The real estate industry has been encouraged to look again at how transactions can be streamlined.
The Investment Property Forum's second edition of Readiness for Sale - A Guide for Streamlining Commercial Property Transactions continues to recommend that sellers are prepared for disposals.
This is achieved by pre-market familiarisation with the property and title, to inform negotiating strategy and to facilitate the production of a full package of legal documentation and management information from the outset.
Clearly this is good advice. As an asset class, real estate has a reputation for illiquidity. Transaction delay and cost are often issues. In a volatile market, a prepared seller may be able to avoid the challenges of price renegotiations and abortive transactions.
Due to time and cost implications, the guide particularly recommends readiness for sale in the case of properties which are newly developed or newly acquired, and properties where disposal is contemplated, although the timetable is uncertain.
CPSE replies: The rub?
The guide recommends early preparation of replies to Commercial Property Standard Enquiries (CPSEs) and warns that replies not answered fully or correctly may cause delay.
The widely adopted CPSEs are intended to be a uniform method of disclosing property information and supporting documents.
Yet the trend is for CPSE replies to yield a diminishing amount of valuable information. Replies are cautious and caveated with disclaimers. Why is this, when comprehensive replies may expedite the transaction?
Sellers and their advisers are conscious of their exposure to claims for misrepresentation. Such claims will succeed where a buyer can demonstrate untrue statements of fact by the seller, on which the buyer relied to enter into contract, and then suffered loss as a result.
Although it may seem unhelpful, sellers often refer buyers to their own due diligence, rather than expressing opinions which may be inaccurate. Sellers should consider the following:
- the common response 'not so far as the seller is aware' implies that the seller has taken reasonable steps to ascertain whether any particular matter exists prior to answering in this way
- another common response - 'not to the seller's knowledge but no warranty is given and the buyer must rely on its own inspection and survey' - will not protect the seller if the reply also contains a misrepresentation - the misrepresentation being that the seller was not aware of a particular matter
- it may be better to avoid making any statement as to the seller's knowledge where there is any doubt, although this may seem unhelpful to the buyer
- a commercial organisation should be clear where there are gaps in the information that is available for the property, as a result of missing records
Sellers will continue to have to do a balancing act - judging which properties merit the resource required to be 'ready for sale', and, in replying to CPSEs, when it is prudent to revert to a 'buyer beware' approach, even if this could jeopardise target timetables.
Readiness for Sale - A Guide for Streamlining Commercial Property Transactions is at https://www.ipf.org.uk/home/about_the_ipf/industry_publications/default.aspx