Replies to CPSEs – make sure you check them!
For those who have come across Commercial Property Standard Enquiries (CPSEs), it might be hard to believe that it was not too long ago (pre-2002) that CPSEs did not exist.
Commercial property lawyers who experienced those days will recall trawling through long and imaginative property enquiries and then working with their client to come up with a suitable response to often obscure questions in order to assuage the purchaser's overly zealous solicitor.
Thankfully those days are gone. Since their introduction in 2002 the CPSEs have worked wonders in speeding up commercial property transactions for both lawyers, and more importantly, our clients. Instead of a tenant or buyer's lawyer issuing their own bespoke set of enquiries, the CPSEs have become accepted as the standard enquiries to be answered when you are looking to sell or let out a commercial property.
However the recent Court of Appeal case of First Tower Trustees Ltd. & Another vs. CDS (Superstores International) Ltd. 2018 serves as a reminder that even though CPSEs go a long way in standardising title enquiries, how you reply still needs to be taken seriously and the information needs to be verified as correct by the selling client.
In this instance, the landlord stated in the CPSE replies that it was not aware of any environmental problems associated with the warehouse that it was proposing to let to the tenant. This was despite the landlord being well aware that the building was riddled with asbestos and nowhere near ready for meaningful occupation.
It was not until after the deed was done that the tenant realised the building was spattered with asbestos and totally unfit for occupation. They were forced to take a lease for another property whilst the asbestos was cleared out.
The tenant sued the landlord for misrepresentation
The landlord pointed out that under a clause in the lease, the tenant had acknowledged that it did not rely on any representations (including the CPSE replies) made by the landlord when it entered into the lease. The Court did not agree, making it clear that the tenant must be able to rely on the replies to CPSE enquiries. The exclusion clause in the lease was deemed entirely unreasonable and failed in its attempt to exclude CPSE replies.
Although the days of painstakingly working through personalised enquiries are long gone, this case is a reminder that the court will not look kindly upon misrepresentations in the CPSE replies and the seller cannot hide behind boilerplate lease clauses.
Therefore when reviewing the replies to enquiries it is important that the selling client ensures replies are accurate and verified and not just generic replies. The CPSEs are definitely more convenient but it remains vital to spend the time getting the answers right.