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Commercial Property Standard Enquiries - the truth, the whole truth and nothing but the truth

Nov 13, 2018

If you have bought, sold or rented commercial property, then you may have heard your legal adviser refer to Commercial Property Standard Enquiries, or more commonly known CPSE.   Whilst “standard” the questions  are complex and full of legal jargon.  Faced with them, it is not uncommon for a seller or landlord to put ‘N/A’ in response to any questions that they do not fully understand. This temptation should be resisted or it could result in a costly misrepresentation claim.

CPSE misrepresentation claims

CPSE reports are there to assist the tenant or buyer of a commercial property to understand the premises inside and out, and they therefore are entitled to rely on the information given in the replies; any misleading information given by the landlord or seller could lead to a misrepresentation claim.

The recent Court of Appeal case, First Tower Trustees Ltd. & Another vs. CDS (Superstores International) Ltd is a reminder to commercial property landlords and sellers of the importance of completing these enquiries to the best of their knowledge, and being accurate in their responses.

In this case, the landlord stated in replies to CPSE 1 enquiries that it was not aware of any environmental issues associated with the property, in this case a warehouse. The property did however contain large quantities of asbestos; a fact of which the landlord was aware. The tenant completed the lease and subsequently discovered that the property was not in any way suitable for occupation due to the levels and condition of the asbestos. As a result, the tenant had to take another lease of a separate property whilst the asbestos issue was sorted out at great expense. The tenant, unsurprisingly, sued the landlord for misrepresentation and won.

The landlord argued that a clause in the lease stating that the tenant could not rely on any representations made by the landlord before the lease was signed, prevailed, but the court was not impressed by this argument. They made it clear that the tenant was entitled to rely on the replies to CPSE, and that an unscrupulous, or even careless, landlord could not hide behind standard lease clauses to get out of responsibility for the replies given.

Landlord and seller CPSE responsibilities

It is worth remembering that landlords and sellers, are not obliged to give replies to CPSE, although providing detailed answers can assist with the progress of the tenancy agreement or sale.  If replying, , they should take time over the questions and answer them properly, in full and to the best of their knowledge. 

We would recommend that where there is any uncertainty landlords/sellers  obtain legal advice. There are, however a few sensible rules to follow:

  • It is perfectly acceptable to caveat responses, “not as far as the seller is aware” or “the landlord does not occupy the premises and does not know” rather than an outright “no”.  
  • It is acceptable to say “don’t know” if that is true.  If it comes out later that it was known, or should have been known, then the landlord/seller could be at risk.
  • There is an assumption that the person answering has completed a full investigation into the point before replying and, if they are answering on behalf of a company, that the answer reflects the knowledge of the company, not just that of the answerer.
  • No response at all will be better than a half truth or incorrect reply. Only answer ‘yes’ or ‘no’ if it is indeed a fact and that has been checked A few extra minutes spent dealing with replies thoroughly and accurately could save thousands in litigation costs and liability thereafter.

For any further advice on replies to enquiries that you have received or have been asked to prepare, then please contact Jenny Colvin in our Portsmouth office on 023 9277 6558 or email jennycolvin@warnergoodman.co.uk.

ENDS

This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.  All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.