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Commercial Property Standard Enquiries – what’s all the fuss about?

7 Mar 2018

 

Commercial Property Standard Enquiries (“CPSEs”) are usual sets of enquiries which the solicitor of a potential purchaser or tenant of commercial property will request the seller or landlord’s solicitor to provide replies to before completion.

 

There are various sets of CPSEs depending on the type of transaction (i.e. a purchase, grant of a new lease or assignment of a current lease) but the one that is present is every transaction in which CPSE replies are obtained is CPSE 1. This is the most comprehensive set and provides general information about a property, including asbestos, fire safety, the environment the property is located in and a host of other matters.

 

CPSEs are often understated in their importance, both in providing information about a property to a purchaser / tenant and, from a seller / landlord’s perspective, ensuring that the replies are accurate.

 

The importance of CPSEs and the risk they pose to a seller / landlord who gives an incorrect reply was recently tested in the case of First Tower Trustees Ltd v CDS (Superstores International) Ltd (2017).

 

Facts

 

First Tower Trustees Ltd (“FTT”) was a landlord of a property let to CDS (Superstores International) Ltd (“CDS”).

 

In the course of negotiating the lease, FTT provided CDS with replies to CPSE 1, as is normal.

 

These stated, amongst other things, that FTT had not been notified of any actual, alleged or potential breach of environmental law or environmental problem but that CDS must satisfy itself of the same.

 

This latter italicised part is fairly standard wording as a seller / landlord attempts to leave the final decision up to a purchaser / tenant.

 

The CPSE 1 replies went on to the say that prior to completion of the lease, FTT would notify CDS if it became aware that any reply was incorrect.

 

On 20 April 2015, FTT received an email from their asbestos specialist stating that asbestos had been found in the property. FTT did not update CDS to inform it of this finding and on 30 April 2015 FTT and CDS entered into a lease of the property. CDS subsequently found the asbestos when it was carrying out works under the lease.

 

CDS sued FTT for the cost of carrying out further remedial works and for the cost of leasing alternative accommodation while the asbestos was removed. The property was able to be occupied by CDS in January 2016.

 

Decision

 

The Court decided that use of the qualifying words “CDS must satisfy itself” did not assist FTT’s argument that it was not liable.

 

The Court said that, because CDS had stated that it had not been notified of any actual, alleged or potential breach of environmental law or environmental problem, CDS was only required to satisfy itself of the same in the context that FTT had not been made aware of any problems. It could then somewhat rely on what CDS had said when determining what, if any, surveys to carry out.

 

As such, the court decided that FTT was liable for misrepresentation and for the losses claimed because it had either given an incorrect reply or had failed to update CDS when it became aware of environmental problems.

 

Conclusion

 

It is important that clients and solicitors are aware of the potential ramifications of providing incorrect or inaccurate replies to CSPEs.

 

This case also suggests that, once replies are provided, there is an ongoing duty to update a purchaser / tenant if the seller / landlord becomes aware of matters which will affect the replies previously given.

 

Generally, unless a solicitor is fully acquainted with a property, draft replies to CPSEs will be prepared by the solicitor but sent to the seller / landlord client to finalise and approve before being sent to the purchaser / tenant’s solicitor. If this is the case then the client should be made aware of the consequences of inaccurate replies and its duty to notify the purchaser / tenant if it subsequently becomes aware of facts which would or may change the reply previously given.

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Short Richardson & Forth, 4 Mosley Street, Newcastle upon Tyne, NE1 1DE

Tel: +44 (0)191 232 0283  ·  Email: info@srflegal.co.uk

 

Short Richardson and Forth Solicitors Limited is a private limited company registered in England and Wales under company number 10572065, authorised and regulated by the Solicitors Regulation Authority No 637150.

Short Richardson and Forth Solicitors Limited is a private limited company constituted and run in accordance with the provisions of the Companies Act 2006. The term “partner” has been used to denote individual senior solicitors employed by Short Richardson and Forth Solicitors Limited.