Large hangar warehouse industrial and logistics companies. Warehousing on the floor and called the high shelves. Toning the image.

Undisclosed asbestos contamination in a warehouse has cost the landlords nearly £1.5 million in clean-up costs.  The landlords tried to avoid liability by relying on an exclusion clause which said the tenant could not rely on any statement made by them about the condition of the property.

CDS Superstores rented four warehouse units from the trustees of a unit trust.  Solicitors had made the usual pre-contract enquiries and in their responses, the landlords had replied that they were unaware of any asbestos contamination in the property.

Two months after the pre-contract enquiries were completed, but before contracts were signed, the landlords had been made aware of dangerous levels of asbestos in the warehouse.  This information was not passed on to the tenant.

The tenant successfully sued, claiming negligent misrepresentation. It claimed the costs of the clean-up works and alternative warehousing space whilst the work was being done.

The Landlord appealed, arguing that

an exclusion clause in the lease allowed it to avoid liability.  This stated that the “lease has not been entered into in reliance wholly or partly on any statement or representation made by or on behalf of the landlord.”

The Court of Appeal rejected the landlord’s argument.  It ruled that the clause was not ‘reasonable’ under the Unfair Contract Terms Act as this would exclude reliance on pre-contractual enquiries which parties need to be able to rely on in their decision making.

An exclusion clause will only be effective if it can pass the reasonableness test, which the landlord’s blanket exclusion failed,” said James Burgoyne, Director – Claims & Technical, Brunel Professions.  “This case shows how important it is for landlords to update their responses to pre-contract enquiries if they become aware of new information before signing.”

Reports have been published by Browne Jacobson, Littleton Chambers and Ashfords.

Brunel provides a wide range of Professional Indemnity Insurance broking services to property professionals.  Click here to find out more, or call Mark Sommariva on 0203 475 3275.