The meaning of replies to enquiries in property transactions

As part of a healthcare property transaction, the seller or the landlord of a property is required to provide replies to enquiries to the buyer or the tenant. For commercial property, replies are usually given in the first instance via Commercial Property Standard Enquiries (“CPSEs”).

CPSEs include pro-forma questions which the buyer’s or tenant’s legal representatives will review in the first instance, later raising additional enquiries that are more specific and, more often than not, are used to ask for more details on replies given in CPSEs.

Specific enquiries for healthcare property for supported living will include a copy of the HMO licence. For dental or veterinary practices, these will include copies of the planning permissions authorising the property’s use. As part of the CPSEs the seller or landlord will need to provide due diligence documents which include an electrical installation condition report, an EPC, certificate, a gas safety certificate and so on.

It is important that sellers and landlords provide full replies to all enquiries so as to avoid delays to the transaction, as if adequate replies are not given then the buyer or tenant will raise further enquiries until they are satisfied that they fully understand the position.

This is especially important as, if buyers are taking a mortgage over the property to fund the purchase, then the lender – which in most cases is usually a bank – will need to be sure that there are no major issues with the property before they allow funds to be released.

Many healthcare clients require bank funding as they will often be buying an existing healthcare business which is operating from the property as well as purchasing the property or taking a lease.

If replies to enquiries are found to be inaccurate and the buyer suffered a loss as a result, then the buyer or tenant can make a claim for misrepresentation. However, the buyer can only make a claim if a statement was found to be incorrect relating to a fact, not the seller or landlord’s opinion on something.

The seller or landlord should provide updated replies to enquiries until the transaction has completed. If the position changes, the seller or landlord should promptly reply with this information to the buyer or tenant.

For example, a seller may state that no planning applications had been made in respect of the property. Later down the line in the transaction, the seller may receive notice of a planning application submitted by a third party. The seller or landlord should tell the buyer or tenant as soon as possible to avoid a claim of misrepresentation if the planning application later causes a loss.

It is advisable for buyers and tenants to check with the seller or landlord before the transaction is completed that the replies to enquiries given earlier on in the transaction remain true and accurate.

If a property transaction forms part of a corporate transaction agreement, warranties are usually given in respect of the property. Warranties are contractual statements given by the seller. The main warranty that is usually given in respect of property is that the replies to enquiries given are true and accurate. If this warranty was found to be breached, the seller could claim for breach of warranty. The usual remedy for a breach of warranty claim is financial compensation – meaning that the seller may have to pay for the loss the buyer has have suffered.