Can Sellers really scare…with the concept of Buyer Beware?
Clients selling commercial property will be familiar with the CPSEs (Commercial Property Standard Enquiries), to which they need to provide replies.
Replies should always be prepared cautiously and this blog looks at some of the risks of relying too heavily on the principle of “caveat emptor.”
“Caveat Emptor” meaning “let the buyer beware” carries the idea that it is for the buyer to find out as much information as possible about the property.
From the buyer’s perspective, it makes perfect sense to carry out full due diligence on a property before exchange of contracts. Solicitors will not have carried out physical inspections of the property and the value of conducting site visits and making your own enquiries cannot be underestimated, particularly given the large sums of money at stake.
However, from the seller’s perspective, a prudent buyer doing their own research is no excuse to provide hazy information about the property. Sellers have a duty to:
- take reasonable steps to provide correct responses
- ensure any defects not apparent from inspection of the property or the title, are disclosed
- update buyers before exchange, if information previously provided is or becomes incorrect
A failure to comply with the above carries many risks, including a potential claim for misrepresentation against the seller.
This is painfully demonstrated in a recent case called Greenridge Luton One Ltd v Kempton Investments Ltd . Here, the buyer was allowed to rescind the contract, reclaim its deposit and secure damages of about £395,000 as a result of the seller stating there were no service charge arrears – a statement which was actually inaccurate at the point of exchange.
Needless to say, sellers would be wise to tread with caution and think carefully about what they tell buyers. Further, to protect themselves, both buyers and sellers are always advised to communicate any property information via their solicitors and in writing.
If you would like more information, please do contact our Property team at Foskett Marr Gadsby & Head LLP (based in Epping and Loughton) on 01992 578 642 (http://www.foskettmarr.co.uk/index.php/our-team/commercial-property-solicitor-essex/).