seller. The move sparked decades of discussion within the legal community over whether that meant a ‘get out of jail free’ card for all sellers who fail to mention their property problems to potential buyers – even if they’re acting in bad faith. 

But this month’s Royal Court ruling changed that. Acting for Ms Mackie, Advocate Mark Taylor, who was supported by Scott Tolliss, successfully convinced the Court that applying the law in such a way would allow the vendor to be reckless in what they tell the seller, without fear of legal consequences.

Pictured: Advocate Mark Taylor, who represented Ms Mackie.

Advocate Taylor’s firm, Bedell Cristin, extolled the judgment as marking “a significant development in the law of Jersey real estate and conveyancing transactions.”

“It is no exaggeration to say that thousands of properties have been bought and sold where the vendor has made pre-contractual representations to the purchaser which in turn have been relied upon by the purchaser and the purchaser's lawyers in providing a certificate of title in support of the purchaser's mortgage. All of those contracts contained the "tout tel clause". Had the Defendant succeeded in her argument, it would at stroke have driven a coach and horses through the standard practice adopted by all conveyancing firms in Jersey,” they explained.

“That there was room for an argument to be made by a Defendant looking to avoid responsibility for pre-contractual replies suggests that the Jersey Law Society may need to review the process of how the conveyancing profession deals with pre-contractual enquiries and binds them into the contract of conveyance registered in the public registry.”

Following the Court's judgement, the case for compensation will now continue.