As part of the conveyancing process we normally get asked by our clients why they have to answer further enquiries about the property they are selling when they feel they have already answered them, or they feel the question has such an obvious answer that it should not be asked in the first place.
Clients normally feel that lawyers can be ‘dragging their feet’ during the process of obtaining enquiries and responding to enquiries. This stage of the conveyancing process is incredibly important as it allows the buyers’ solicitors to ask all the necessary questions they feel may protect their clients when purchasing this property. The importance of this stage has been highlighted in the case of First Tower Trustees v CDS. This case raised the question whether a non-reliance clause in a lease should prevail over an incorrect reply to a pre-contract enquiry.
The details of the case
This case involved a lease for a warehouse. The landlord, when completing the pre-contract enquiries, stated that they were unaware of any environmental problems. After giving that reply, the landlord was then told that the premises contained dangerous amounts of asbestos, but the pre-contract replies to enquiry were not corrected.
The lease was then completed and included a non-reliance clause. This non-reliance clause attempted to exclude reliance on the pre-contract enquiries.
The tenant then began works on the property and substantial amounts of asbestos were found. The costs of remedial works and alternative accommodation while the works were carried out were substantial. As a result of this, the tenant took the landlord to Court to claim these substantial costs against the landlord and also making a claim for misrepresentation. The case was first heard before a trial judge before being heard by the Court of Appeal.
The Court of Appeal Decision
The Court of Appeal had to decide whether the non-reliance clause in the lease was an attempt to exclude liability for misrepresentation and therefore fell within s.3 of the Misrepresentation Act 1967, and therefore whether the clause was reasonable under the Unfair Contract Terms Act 1977. In other words, the Court had to consider whether the exclusion clause was reasonable.
The Court of Appeal decided that the clause was unreasonable. There was a great emphasis placed on the importance of being able to rely on pre-contract enquiries in conveyancing transactions. The Court stressed that the pre-contract enquiries are important in the conveyancing process, and if a non-reliance statement overrode those enquiries then they became worthless. However, the Court did state that there could be exceptional facts that mean a non-reliance clause could be deemed reasonable, but it would be difficult to imagine what those facts might be. Generally speaking, a non-reliance clause would be unreasonable.
Apart from confirming that you cannot exclude liability for pre-contract replies the case illustrates the importance of reviewing the accuracy of those replies prior to exchanging. Sometimes there can be a time gap between the giving of those replies and the later exchange of contracts. It is up to the solicitors to ensure that these replies remain unaltered.