When selling a commercial property, sellers often assume the principle of caveat emptor (‘let the buyer beware’) applies, meaning they have no obligation to disclose issues with the property.
However, failing to disclose key information can lead to misrepresentation claims, contract disputes, and serious financial consequences.
Ensuring clear terms and accurate representations in commercial property transactions is essential to avoiding potential legal challenges.
What must sellers disclose when selling a commercial property?
Unlike residential transactions, where sellers complete a standard Property Information Form (TA6), commercial property sales typically involve more extensive disclosures through Commercial Property Standard Enquiries (CPSEs) and additional bespoke enquiries from buyers as part of due diligence.
However, sellers must not misrepresent the property in a way that misleads the buyer.
Key legal considerations include:
- Misrepresentation – If a seller provides false or misleading statements about the property (whether deliberately or negligently), the buyer may have grounds to sue.
- Latent defects – While general defects may be the buyer’s responsibility to uncover through due diligence, certain hidden structural issues could create liability if not disclosed.
- Ongoing disputes or legal issues – Sellers should disclose existing legal disputes, such as boundary issues, lease disputes, or enforcement notices, to avoid future litigation.
- Environmental risks – Issues such as contamination or flood risks should be flagged if they are known to the seller, as failure to disclose could result in liability.
How sellers can protect themselves
To avoid potential litigation, sellers should:
- Be honest in negotiations – Any representations made about the property must be accurate and not misleading.
- Complete CPSEs carefully – Commercial Property Standard Enquiries (CPSEs) require sellers to disclose information about disputes, structural defects, and environmental issues.
- Use well-drafted contracts – Properly worded exclusion clauses can limit liability, but they must be fair and enforceable.
- Encourage due diligence – Allow buyers sufficient time for surveys and searches, reinforcing the ‘buyer beware’ principle.
- Disclose material issues early – Proactively addressing concerns can prevent costly disputes later.
While the onus is still on the buyer to carry out a thorough and complete investigation, commercial property sellers cannot mislead buyers or conceal known defects.
Ensuring clear and accurate disclosures from the outset can prevent unnecessary disputes and safeguard the transaction.
Do not let unclear disclosures put your transaction at risk.
Speak with our commercial property solicitors today and sell your commercial property with confidence.