In almost any conveyance, it is accepted practice that Standard Enquiries are made of the Seller so the Buyer can enter into the contract with a full understanding of the property and any liabilities it may incur as a result of purchasing that property.  Once the Seller has replied to the enquiries, and contracts have been exchanged, there are very few opportunities for a reluctant Buyer to rescind the contract. 

Condition 7.1.3 of the Standard Conditions of Sale (4th Edition) stipulates that an error or omission on the part of the Seller only entitles the Buyer to rescind the contract where it results from fraud or recklessness, or where the Buyer would be obliged, to his detriment, to accept property differing substantially (in quantity, quality or tenure) from what the Seller’s error or omission had led him to expect.

However, the recent Court of Appeal Case of Cleaver v Schyde [2011] EWCA Civ 929 has not only highlighted the importance of updating Standard Enquiries but has also widened the Buyer’s scope to rescind beyond those circumstances set out in Condition 7.1.3.  

In Cleaver v Schyde the Buyer entered into negotiations to purchase a property from the Seller so he could develop the property into a block of flats.  Unbeknown to the Buyer, a local doctor was also interested in developing the property into a small medical centre.

The parties underwent the usual conveyancing process and the Buyer provided the Seller with the Commercial Property Standard Enquiries (“CPSEs”) in respect of the property, which place an obligation on the Seller to confirm that he will notify the Buyer on becoming aware of anything that might cause any replies given in the CPSEs to be incorrect. 

Two days after the Seller had replied to the CPSEs the Doctor submitted a planning application for his proposed development of the property.  Although this was passed onto the Seller’s solicitors, no amendments were made to the CPSEs and the Buyer’s solicitors were not notified of the planning application at anytime before or during exchange of contracts.  On discovering the doctor’s application for planning permission the Buyer sought to rescind the contract.  He argued that if planning permission was granted for a new medical centre, its benefit to the local community would make it highly unlikely that the property could be redeveloped for any other use.  

The Seller counterclaimed using Standard condition 7.1.3 and sought specific performance of the contract, or damages for breach of contract.

On appeal, the Court of Appeal agreed with the first instance decision of the County Court.  Although the doctor’s planning application did not affect the "quantity, quality or tenure" of the property, as no planning consent had been granted at the date of the contract, the Buyer had relied upon the accuracy of the replies to the CPSEs and would not have entered into the contract if it had known of the nature of the planning application and its potential impact on his own intentions for the property. 

Furthermore the Court dismissed the Seller’s counter-claim under Standard Condition 7.1.3 and found the reliance on the Condition to be unfair and unreasonable under the Unfair Contract Terms Act 1977.  Despite Condition 7.1.3 being accepted standard practice, endorsed by the Law Society, and despite both parties being legally represented and there being no allegation of fraud or recklessness, the Condition could not be said to be reasonable when assessing the circumstances that were, or ought reasonably to have been, known to the parties when the contract was made.

Ultimately it was not fair or reasonable to prohibit rescission when the Seller had neglected its obligation under the CPSEs and had withheld facts about the property, even if that did not amount to fraud or recklessness and was an innocent misrepresentation.   
 
Cleaver v Schyde demonstrates that replying to CPSEs is not to be treated as a one-off exercise within the conveyancing procedure but is a continuing requirement up to the exchange of contracts and needs to be monitored and updated accordingly.  If the Seller becomes aware of anything that may have an affect on their original replies it needs to be disclosed as early as possible.  As Cleaver v Schyde suggests, Sellers no longer have the safety-net afforded by Condition 7.1.3 as the Courts are willing to look beyond its narrow provisions and allow rescission based on the facts of a case. 

Please note that this information is provided for general knowledge only and therefore specific advice should be sought for individual cases.

For further information, please contact Andy Parker at