The importance of accurate replies to Commercial Property Enquiries

When selling a property or granting a lease, replies to commercial property standard enquires, known as CPSE are usually required.  Whilst these are often seen as a chore to do, the importance of these replies cannot be overstated. 

Legal Compliance: Properly answering enquiries helps mitigate the risk of legal issues or legal action being taken.

Informed Decision-Making: Stakeholders rely on accurate data to make informed decisions regarding purchases, leases, investments, or developments.

Risk Management: Accurate responses help identify potential risks in property transactions, allowing parties to manage, mitigate, or avoid those risks proactively.

Financial Implications: Misrepresentations can lead to financial losses for parties involved, impacting valuations, returns on investment, and the overall profitability of transactions.

Due Diligence: Accurate answers support thorough due diligence processes, which are essential for buyers and investors looking for reliable information about a property’s condition, market standing, and legal status.

Risks of inaccurate replies

Legal Consequences: Inaccurate information can result in legal action, fines, or penalties due to breach of contract, misrepresentation, or failure to disclose essential facts relevant to the property, for example, recent case law has found sellers liable for not informing a buyer about Japanese knotweed within the boundaries of a property and having to pay substantial damages to the buyer.

Since 6th April 2016, the Consumer Protection Regulations 2016 (CPRs) have been in force.   Dealings with clients or consumers need to be free from any practice which would constitute an unfair commercial practice, a misleading action or a misleading omission and these 3 items are all offences under the CPRs.  The offences carry criminal sanctions ranging from a fine to imprisonment of up to two years.   There is a full need to disclose matters, and where matters are disclosed to solicitors, this is not kept hidden but is disclosed to buyers.  Where the seller/landlord does not permit this, solicitors cannot continue to act for that client.

It is an offence if a misleading action is taken or a misleading omission by the seller or on behalf of the seller by those acting for the seller (e.g. a solicitors firm dealing with the conveyancing or an estate agent). 

The impact of the CPRs in respect of “misleading omissions” is that solicitors firms should be making full disclosure to private buyers or the solicitors representing them about the defects and other material adverse matters relating to the property if it is known to them, having obtained the authority of the client to do so. 

If solicitors become aware of the existence of material information that is relevant to a transaction, it may be their duty in a trader-consumer transaction to disclose what is known (having obtained the client’s authority to do so) as not to do so would be responsible for a misleading omission.  This duty appears to go much further than the duty not to misrepresent.  It also appears to considerably reduce the application of the principle of caveat emptor- buyer beware.

Therefore, the seller/landlord  should be aware that neither they nor their solicitor must mislead the buyer by providing any incorrect or ambiguous information or provide material information.

Financial Loss: Errors can lead to overvaluation or undervaluation of a property, resulting in significant financial losses for one or more parties involved in the transaction.

Regulatory Scrutiny: Inaccuracies in property enquiries may draw the attention of regulatory bodies, leading to investigations and further repercussions for non-compliance with property laws.

Complications in completing Transactions: Inaccurate information can cause delays or complications in completing matters, which can disrupt financial planning and operations for all parties involved.

In summary, the risks associated with inaccuracies, incomplete or inaccurate information  pose significant issues that can result in legal action being taken for damages and rights to rewind the transaction.  Hence, thorough attention to detail and diligence in providing accurate information is crucial for all parties involved in commercial property dealings.