This case concerned answers to pre-contract enquiries during the conveyancing process. The claimant contracted to buy an office block from the defendant for £16.25 million. In the Commercial Property Standard Enquiries (CPSEs) as part of the sale process, the seller stated that there were no arrears of service charge owed by the commercial tenant and that there were no disputes over service charges. The Judge held that these answers were not true as the tenant had withheld around £95,000 from the service charge and there was much correspondence about this issue.
On discovering the existence of the service charge arrears and dispute shortly before the contractual completion date, the claimant asked the defendant for clarification. The defendant served a notice to complete in response. The claimant, in turn, served notice of rescission of the contract. The defendant accepted the ending of the contract and subsequently sold the office block to a third party.
The claimant’s claim was for a declaration that they had been entitled to rescind the contract, the return of its deposit and damages. The Judge found that the representation about the lack of arrears was made fraudulently or recklessly by the defendant seller and so the claimant was successful. The buyer had relied on the misrepresentations and had been induced to enter the contract. This case is a reminder that replies to enquiries must be answered accurately and that care must be taken in answering them.