A common feature of most commercial property transactions, whether a sale or a lease, is standard enquiries raised on behalf of the buyer or tenant and the replies given on behalf of the seller or landlord.
The process of raising and responding to standard enquiries aims to ensure that the buyer or tenant has all the information that they need in order to decide whether to proceed with the property transaction.
Commercial Property Standard Enquiries
With that in mind, solicitors tend to use standard forms of enquiries, known as Commercial Property Standard Enquiries (CPSE), that have been designed to cover the most common types of issues that buyers and tenants might need to know about.
Tom Gibbons, commercial lawyer at Tallents Solicitors in Newark looks at a number of issues when responding to or reviewing standard enquiries that need to be thought about by all the parties to a commercial property transaction.
Issues for the seller or landlord
Sellers and landlords often find replying to commercial property standard enquiries frustrating – the standard sets of enquiries try to cover many different scenarios, so there are often some which do not apply to a given transaction. It is important, however, that care is taken when replying to enquiries.
In a recent legal case, Morrell v Stewart (2015), a seller of commercial property was found to have given a fraudulent reply to an enquiry and was ordered to pay £33,000 compensation to the buyer as a result.
The seller failed to disclose issues affecting the drainage at a property, and remedial works carried out in response to a notice that had been served on them.
The seller argued that it did not occur to them to disclose those matters because they thought the work that had been done had cured the problem. However, the court found that this missed the point; even though works had been done, the buyers should have been told about the issues so that they could have the opportunity to check the works and satisfy themselves that the issues had been fully resolved.
In this case, the old saying of ‘honesty is the best policy’ most definitely applies here.
Sellers and landlords should not be tempted by the thought that withholding information may help the sale go through.
This approach is dangerous for two main reasons:
(1) as in the case mentioned above, the buyer may have a claim for compensation against the seller even after completion if information was wrongfully withheld, and
(2) if it comes to light that information has been withheld, then this might affect trust between the parties and could lead the buyer or tenant to raise further enquiries or, in extreme cases, can mean parties walking away from transactions.
Sellers and landlords should always read enquiries carefully and ensure that they (and any managing agents) check their records when giving replies – their solicitors should be able to advise further if there is any doubt about whether a matter ought to be disclosed.
Care should also be taken with replying to an enquiry along the lines of ‘Not so far as I am aware’, which can be taken to imply that records have been checked and reasonable steps taken to discover any issues that the seller or landlord should have been aware of.
Ultimately, sellers and landlords should recognise that replying to enquiries is a central part of a commercial property transaction and that it requires care and attention in order to protect their own position and help the transaction to progress.
Issues for the buyer or tenant
There are two distinct points where the buyer or tenant needs to pay close attention: whilst in the legal case highlighted above, the buyer was able to claim compensation, buyers and tenants should not simply rely on being able to do so as this will depend on all of the circumstances of a case.
Firstly, if the buyer or tenant is aware of any specific issue which might affect a property then they should let their solicitors know about this as soon as possible so that any appropriate enquiries can be raised in addition to the normal enquiries.
By raising the relevant points as soon as possible, buyers and tenants should have the necessary information to make an informed decision on these issues sooner rather than later.
Secondly, once the seller or landlord has issued replies to enquiries the buyer or tenant should review the replies in detail to check that there is nothing unexpected and to consider what, if any, further information is needed in relation to any matters that have been raised.
Buyers and tenants should review the replies together with other information that they have about the property (for example, search results and survey reports) to check that there are no inconsistencies. It also makes sense to consider whether the information in the replies to enquiries mean that a further inspection of the property would be useful in order to clarify any matters.
Sellers should take great care to ensure that their answers to the buyer’s enquiries are both truthful and accurate. We would also urge buyers to commission an independent full survey before exchanging contracts.
The commercial property department at Tallents has extensive experience in advising sellers, buyers, landlords and tenants regarding all aspects of buying and selling or leasing commercial property. In the event of a dispute then our specialist litigation solicitors can help guide clients through the process.
For more information please contact Tom Gibbons on 01636 671881.