'Legal Landscape' - What does ‘Caveat Emptor’ or ‘Buyer Beware’ mean?
Darren Donnithorne and Stephanie Matthews from Marshall Diel & Myers Limited Property & Estate planning team answer your property related questions and issues in this monthly edition of 'Legal Landscape' with Marshall Diel & Myers Limited.
Question: What does ‘Caveat Emptor’ or ‘Buyer Beware’ mean?
The principle of ‘caveat emptor’ is the Latin phrase meaning ‘buyer beware’ and is often quoted in relation to the purchase of property. In essence, it means that a buyer accepts a property in its current condition, and it is the buyer's responsibility to carry out a full and thorough investigation as there may be no recourse against a seller after the transaction closes.
The buyer's attorney will obviously be an important part of this investigation, and as a starting point will typically undertake the following standard checks:
- Investigating the title deeds for the property to ensure good title is passed from seller to buyer.
- Obtaining a boundary survey report to ensure there are no encroachments affecting the boundaries of the property.
- Undertaking a planning search to ensure that no development has been undertaken in breach of planning law.
However, there may be other areas of potential concern to a buyer and they must raise all relevant enquiries with the seller in order to satisfy themselves that they have completed the necessary and rigorous investigation.
Although buyers are often reluctant to incur the additional expense, we often recommend that our clients obtain a building survey in respect of the physical condition of the property. Typically, if a buyer is obtaining a mortgage, the bank will insist on a survey of the property, but these surveys focus on the value of the property and its suitability as security for the bank’s loan; they do not include a detailed assessment of its state of repair.
It is important to note that while the seller is obliged to hand over the property in the same state of repair and condition as exists at the date of the contract, any pre-existing problems will be inherited by the buyer. For example, termites are a common problem in Bermuda and can cause extensive damage. If a survey is obtained and the problem identified before the buyer enters into the contract, he or she has a chance to renegotiate the deal and ensure the seller pays for the remedial cost. If not, any costs arising when the problem is discovered after closing will likely be the sole responsibility of the buyer.
Keep in mind that outside of Bermuda, sellers are often obliged to complete a standard form of questionnaire intended to identify any problems with the property like the ownership and maintenance of boundaries, disputes with neighbours and informal rights of way. This does not occur in Bermuda so a buyer should be pro-active by carefully inspecting a property and raising enquiries of the seller as they see fit. Any issues of concern should be communicated to their attorney, who can obtain a written representation from the seller’s attorney or even insert a formal warranty into the contract for sale, thereby potentially providing recourse to the buyer if the information provided by the seller later turns out to be wrong.
At the end of the day, the phrase ‘Caveat Emptor’ is actually part of a longer statement “Caveat emptor, quia ignorare non debuit quod jus alienum emit” which translates as ("Let a purchaser beware, for he ought not to be ignorant of the nature of the property which he is buying from another party.") It pays for a buyer to pay careful attention to the property they have decided to purchase, and to make appropriate and detailed enquiries before signing on the dotted line.
This article was written by Darren Donnithorne (Senior Associate & Head of the Property and Estate Planning Team) and Stephanie Matthews (Associate of the Chartered Institute of Legal Executives).
This column is for general guidance only. It should not be used as a substitute for professional legal advice. Before proceeding with any matters discussed here, persons are advised to consult with a lawyer.
If you have any property questions or issues, please contact us at firstname.lastname@example.org or email@example.com. We would be happy to work with you to help you navigate the legal landscape in Bermuda, and you may even find your question featured on propertyskipper. We look forward to hearing from you!