If you are selling a commercial property, it’s important that you reply accurately and truthfully to enquiries made by the buyer’s solicitor.

In the course of a commercial property sale, the purchaser’s solicitor will pose a range of Commercial Property Enquiries (CPSEs). As a vendor, it’s vital that you supply the answers to the enquiries honestly and provide as much information as possible to the buyer via their solicitor. If circumstances change or arise during the transaction, the onus is on the seller to update the replies.

Sellers must remember that the duty to tell the buyer about disputes, notices etc continues after exchange and up to the point that the transaction completes.

The implications of failing to answer these enquiries honestly and fully are serious. In the case of Greenridge Luton One Limited v Kempton Investments Limited [2016] EWHC 91 (Ch)  that involved the sale of a commercial building, the seller was found to have fraudulently misrepresented the situation as a result of failing to honestly answer a query relating to service charge arrears at any let unit.

A key tenant of the building had started to complain about the level of service charges and was withholding payments. The result of this was that significant service charge arrears has built up. The seller did not disclose this information to the buyer of the property, answering ‘none’ or ‘none so far as the seller is aware’ to a number of relevant queries.

By the time exchange of contracts came, the tenant had written to the seller to state that they considered that a dispute had arisen. The seller did not reveal this to the buyer.

The service charge dispute came to the attention of the buyer and the buyer’s solicitor between exchange and completion and the buyer sought to withdraw from the contract on the basis that the property was worth less as a result of the dispute.

The Court found that the seller had fraudulently misrepresented the situation to the buyer and awarded the buyer the return of the £812,500 deposit paid on exchange, and costs and damages of almost £400,000. The seller was found to have deliberately misled the buyer, as opposed to making an innocent misrepresentation.

The seller is not required to volunteer information if no enquiries are raised. The buyer will have no recourse as, in the absence of relevant enquires, the principle of ‘buyer beware’ (caveat emptor) applies.

Advice for buyers:

Make sure your solicitor carries out a comprehensive range of searches and enquiries when buying a commercial property – which is where our invaluable guidance comes in to safeguard your interests.

We have many years of detailed experience in negotiating commercial leases, so do please contact us if you are considering taking on a new tenant. We can help you minimise the risks.

If you have any questions or require further advice, please contact:

David Hall, 01789 772955 / email@hallreynolds.co.uk

The information, materials and opinions contained on this website are for general information purposes only, are not intended to constitute specific legal or other professional advice, and should not be relied on or treated as a substitute for specific advice relevant to particular circumstances. Hall Reynolds LLP does not accept any responsibility for any loss which may arise from reliance on information or materials published on this website