Investment Property - Misleading Action

Published on Thursday, 05 December 2013. Posted in Case Studies


The potential buyers, Mr and Mr D, asserted that the Agent’s sales particulars were misleading as they had described the Property as being ‘ideal for any investment’, yet they had discovered through their solicitor that the lease contained a covenant preventing the Property from being sub-let, making it unsuitable for a buy to let investment. The Agent responded stating that they had been unaware of the covenant, that this was a matter for legal representatives to determine and, therefore, they could not be held accountable for
Mr and Mr D’s losses.


I was satisfied that Mr and Mr D were intending to purchase the Property as an investment on a ‘buy to let’ basis and that the Agent was aware of this. I consider that a common sense interpretation of ‘ideal for any investment’ is that the property concerned would provide a potential return for the capital invested, and in particular that it would be suitable as a buy to let purchase. In this case, the Agent failed to demonstrate that they had taken any steps to support making such a statement which, at the minimum, would constitute obtaining the Seller’s approval of the sales particulars. The Seller was aware of the covenant in this case and had enquiries been made, it would have become apparent that such a statement would not have been correct.


When describing a property as suitable for investment I consider that agents should be able to demonstrate that they have taken reasonable steps, prior to placing the property on the market, to ensure that there are no restrictions which would prevent it from being utilised for investment. This did not occur in this case. Had the Agent done so they would not have made such a statement and Mr and Mr D would not have considered the Property. I supported the complaint, making an award of £795 which included the solicitor’s fee, mortgage broker’s fee and the mortgage application fee that Mr and Mr D incurred in their attempt to purchase the Property.


Agents should exercise caution when describing properties as suitable for investment. If an agent advertises a property as being suitable for investment then I expect them to be able to demonstrate that they have taken all reasonable steps to ensure this is the case and that the Property can be sub-let. In this case, the Agent’s failure to demonstrate such caution resulted in a misleading statement being made contrary to their obligations under Paragraph 5h of the TPO Code of Practice and the CPRs.