Misleading replies to enquiries

It is standard in commercial property for the Seller to be required to provide replies to enquiries. This is usually done in the form of CPSEs (commercial property standard enquiries).

In a recent case (Greenridge Luton One Ltd and another v Kempton Investments Ltd [2016] EWHC 91 (Ch), the courts showed how they deal with misrepresentation in a routine commercial situation.

Brief facts of the case

In Greenridge, the Seller’s replies to enquiries did not disclose that the current tenant had withheld service charge payments on account of an ongoing disagreement with the Seller. Contracts were exchanged and a deposit paid. Following exchange of contracts, the Buyer became aware of the service charge dispute and subsequently rescinded the contract under the terms of the contract. The Seller refused to return the deposit, which in turn resulted in the commencement of the proceedings by the Buyer.

The matters of question in this case were; whether a false representation had been made to the Buyer during the negotiations of the contract or if it had been made in the contract itself, whether the Buyer was induced to enter into the contract by reason of any misrepresentation, whether any misrepresentations were attributable to fraud or recklessness and whether the Buyer was entitled to damages.

The High Court held that the Buyer was entitled to terminate the agreement and have its deposit returned because of the false representation that there were no service charge disputes. The Buyer was also entitled to damages for the deceit which amounted to £395,948. The damages awarded by the court were for the costs incurred in the purchase which had been wasted as a consequence of the misrepresentation, that is, professional, survey fees and other costs relating to the proposed structuring of the purchase.

Be cautious

Answering CPSEs (commercial property standard enquiries) can be a laborious task for the seller particularly where there are time constraints. It is, however, important to ensure the replies are not overlooked and are considered in full and with accuracy.  To avoid such a claim it is important that sellers ensure that buyers are provided with up-to-date replies to enquiries and kept informed of any changes.

Tolhurst Fisher has one of the largest specialist property teams in the region and, as such, is ideally placed to advise on this and any other property related matter.

For further information contact us on 01702 352511