24th Mar 2017

Pre-contract enquiries – a pain in the neck?

You’ve spent ages marketing that shop, office premises or industrial unit, found a buyer or tenant and have concluded the heads of terms for the sale or lease. Job done - get everything over to the solicitors and sit back while they document the deal before getting your pen out and signing on the dotted line?

Well, not quite. The first thing your solicitor sends you is a standard set of CPSE or Commercial Property Standard Enquiries about the property – 30 or so pages of tedious questions (although shorter versions are available for simpler transactions).

If you are lucky, and your solicitors are doing their job properly, they will have suggested answers to as many of these as they can from their own knowledge of the property and/or by looking at the existing title deeds.  This should reduce some of the tedium, but it’s still a time consuming process and the tendency sometimes is to rush the answers or be non-committal to the point of being downright unhelpful. This is particularly true if you are concerned about any potential liability for misrepresentation, negligent mistake or even fraud and any damages (or worse) which may flow. That’s understandable, but remember that the whole point of answering the questions is to provide the buyer or tenant with all the information it needs about the property before committing to an exchange of contracts and the seller (or landlord) has a duty to the buyer (or tenant) to provide accurate replies.

A recent case has consideredthe issue once again. In First Tower Trustees Ltd v CDS (Superstores International) Ltd (2017), the High Court considered a misrepresentation claim brought by a commercial tenant where the landlord failed to update its replies to enquiries. The landlord, a trust company, stated in replies to pre-contract enquiries that it was unaware of notices or breaches relating to environmental matters. Later the landlord trustees became aware of the presence of asbestos; however, they failed to update the replies before entering into a lease of warehouse premises with the tenant.  Although the case was also concerned with the effectiveness of a clause in the lease that purported to exclude liability for reliance on representations made by the landlord and the potential limit of liability on landlord trustees, the High Court held that the trustees were liable for misrepresentation and the case is a helpful reminder that if a seller or landlord makes a representation in replies to enquiries, but becomes aware before contracts are exchanged that it is untrue or the answer has changed, it should update its earlier reply and notify the other party.   

Be warned!

Richard Wheeldon is a Senior Consultant within Berwins' Commercial Property team. He has nearly 30 years of legal experience and is consistently ranked in leading legal directories. 

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