Landlord has to pay damages for misrepresentation about asbestos

A landlord has had to pay damages for misrepresentation about asbestos in a commercially let premises. In the recent case of First Tower Trustees Ltd v CDS (Superstores International) Ltd, the landlord granted a lease of several bays within an industrial warehouse. In the replies to pre-contractual enquiries, it answered that it had not been notified of any breaches of environmental law or any other environmental problems, but the buyer should satisfy itself. This reply was correct at the time it was given, but before completion of the lease the landlord received a report detailing that asbestos was present at the property, which posed a health and safety risk. They failed to pass this information on to the tenant.

When the tenant started its fit out works it then discovered that the premises was so contaminated with asbestos that it was dangerous to enter. It subsequently brought a claim against the landlord for the cost of the remediation work and of alternative accommodation while the work was carried out.

The landlord sought to exclude its liability by relying on a clause in the lease stating that, “The tenant acknowledges that this lease has not been entered into in reliance wholly or partly on any statement or representation made by … the landlord.”

The courts found, however, that this exclusion of liability clause was invalid because it was unreasonable. It did not allow the tenant to rely on replies to enquiries, which would have made the entire exercise of raising enquiries pointless.

The landlord in this case was a trustee company. It tried to argue that any damages payable should be limited to the value of the trust assets, and there was a clause in the lease to this effect. However, because the wording of the relevant clause was not wide enough to cover this particular set of facts, the trustees were held liable for the full £1.4 million plus interest of damages awarded.

The key lessons to take away from this case are:

• How important it is to keep replies to pre-contract enquiries under review until completion and to let the other side know if anything changes.
• Trustee limitation of liability clauses should be drafted extremely carefully to cover pre-contract and non-contractual liability; and
• Exclusion of liability clauses can be unreasonable and consequently fail to offer the protection that they set out to.

Fenella Eddell is a solicitor in the property department at Barker Gotelee, Suffolk solicitors.

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