Courts considered whether misleading information contained in pre-contract enquiries meant that the landlord was liable for the cost of remedial work which the tenant had to carry out.

In the recent case of First Tower Trustees Ltd v CDS (Superstores International) Ltd [2017] the Court considered whether misleading information contained in pre-contract enquiries meant that the landlord was liable for the cost of remedial work which the tenant had to carry out.

This claim related to warehouse premises in Barnsley. Bays 1-3 of the warehouse were let to the tenant and shortly afterwards it was discovered that the premises suffered from a severe asbestos problem and the tenant was forced to carry out significant remedial works before they could occupy.

The landlord made a claim for unpaid rent and the tenant counterclaimed for the losses it had incurred in respect of the asbestos problem: the remedial work costs were £356,953.60 and they had also incurred costs of alternative warehouse accommodation.

Before the tenant entered into the lease the landlord provided the tenant with a report that indicated that there were no problems with asbestos in the units. The landlord was also asked in pre-contract enquiries whether they were aware of any environmental problems relating to the premises; they answered that they were not but that the tenant must satisfy itself as to the condition of the premises.

Before the contracts were completed, the landlord had received various reports indicating the presence of asbestos and by the time of the completion of the contracts, were well aware that there was an asbestos problem and therefore they had misrepresented the position to the tenant.

The tenant claimed that it had entered into the lease on the basis of the landlord’s representations that there were no problems with asbestos at the premises. The landlord denied prior knowledge of the presence of asbestos and also claimed that as a trustee liability was limited to the extent of the trust assets.

However a clause in the lease stated that the tenant acknowledged that it had not entered into the lease in reliance on any representation made by the landlord. The lease also provided that the landlord contracted in its capacity as trustees of a specified trust and not otherwise.

The deputy judge decided that there was an exclusion clause but that the landlord had to show that the exclusion of liability was reasonable and that given the well-recognised importance of pre-contractual enquiries, it was highly unreasonable for the landlord to withhold, in its replies to those enquiries, knowledge of a serious problem.

The tenant was entitled to the full costs of the asbestos remedial works and the costs of alternative warehouse accommodation whilst the premises were incapable of use. The judge also decided that the trustee limitation provisions did not limit a claim in misrepresentation

Comment

This case highlights the importance of both correctly and truthfully answering pre-contract enquiries and the continuing duty to update the responses given if the position changes and a landlord (or vendor) finds out something about the premises that he did not know at the time of answering the enquiry, it must be disclosed as failure to do so may make you liable for the consequences.

The case also demonstrates that it may not be possible to hide behind a blanket exclusion clause as this may not pass the requirement of reasonableness set out in the Unfair Contractual Terms Act 1977.

For further information relating to the points raised in this article, please contact Johanne Spittle or a member of the Property Litigation Team.

Please note this information is provided by way of example and may not be complete and is certainly not intended to constitute legal advice. You should take bespoke advice for your circumstances.

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