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1. I am afraid you certainly will have to disclose this matter to your Buyer. Once a Sale has been agreed, your Solicitor will send you a Property information Form, which forms part of the Contract documentation that is forwarded to the Buyers Solicitors. One of the questions on the form asks "Have there been any disputes or complaints regarding this property or a property nearby? If Yes, please provide details".
If you weren't to disclose this issue, then the buyer would be entitled to sue you for Misrepresentation.
2.You will need to disclose all correspondence you have had with the Council.
3. As mentioned above, the information will be submitted with the Contract at the onset of the transaction.
4. I can't really answer this, as a property is only worth what someone is prepared to pay fo rit. In my experience, no Solicitor will advise a Buyer client to proceed with a purchase if ther eis any kind of ongoing dispute. It is therefore very much a case of assessing the position as and when you have placed the property on the market.
5. The Council do not hold any powers to demand that the internal layout is changed/soundproofing is installed, I'm afraid.
I hope this assists and sets out the legal position.