Pre-contract searches and enquiries - Personal inspection and survey reports

Learning Outcomes

After reading this article, you will understand the buyer’s responsibility to investigate the physical condition of property before exchange of contracts. You will be able to explain the principle of caveat emptor, distinguish between personal inspection and professional survey types, and advise on the suitability of RICS Level 1, 2, and 3 surveys. You will also appreciate the solicitor’s role in advising clients on pre-contract due diligence for SQE1.

SQE1 Syllabus

For SQE1, you are required to understand the buyer’s obligations and practical steps for assessing property condition before contract exchange. In your revision, focus on:

• The caveat emptor principle and its application to physical defects in property transactions.
• The purpose and limitations of personal inspection by the buyer.
• The different types of RICS survey reports (Levels 1, 2, and 3) and their suitability for various properties.
• The solicitor’s duty to advise on inspections and surveys.
• The consequences of failing to identify defects before exchange.

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. What is the legal principle that places the risk of undiscovered physical defects on the buyer before exchange of contracts?
   1. Privity of contract
   2. Caveat emptor
   3. Duty of care
   4. Misrepresentation Act 1967
2. Which RICS survey type is most appropriate for an older property with visible signs of disrepair?
   1. Mortgage valuation
   2. Condition Report (Level 1)
   3. HomeBuyer Report (Level 2)
   4. Building Survey (Level 3)

3. True or false? The seller is always legally obliged to disclose all physical defects in the property to the buyer before exchange of contracts.

Introduction

When buying property, the buyer is expected to investigate the physical state of the building and land before becoming contractually bound. The seller’s duty to disclose is limited, and the buyer must rely on their own inspection and professional advice. This article explains the caveat emptor principle, the importance of personal inspection, and the main types of survey reports available, all of which are essential for SQE1 Property Practice.

The Caveat Emptor Principle

The starting point for physical defects in property transactions is caveat emptor—let the buyer beware. The buyer is responsible for discovering any issues with the property before exchange. If defects are found after exchange, the buyer will usually have no remedy unless the seller has actively concealed them or made a misrepresentation.

Key Term: Caveat Emptor
The common law rule that the buyer is responsible for identifying physical defects in property before exchange. The seller is generally not obliged to disclose such defects.

Personal Inspection

A buyer should always be advised to carry out a careful personal inspection of the property before exchange. This is more than a casual viewing; it involves looking for obvious (patent) defects such as cracks, damp, missing tiles, or signs of water ingress. The buyer should also check boundaries, access, and look for evidence of third-party occupation or rights of way.

However, a personal inspection by a layperson is limited. Many defects—especially structural or hidden (latent) issues—will not be apparent without professional knowledge or intrusive investigation.

Worked Example 1.1

A buyer views a 1920s house and notices a musty smell but sees no visible damp. After completion, extensive rot is discovered under the floorboards. Can the buyer claim against the seller?

Answer: No. Under caveat emptor, the buyer was responsible for investigating the property’s condition before exchange. The seller had no duty to disclose the hidden defect unless specifically asked or unless they actively concealed it.

Professional Surveys

Because personal inspection is limited, buyers should be advised to commission a professional survey before exchange. A survey is carried out by a qualified surveyor and provides an expert assessment of the property’s condition. This is distinct from a mortgage valuation, which is for the lender’s benefit only and does not protect the buyer.

Key Term: Mortgage Valuation
A basic assessment for the lender to confirm the property is suitable security for the loan. It does not provide advice on the property’s condition for the buyer.

Key Term: Survey
A professional report prepared for the buyer, assessing the property’s condition and highlighting defects, repairs, and risks.

RICS Home Survey Levels

The Royal Institution of Chartered Surveyors (RICS) sets out three main types of survey, each suited to different properties and buyer needs.

Key Term: Condition Report (Level 1)
The most basic survey, providing a summary of the property’s condition using a traffic-light system. Suitable only for newer, conventional properties in good condition. No advice or valuation is included.

Key Term: HomeBuyer Report (Level 2)
A more detailed survey, identifying significant defects and providing advice on repairs and maintenance. Suitable for conventional properties in reasonable condition. May include a valuation if requested.

Key Term: Building Survey (Level 3)
The most comprehensive survey, with a thorough inspection and detailed report on construction, defects, repairs, and risks. Recommended for older, larger, or altered properties, or where major works are planned.

Choosing the Right Survey

The appropriate survey depends on the property’s age, type, and condition, as well as the buyer’s intentions. For example, a Level 1 report is not suitable for an old or obviously neglected property. A Level 3 survey is advisable for properties with signs of disrepair, non-standard construction, or where the buyer plans significant alterations.

Worked Example 1.2

A client is buying a 1950s semi-detached house in average condition and asks whether a Level 1 Condition Report is sufficient.

Answer: No. For a property of this age, a Level 2 HomeBuyer Report is the minimum recommended. A Level 1 report is only suitable for newer homes in good condition.

Exam Warning

In SQE1, you may be asked to recommend the appropriate survey for a given property. Always consider the property’s age, condition, and the buyer’s plans. Recommending an inadequate survey is a common error.

The Surveyor’s Role and Liability

Surveyors owe a duty of care to their client to exercise reasonable skill and care in inspecting the property and preparing the report. If a surveyor negligently fails to identify a defect that should have been discovered, the buyer may have a claim for losses suffered.

Revision Tip

Always advise clients to check the surveyor’s terms of engagement and ensure the surveyor has professional indemnity insurance. Survey reports are usually non-intrusive and may not cover inaccessible areas.

Summary Table: RICS Home Survey Levels

Key Point Checklist

This article has covered the following key knowledge points:

• The buyer is responsible for investigating the property’s physical condition before exchange (caveat emptor).
• Personal inspection can reveal obvious defects but is limited.
• Professional surveys are essential for identifying hidden or structural issues.
• Mortgage valuations are for the lender and do not protect the buyer.
• RICS surveys: Level 1 (Condition Report), Level 2 (HomeBuyer), Level 3 (Building Survey).
• The solicitor must advise on the importance and suitability of different survey types.
• Surveyors owe a duty of care but survey reports have limitations.

Key Terms and Concepts

• Caveat Emptor
• Mortgage Valuation
• Survey
• Condition Report (Level 1)
• HomeBuyer Report (Level 2)
• Building Survey (Level 3)