If they sue, will they win?

So homeowners are seeking to sue housebuilders for loss of value after neighbouring properties were sold to social landlords. Do they have a leg to stand on?

First, what does the contract of sale say? Is there anything specific within it that would let the homeowner sue for breach of that contract? The chances are that the contract will be silent on the point and implying a term to that effect would be difficult. Caveat emptor.

If there is nothing in the contract itself, what about the sales particulars? We all know that they tend to paint the goods in glowing terms (“substantial property in a desirable location”). If the property doesn’t quite match the expectations raised by the particulars, does that give the homeowner a right of action? In most circumstances, the answer is no. These are simply expressions of opinion that ought to be taken with a pinch of salt – and are typically accompanied by a disclaimer.

Take the situation where the housebuilder makes certain factual statements regarding the property to the potential purchaser, and those induced them to buy it. Does the purchaser have any recourse against the seller?

Well, if factual statements or “representations” turn out to be untrue, the purchaser may be able to have the contract struck down or seek damages from the housebuilder on the grounds of misrepresentation. The misrepresentation need not necessarily be fraudulent or negligent. Damages for misrepresentation are available unless the seller can prove that, up to the time the contract was concluded, it reasonably believed the truth of the facts it was representing.

What’s more, even if a homeowner could establish a valid case of misrepresentation, it would be difficult to prove that any loss it suffered was the result of that, rather than the downturn in the market.