32 reasons to give replies to CPSEs your full attention
A recent case has highlighted the importance of providing accurate replies to Commercial Property Standard Enquiries (CPSEs) and keeping them up to date.
CPSEs come in many different guises depending on the particulars of a transaction, but the main and most frequently used beast is CPSE 1; a lengthy set of 32 enquiries which requires a property owner (maybe seller or landlord) to give copious amounts of information about the title and management of a property. The document is over thirty pages long and the thought of completing the same is daunting whether you’re a dab hand at property transactions or new to the market.
It is usual for a solicitor to have the first stab at completing the replies on behalf of its client using information provided by the client and its agent. However, the client must then review the replies, check that they are correct, add any additional replies and supply any supplemental documentation e.g. an insurance schedule, energy performance certificate and option to tax (if applicable).
And the client must get – and keep getting – this bit right. The whole point of the replies is to give the buyer or tenant a comprehensive set of accurate information and documentation about the property in which it is about to take an interest, and on which it can rely. Failure by the seller or the landlord to supply the information and documentation of which it is aware and to update the replies if necessary could lead to a claim for misrepresentation by the buyer or tenant.
In First Tower Trustees Ltd & Anor v CDS (Superstores International) Ltd  the landlord completed its replies to CPSEs at the beginning of the transaction and in relation to environmental matters stated that it had no knowledge of anything untoward at the property. The parties went on to complete the lease and it then came to light that between completing the replies to CPSEs and completion of the lease the landlord had become aware of the presence of asbestos at the property but had failed to inform the tenant. The tenant brought a claim for misrepresentation and the landlord sought to rely on a clause in the lease that prevented the tenant from relying on any representation made by or on behalf of the landlord prior to completion of the lease. The court found that this ‘non-reliance clause’ was intended to capture information provided outside of and not relating to the CPSEs. It reiterated that the CPSEs are a standalone document and, under the terms of those enquiries, a party completing the replies is required to notify the other party of anything of which it becomes aware that renders the original replies incorrect and inaccurate. The landlord in this case had failed to do this and was therefore liable to the tenant for the cost of removing the asbestos from the property: circa £350,000 plus VAT.
So, what lessons can be learned from this case?
- If you are required to complete replies to CPSEs you must do accurately and with as much information as possible.
- If you are in any doubt as to the content of your replies then speak with your solicitor about the responsibility that can be placed on the buyer or tenant to seek the requested information on its own accord.
- The replies to CPSEs are a live document until the transaction is completed. If anything comes to light during the course of the transaction that should be disclosed to the buyer or tenant by reason of the CPSEs then do so. The consequences of the alternative could be costly.