Due diligence on property disposals

How should public sector organisations disposing of sites approach replying to buyers' enquiries? Phil Lawrence outlines some of the issues that need to be considered.

Public bodies are generally required to hold real estate for operational needs only. Surplus land is disposed of to either repurpose a site or generate capital receipts. This is increasingly important for public bodies in the present economic climate where there is a strategic objective for the government to bring land forward to stimulate growth and development.

When disposing of properties any public body will have a number of issues to consider. This will include dealing with the questions of the proposed buyers about the land as well as involving the different strands of the conveyancing process.

One important element can be the conveyancing enquiries. These are also often described as pre-contractual enquiries and are essentially detailed questions asked about the property by a proposed buyer. For non residential land, they are often in the form of the commercial property standard enquiries (CPSE).

Any seller of land will take great care in completing these replies to enquiries. There are likely to be a number of contractual remedies for any buyer if the information proves, even innocently, to be incorrect. For this reason many of the replies will contain disclaimers about the completeness of the information and that providing information on the property does not relieve the buyer's obligation to make its own searches, surveys and inspections.

Some additional issues for public sector organisations to consider when giving replies to buyers about the disposal sites are as follows:

• The land has often been held for some time and been transferred to successor bodies. Confirming the history and paper trial should be considered early in the process.
• The land will have been typically held by a large organisation which will have had many employees, both past or present, who may have had knowledge of the property. It can be important in both terms of internal, and external, communications to be clear what knowledge base is being drawn on in providing any information about the property.
• As with any large organisation, information and records may be either incomplete or unavailable over time. It can be important to communicate what level of records search has been undertaken in connection with any proposed transaction. If an exhaustive search of all records has not been undertaken then the buyer should be told not to assume it has been.
• Certain public bodies may have been interested in land in different capacities (ie other land owner). For instance in terms of planning powers or exercising certain rights over the land in different operational capacities. Being clear about the perspective from which replies are being given can be an important consideration.
• The information given can be relied upon by buyers and may need to be verified by internal stakeholders, other than the disposal officers. Accordingly we would recommend any public sector organisation considering disposing of property and committing to a due diligence process take early legal advice on this aspect. 

Phil Lawrence is an Associate at Veale Wasbrough Vizards. He can be contacted on 0117 314 5441 or by This email address is being protected from spambots. You need JavaScript enabled to view it.