First Tower Trustees Limited -v- CDS (Superstores International) Limited: A Continuing Obligation to be Accurate in Property Transactions
Normally, as part of any commercial property transaction, a landlord or a seller will usually provide to the prospective buyer or tenant, a copy of pre-contract enquiries, typically in the form of the Commercial Property Standard Enquiries (CPSEs) document. The solicitor or conveyancer acting for you, will usually help you to answer any legal questions arising from the document, but the factual enquiries will need to be answered by the seller or landlord.
Whilst any prudent buyer or tenant will conduct its own investigations into the property (for example: searches, structural survey, etc.), you will be expected to provide a copy of the completed CPSEs. Whilst there is no legal obligation to do so, a failure to provide the CPSEs could give rise to suspicion by the buyer or tenant, as to what issues they may be taking on with the property.
It should also be stressed that the seller or landlord could be found liable misrepresentation if any information is incorrect or omitted in the CPSEs and the buyer or tenant relies on that information in deciding whether to proceed with the transaction.
A fine example of the importance of the accuracy of responses to the CPSEs can be seen in the case of First Tower Trustees Limited -v- CDS (Superstores International) Limited [2017] EWHC B6 (Ch). Here, First Tower Trustees Limited (‘the Landlord’) had granted a lease of several bays and entered into an agreement for a lease of a further bay, within a warehouse to CDS (Superstores International) Limited (‘the Tenant’).
One of the sections of the CPSE centres on any environmental issues that may affect the property. The enquiry asked the Landlord to provide full details of any notices under environmental law relating to real or perceived environmental problems that could affect the property. The Landlord responded by stating that it was not aware of any notices but that the Tenant should rely on its own investigations.
However, the Landlord forgot that it was under a duty to notify the Tenant if it became aware of any matter, prior to the exchange of contracts or completion, which would mean that any of the information previously supplied would be in correct.
Ten days before the completion of the transaction documents, the Landlord became aware of the presence of asbestos near the loading bay of the property that posed a significant health risk. The Landlord failed to notify the Tenant of this risk and the Tenant discovered the asbestos almost immediately upon taking possession of the property.
The High Court found in favour of the Tenant and found that the Landlord had misrepresented the condition and state of the property in its CPSEs and that this was information that the Tenant relied upon. Simply by stating that the Tenant should rely on its own investigations did not reduce or minimise the Landlord’s liability. The Landlord was ordered to pay for the full cost of removing the asbestos and the Tenant’s cost of leasing alternative premises for eight months whilst the asbestos was removed safely.
Conclusion
The take home message from this article is that you should spend sufficient time and resources in ensuring that your CPSE responses are accurate and true. You should also ensure that they remain accurate throughout the life of the transaction and ensure that you report any issues or inaccuracies to your solicitor so they can discuss these with you and notify the seller or tenant as soon as possible.
At Foskett Marr Gadsby & Head LLP, we have the expertise and the experience to guide you through the everchanging commercial and legal scenery. Should you wish to speak further about this with someone, then please either contact either John Worby (Epping office) or Robin Cearns (Loughton office) on 020 8502 3991.