When dealing with commercial property in England and Wales, the legal principle of caveat emptor is the reason that a buyer’s solicitor will ask a seller to reply to commercial property standard enquiries (CPSEs).

The Latin phrase means ‘let the buyer beware’, and it aims to limit the seller’s obligation to disclose in detail every aspect of a commercial property to a buyer. The intention is to encourage buyers to thoroughly investigate the transaction that they are entering into, thereby shifting the burden from the seller to the buyer.

As a consequence of this legal principle, a buyer’s solicitor will ask that a seller replies to CPSEs to obtain information about the property. If the replies are incorrect and the buyer relies on the replies in its decision to buy the property, the seller risks a claim for misrepresentation.  This is why replies to CPSEs are generally qualified by statements such as ‘not so far as the seller is aware’, or ‘the buyer should rely on its own survey’.

When the answers to the enquiries prove to be incorrect, can the seller’s solicitor be liable to the buyer for the seller’s inaccurate answers?

The case

The High Court was recently asked to decide this[1]. The claimant had bought a holiday park for £1.35 million from a company that was heading toward insolvency. The seller had incorrectly answered some of the CPSEs regarding the physical condition of the property.

Q:        has ‘the Property … been affected by …

            (a) Structural or inherent defects …

            (c) Defective Conduits, fixtures, plant or equipment … [and]

            (e) Flooding’?

A:         No

The property had been affected by structural defects and some conduits were defective.  The seller, therefore, had misrepresented the condition of the property.

The buyer did not pursue the seller company for damages because of the company’s financial difficulties. Claims were instead brought against the managing director of the seller, the seller’s solicitor and his firm.

The claims

The buyer’s claim of deceit and negligent misstatement against the seller’s managing director did not succeed as there was no evidence that the buyer had relied on the answers to the CPSEs – or even looked at the answers.

The claim for negligence against the seller’s solicitor, and vicariously against his firm, also failed for two main reasons:

  1. this case followed a previous case[2], which established that in normal conveyancing transactions, sellers’ solicitors do not owe a duty of care to buyers when answering the enquiries; and
  2. the CPSEs state that the replies are given ‘by the Seller and addressed to the Buyer’, without liability on the part of the seller’s solicitors.

In this case, the seller’s solicitors were found not to be responsible for the buyer’s loss.

Conclusions

This case supports established law that sellers’ solicitors are unlikely to be liable to a buyer for incorrect replies to CPSEs. The result again emphasises that it is for the buyer to be satisfied that they have sufficient information to make appropriate decisions when purchasing commercial property. Buyers should be aware of the importance of actually reading the answers to the CPSEs if they want to rely on the information in them.

This blog post was written by Imogen Cox. 

[1] Francis & Anor v Charles Knapper & Ors [2016]

[2] Grand Gelato Ltd v Richcliff (Group) Ltd [1992]


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This blog is intended only as a synopsis of certain recent developments. If any matter referred to in this blog is sought to be relied upon, further advice should be obtained.