Many people have heard of the saying ‘buyer beware’ when it comes to purchasing property. It effectively means that the buyer is responsible for doing the investigative work and finding out what they need to know before buying. Often, you rely on information given to you by the seller when making a decision. If what they told you turns out to be false or misleading, you may be able to bring a misrepresentation claim.
In this article, we explain misrepresentation in the context of commercial property transactions, including what it involves, how it happens, and what you can do about it.
If you believe you were misled during a commercial property transaction, our commercial property dispute solicitors can help. We provide clear advice on misrepresentation claims and guide you through the process of protecting your position and recovering any losses.
Contents:
- Who can bring a misrepresentation claim involving commercial property?
- What counts as a misrepresentation in commercial property?
- Where do misrepresentations typically appear in commercial property transactions?
- What type of misrepresentation was it? Why does that matter?
- What documents or evidence support your misrepresentation claim?
- How to make a claim for misrepresentation involving commercial property
- Summary
Who can bring a misrepresentation claim involving commercial property?
Misrepresentation claims can be brought by a party who relied on a false statement of fact or law when entering into a commercial property transaction, provided that:
- The statement was made by (or on behalf of) the other party.
- The statement induced you to enter into the contract.
- You suffered loss as a result.
In commercial property, this most commonly affects:
- Buyers of freehold property who discover that the building, land, or legal title isn’t as described.
- Tenants taking a lease, particularly if they relied on misleading information from the landlord or their agent.
- Assignees of a lease or purchasers of an investment property, if they were given incorrect information, including about income, tenant arrears, or disputes.
It is important to know that a claim can arise even if the misleading information was not written into the contract itself. Misrepresentation is usually what induced someone to enter into the contract in the first place, and can be through answers to pre-contract enquiries, marketing materials, verbal assurances, or even conduct.
What counts as a misrepresentation in commercial property?
A misrepresentation is:
- An untrue statement of fact or law, made by one party to another, which induces the other to enter into a contract.
- It is not enough that you are unhappy with the deal afterwards. The statement must have been:
- Untrue or misleading at the time it was made.
- Relied upon by you when making your decision.
It is enough if someone states their opinion on a subject that turns out to be unfounded. If the person didn’t genuinely believe that opinion or couldn’t reasonably have held it, then it can be treated as misrepresentation. Half-truths can also be misleading.
Where do misrepresentations typically appear in commercial property transactions?
Incorrect or misleading replies in CPSEs
Commercial Property Standard Enquiries (CPSEs) are the standard questionnaire used in most commercial sales or leases. They cover a wide range of topics, such as environmental hazards and disputes, planning permissions and service charge history. Because they are prepared by or on behalf of the seller/landlord, the answers carry weight with a potential buyer or tenant.
There can be problems where:
- The reply is factually wrong. For example, stating there are no disputes when there is an ongoing boundary case.
- The reply is incomplete or evasive. For example, omitting details that, if known, would influence the deal.
- The reply is given without reasonable checks being made, so it turns out to be inaccurate.
It’s interesting to note that sellers aren’t obliged to answer pre-contract enquiries, and some questions only ask the seller’s opinion. That said, in practice seller’s replies are expected, especially as negative inferences can be drawn if they simply refuse to. Answers given to pre-contract enquiries should reflect the seller’s knowledge at the time given. Generally speaking, if a reply to a pre-contract enquiry was true at the time given but becomes untrue later in the process before the exchange of contracts, the seller should update it.
False claims in sales brochures or marketing materials
Sales brochures, online listings, and investment memoranda are designed to attract interest, but they must still be accurate. Information in these materials may form the basis of a misrepresentation claim if it is:
- Presented as fact rather than opinion.
- Material to the decision to proceed.
- Relied upon by the buyer or tenant.
For example, if a buy to let property is advertised as in full occupancy when tenants have already handed in their notice or left. Another example could be advertising a property as benefiting from planning permission when it hasn’t been secured or finalised.
While “sales puff” (overly optimistic but obviously exaggerated claims) is generally not actionable, anything that could be read as a factual statement carries a risk.
Verbal assurances during negotiations
Not all misrepresentations are in writing. Statements made in viewings, phone calls, or meetings can be just as significant, and often more problematic, because they are harder to verify later. It might be a landlord stating, ‘we’ve never had issues with damp,’ when in fact complaints have been made and they’ve tried to remedy the problem. Or it could be a seller assuring you that ‘the property’s heating system is brand new,’ when it was only repaired.
These verbal statements can be actionable even if they don’t appear in the contract, provided you can show they were made, that you relied on them, and that they were false or misleading. Keeping detailed notes of negotiations (or having more than one person present) can make a big difference in proving your case later.
Omitting key issues despite being asked
Sellers are not expected to disclose information voluntarily about something that might impact your decision to buy a property where a question isn’t put to them. The exception to this it that sellers have a specific duty to disclose any latent defects in title, despite problems that wouldn’t be apparent on reasonable inspection.
If asked a question directly, and the seller or landlords answers it – the answer should be full and accurate to the best of their knowledge. Whilst silence itself does not usually amount to a misrepresentation, something can be deemed to be a misrepresentation by virtue of what was left unsaid.
Omissions can be treated seriously because the question shows the matter was important to you. If the answer leaves out relevant details, it can be seen as misleading. For example, a seller is aware that the main electrical systems are outdated and require replacement, but only discloses a minor recent repair to you when asked about the condition of the electrics (giving you a false sense of security).
Misleading statements about the property’s condition
Condition-related misrepresentations are particularly common, especially where defects are hidden or only become apparent after occupation. Examples include:
- Saying the roof was replaced recently, when only patch repairs were done.
- Stating there have been no flooding incidents, when in fact the basement flooded twice in the last five years.
- Confirming “no asbestos on site” when asbestos-containing materials were found in a past survey.
Sometimes the problem isn’t false outright, but an overly optimistic claim. For example, ‘the drainage issues have been resolved,’ when only temporary fixes were made. If you relied on that statement in deciding not to commission further surveys, you may have grounds for a claim.
Concealing ongoing planning, access, or boundary disputes
Disputes with neighbours, local authorities, or third parties can significantly affect the value and usability of a property. Examples include:
- An ongoing right-of-way dispute that could affect delivery access.
- A challenge to a planning consent that the buyer is relying on for redevelopment.
- Unresolved boundary disagreements that could lead to legal action.
If these disputes are known to the seller or landlord but concealed or downplayed, and you go ahead with the deal without knowing the risk, that can form the basis of a misrepresentation claim.
Overstating tenant income or concealing rent arrears
In investment property transactions, the rental income is often a key factor in valuation. Representing ‘100% occupancy’ when a tenant has left but their lease hasn’t formally ended is problematic. As is confirming all payments are up to date, when in reality, arrears are building up.
Even if the seller argues that the buyer could have checked the accounts more closely, the law doesn’t excuse deliberate or careless misstatements.
Understating service charge liabilities or lease obligations
For prospective tenants, accurate information about service charges and other obligations is essential to budget. Let’s say, for eg, a landlord confirmed that insurance premiums are included in the service charge, when in fact they are separate. You might have taken on the lease thinking your outgoings will be lower than they actually are. The same could apply when it comes to onerous lease obligations, and the landlord misleading you about these so that you don’t pull out of the deal.
What type of misrepresentation was it? Why does that matter?
The type of misrepresentation has an effect on the remedies available. There are three main categories, outlined below.
Innocent misrepresentation
Here, the person making the statement must show they genuinely believed it was true and had reasonable grounds for that belief (failing which it could amount to negligence).
For example, in selling an office building, the seller tells the buyer that the roof was replaced five years ago. The seller honestly believed this, because that’s what they were assured by the previous owner, and it was also mentioned in old marketing materials. In reality, only minor repair works were carried out.
The remedy in this situation is usually rescission, ie the contract is cancelled, returning both parties to their pre-contract position. Alternatively, the court may decide to award monetary damages instead.
Negligent misrepresentation
This happens when the person making the statement makes it carelessly or without reasonable grounds for believing its truth. For example, a seller could state that they have never known there to be issues with Japanese knotweed at a property, whereas a quick check of their files would have shown a historic issue that was treated.
The remedy in this situation would be damages, which are often calculated as if the statement had been made fraudulently unless the maker of the statement proves they had reasonable grounds for believing it was true. The burden is on the other party to demonstrate this was the case. The contract can also be set aside, unless the court awards damages instead.
Fraudulent misrepresentation
This is the most serious type. It occurs when the person making the statement:
- Knows it is false;
- Is reckless as to whether it is true or false;
- Intends the other party to act on reliance on it.
Example: A landlord says ‘there are no asbestos issues’ when they have already received a specialist report confirming asbestos in several parts of the building.
The remedy could be the cancelation of the contract and the recovery of all losses stemming from the fraudulent misrepresentation, even those not reasonably foreseeable, such as unexpected financing costs, loss of business, reputation etc.
Was my reliance on the statement reasonable?
The existence of a false statement or misrepresentation isn’t enough. For a claim to succeed, you must show actual reliance, meaning that the statement influenced your decision to enter into the contract (or, had you known the truth, you wouldn’t have gone ahead). It doesn’t have to be the sole reason you entered into the contract. It can form part of the overall information relied on. The crucial point here is that it must still have played a real part in your decision and you can back this up. Any evidence you can point to that demonstrates your reliance will strengthen your case.
A misrepresentation generally remains actionable even if the truth could have been discovered through your own further checks. This is the case even where a seller says they aren’t aware of any issues but specifically advises you to rely on your own investigations. The comment that they aren’t aware of any issues could give you reassurance to commission a basic survey only, whereas a deeper, fuller survey could reveal multiple areas of dry rot.
Essentially, you need to show the statement mattered at the time and that relying on it made sense in context. If a statement is obviously false or fanciful, it may be harder to convince a court you genuinely relied on it to enter into the contract.
What documents or evidence support your misrepresentation claim?
- Pre-contract enquiries and replies (such as CPSEs) – showing the inaccurate statement.
- Marketing materials – brochures, online listings, and adverts that contained the misrepresentation.
- Emails or correspondence – especially where the other party confirms details in writing.
- Notes of meetings or calls – notes do carry weight, especially if shared with others at the time they were taken.
- Surveyor or expert reports – to prove the true position (for example, a structural report showing defects contrary to what was said).
- Internal decision documents – board minutes, investment appraisals, or valuation advice showing you relied on the information.
- Financial records – to calculate your losses (for example, rent shortfalls, extra repair costs).
How to make a claim for misrepresentation involving commercial property
Stage 1: Consider legal advice
Misrepresentation claims can be complicated, so it is best to get an experienced solicitor involved as soon as possible. We can help you build a timeline of who said what and when, pinpoint the statement, and gather and organise supporting evidence. We can explain what type of misrepresentation has likely been made (innocent, fraudulent, negligent), help calculate your losses, and instruct any experts needed (surveyors environmental, accounting etc.). Importantly, we can advise on any problem areas like ‘non-reliance’ and ‘entire agreement’ clauses, time limits, and whether you have affirmed the contract, which may affect remedies.
Stage 2: Letters of claim, negotiating and settlement talks
Before starting any court proceedings, parties are required to follow certain pre-action protocols, including sending a detailed letter of claim to the other side setting out their position. Early disclosure of key documents and negotiating to help the other party understand your case can lead to a settlement. It often depends on the strength of your case, the willingness of the other party, and how high the stakes are.
Stage 3: Issue court proceedings
If settlement fails, issuing court proceedings becomes necessary, starting with submitting a claim form to the relevant court, who then sets a timetable for the case. Court proceedings can be lengthy and costly, but may be the only resort. The loser usually pays most of the winner’s reasonable legal costs, but it isn’t automatic. Funding options exist to help manage risk.
Summary
Suffering loss as a result of relying on a false or misleading statement given to you can be very challenging, both financially and emotionally. Fortunately, our experienced commercial property dispute solicitors at Harper James are here to help. We have a successful track record of achieving positive outcomes in this complex area.
Think you were misled? Get in touch with our commercial property disputes solicitors to arrange an initial consultation.
