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

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.   While the name may refer to them as ‘standard’, if you are a seller or a landlord, you may feel that you are actually facing a list of complex questions and legal jargon.  In this situation, it is not uncommon for a seller or landlord to put ‘N/A’ alongside any questions they are not sure of.  Jenny Colvin, Chartered Legal Executive and Associate in our Commercial Property team, explains here why you should resist this temptation, explaining the importance of CPSE in a commercial property transaction, and advising how you can avoid a costly misrepresentation claim against you. 

CPSE misrepresentation claims

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

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

In this case, the landlord confirmed in replies to CPSE 1 enquiries that they were 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 the landlord was aware of. The tenant completed the lease but 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 attempted to argue that a clause in the lease confirming that the tenant could not rely on any representations given by the landlord before entering into the lease prevailed, but the court was not impressed by this argument. They made it clear that in giving the replies to CPSE, the tenant was entitled to rely on them, and that an unscrupulous, or indeed careless, landlord could not hide behind standard lease clauses to get out of the replies given.

Landlord and seller CPSE responsibilities

It is worth remembering that as a landlord or seller, you are not obliged to give replies at all to CPSE, although providing detailed answers can assist with the progress your tenancy agreement or sale.  If you do give replies, take your time over the questions, complete them properly, in full and to the best of your knowledge. 

We would recommend that in places of doubt or uncertainty you ask your legal advisor, however a few common rules to abide by include:

• It is perfectly acceptable to caveat your responses, i.e. “not as far as the seller is aware” rather than an outright “no”, or “the landlord does not occupy the premises and does not know”.  
• It is acceptable to say you don’t know if you genuinely don’t know.  If it comes out later that you did know, or should have known, then you will fall foul of the law.
• There is an assumption that you have completed a full investigation into the point before replying.
• No response at all will be better than a half truth or incorrect reply. Attempts to mislead a prospective buyer or tenant by using ‘caveat emptor’ when you do know the answer will not be well received.
• When stating an answer as definitively a ‘yes’ or ‘no’ answer, make sure it is indeed a fact and that you have checked before giving your response. A few extra minutes spent dealing with replies thoroughly and accurately could save you thousands in litigation costs in the long term.

If you would like 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.