Do the Commercial Property Standard Enquiries ("CPSEs") need to be amended after the Grenfell Tower fire?
The tragic Grenfell Tower fire on 14 June 2017 has caused consternation throughout the property industry and raised numerous industry-wide concerns, from the construction methods employed through to the fire safety of residents using the built out premises. In light of this, should the standard form CPSE.1 enquiries (used on most, if not all, commercial real estate transactions), be modified to allow for specific queries regarding fire safety and the suitability of the fabric used in the construction of the building?
When buying or taking a lease of a property, one would want to know that the materials used in the construction of the building would not be deficient or have a negative impact on the fire safety of the residents. It is also important to establish what fire exit routes there are and that there are adequate fire prevention measures in place at the building.
The first of these issues is covered by CPSE.1 (Version 3.6) Enquiry 8.6 which asks "has any substance (other than asbestos) known or suspected to be unsuitable for its purpose, unstable or hazardous, been used in the present structures forming part of the Property, including conduits, fixtures, plant and equipment?" When answering this query, the buyer should have disclosure of any materials known to be flammable. If as a seller, you are aware of such a matter that is not discoverable on a reasonable inspection of the property, then you are under a general duty to disclose this to the buyer. Solicitors and clients on the selling side should, however, remember that there is a marked difference between saying "not so far as we are aware" and "rely on your own inspection and survey" when responding to this enquiry. The first response opines on flammability which, of course, solicitors are not qualified to do and they are reliant upon the information provided by their seller clients. Whether a building has been constructed suitably is a point for the building surveyor to consider and should therefore be dealt with in the building survey undertaken on behalf of the purchaser. If the building survey then raises further technical questions for the purchaser, these should be addressed by the purchaser's solicitor to the seller's solicitors, to ensure that the purchaser is able to rely on the replies given. The second response is therefore more appropriate in most circumstances, unless there are matters which would not be discoverable on a reasonable inspection of the property.
The question of fire safety at a premises is also already covered by CPSE.1 (Version 3.6) at enquiry 11, which raises various queries, including where one might inspect any fire records in relation to the property and the current means of escape from the property in case of emergency. As a buyer, you would expect the seller to provide you with a fire safety report, if it is in their possession, (albeit bearing in mind whose duty is it to have an appropriate fire risk assessment in place and that the buyer will also need to do its own if the duty falls to the building owner) and to respond on the other queries accurately.
When selling, you should think carefully before answering these questions and ensure that you get the full input of the asset manager and others with the requisite knowledge of the property (as with all replies to enquiries).
On review, therefore CPSE.1 (Version 3.6) already contains quite specific questions regarding hazardous materials as well as fire safety so, although this issue is topical in light of the Grenfell Tower fire, it is no different from any other property defect and should be treated accordingly.
Katie is a Senior Associate in our Commercial Real Estate team.