News

The Law is not static.  Therefore, I need to update previous news letters from time to time.

In December 2007 I wrote about energy performance certificates.  1 October 2008 has come and gone so do you always need an “epc” when you selling or let property?  “Yes” with residential property - an epc is a required part of a home information pack.  “Yes”, too, with commercial property except there is an extension of the transitional arrangements.  Any building on the market at 1 October 2008 measuring 2,500 square metres or less will require an epc either when the property is let or sold or on 4 January 2009, whichever is the sooner.

In November 2007, I mentioned the curious case of Scottish & Newcastle v Raguz.  The Court of Appeal had upheld that a s17 notice (under the Landlord & Tenant (Covenants) Act 1995) had to be served within 6 months of a rent review date even if, by that time, the reviewed rent had not been determined and there were, therefore, no arrears.  The House of Lords, in reviewing the wording of s17(4) said on 29 October 2008, to use the words of Lord Brown of Eaton-Under-Heywood, it “cannot be allowed to distort the obviously sensible and intended construction of section 17(2), namely that no notice need ever be served unless a liquidated monetary charge is already outstanding and recoverable”.  So, the appeal was allowed and common sense prevails.

With the passing of the Tribunals, Courts and Enforcement Act, 2007 I anticipated in September 2007 the property industry waving a sad goodbye to the common law of distress.  However, no enactment order has been passed and the property industry continues to use this quick, cheap and very, very effective method of collecting rent.  It is of course only a matter of time.

Need to know more?  Why not consult with Hatherleigh Training?

No one organism on earth lives in isolation - each is dependent upon others to survive.  Hence, the duty falling upon public authorities in England and Wales pursuant to s40 Natural Environment and Rural Communities Act 2006 is not simply the product of a Government trying to present green credentials - it is a serious attempt to protect mankind.

Clearance of sites for agricultural, housing, retail, office, industrial and leisure use comes at a cost to the natural environment.  It destroys or fragments the habitats of living organisms and is just one of the ways in which humans threaten the environmental balance on earth.

S40 states that all public authorities must have regard, so far as is consistent with the proper exercise of their functions, to the purpose of conserving biodiversity.  Compliance is to be monitored by DEFRA in 2009.  DEFRA has produced guidance for public authorities and it is quite clear that simply producing a biodiversity action plan will not be sufficient to satisfy the inspectors.

However, as the case of Regina (Buglife - the Invertebrate Conservation Trust) v Thurrock Thames Gateway Development Corporation [2008] EWHC 475 (Admin) indicates, some authorities will feel the tension between its duty to bring land into effective use (pursuant to s136 of the Local Government Planning and Land Act 1980) and its duty under the 2006 Act.  This case is pending a hearing in the Court of Appeal.

Are you employed by a public authority or do you act for one?  If so and you wish to hear more about biodiversity, why not contact Hatherleigh Training?

As the news becomes gloomier on the economic front, one’s mind must turn to the rules relating to insolvency and their effect upon the property world.

The modern insolvency regimes are geared to a “rescue” culture and the Enterprise Act 2002 made important changes to the law; for instance, it abolished Crown preference for debts, leaving it an unsecured creditor.  It effectively replaced the administrative receiver with the administrator which puts in place a moratorium to protect the insolvent company’s assets from its creditors.  The Act also made available a prescribed proportion of floating charge assets to unsecured creditors.

The regimes include company and individual voluntary arrangements enabling the insolvent party to come to an arrangement with its creditors in the hope of trading out of the difficulties which have befallen it.  A badly advised creditor may find that the arrangement will bind it even though it did not agree the proposed agreement and claiming unfair prejudice will raely assist.  In addition, part 26 of the Companies Act 2006, which came into effect in April 2008, enables a company to come to a compromise with its creditors including restructuring the company if facing financial difficulties.

Liquidators and trustees in bankruptcy are entitled to disclaim any onerous property vesting in the insolvent party and transactions by way of gift or at an undervalue (even in connection with private arrangements such as a divorce) can be set aside by a subsequently appointed liquidator, administrator or trustee in bankruptcy.

The law is complicated.  Do you know enough to give even the most basic advice to your client?  If not, why not speak to Hatherleigh Training?

The property world relies on information of deals done in the market when assessing price and rental levels.  However, some parties are anxious to keep such information out of the public arena and enter a confidentiality agreement.  Problems arise, however, when a party to litigation wishes to disclose details of all deals done, whether on a confidential basis or not.

The civil court procedure rules state that facts presented in a case must be proven by the presentation of evidence.  Further, the rules governing disclosure of documents state that a party to litigation is to disclose to the courts and to other parties documents upon which it relies as evidence and documents which adversely affect its case or another party’s case or which support another party’s case.  To prove the market price or rental for a property, therefore, a party to litigation may have to disclose details of a deal shrouded by a confidentiality agreement.

The courts have declared that, generally speaking, confidentiality is not a bar to disclosure of documents but will only compel such disclosure if it considers it necessary for the fair disposal of a case.

Disclosure can also cause difficulties if parties to litigation enter into negotiations to settle their dispute and one party wants to keep the details of those negotiations out of the court arena and does not want admissions made in those negotiations to come before the judge.  In such cases, any documents created with the aim of reaching a settlement will often be marked “without prejudice” which such label will protect all negotiations genuinely aimed at settlement from being given in evidence.

If you want to hear more about disclosure, why not ask Hatherleigh Training to help you?

Disability discrimination legislation is well established.  Employers, service providers and managers of property are amonst those who must not treat a disabled person less favourably than they would treat others.  But with whom is the comparison made?

In the first case to come before the House of Lords in this area of law, a Mr Malcolm, who suffered from schizophrenia, leased a flat from Lewisham Council.  Under the terms of his lease, he was to occupy the flat as his only or principal home and could not sub-let.  He vacated the flat and sub-let it.  The Council sought possession, a claim which Mr Malcolm defended on the basis of discrimination as his disability prevented him from understanding the consequences of his actions.

The House of Lords (Baroness Hale dissenting) held the Council’s treatment of Mr Malcolm was to be compared with the treatment they would apply to others, suffering a disability or not, who had sub-let in breach of their lease.  Their Lordships held the task of the court is to ascertain the real reason for the treatment and that it is not the purpose of the legislation to protect disabled persons from lawful litigation or supply a defence to a breach of the law.  In so holding, the House of Lords overturned previous Court of Appeal decisions.

Lord Scott underlined the result of the House of Lords’ findings.  He referred to the example of a blind man with a guide dog wishing to enter a restaurant which does not permit dogs.

“If he is refused entry, it is not because the man is blind but because he is accompanied by a dog and is not prepared to leave his dog outside.  Anyone, whether sighted or blind, who was accompanied by a dog would have been treated in the same way.  The reason for the treatment would not have related to the blindness; it would have related to the dog.”

Want to know more?  Why not contact Hatherleigh Training?

The RICS has published its much awaited new Guidance Note on Dilapidations.  It provides a practical guide to best practice for surveyors working in this arena.

It incorporates, inter alia, the Property Litigation Association’s Protocol relating to any terminal schedule of dilapidations.  Although still not an adopted protocol pursuant to the civil procedure rules in the courts of England and Wales, this document, by being adopted by the RICS within its Guidance Note, is a constituent part of that best practice.

The Protocol says that a terminal schedule of dilapidations should contain an endorsement given by the surveyor preparing it.  He should state that in his opinion all the works in the schedule are reasonably required pursuant to the lease, that full account has been taken of the landlord’s intentions for the property at or shortly after the term end and the costs, if any, quoted in the schedule are reasonable.  It is hoped that the endorsement will help to stamp out exaggerated claims which, historically, have been so common in the field of dilapidations.

The Guidance Note contains much more and should be read not just by surveyors but by anyone involved in a dilapidations case.  It gives guidance on advising the client, preparing the schedule and upon its format, considers what may be included in the claim for damages (including, if appropriate, VAT) and who should pay the surveyor’s fee.  It looks, briefly, at break clauses, a tenant’s claim against a landlord which defaults in complying with its covenants to repair and at alternative dispute resolution.

Vivien King of Hatherleigh Training is a member of the RICS dilapidations working group and of the Law Reform Committee of the Property Litigation Association.  Why not ask her to tell you more about dilapiations?

Break clauses in leases, particularly exercisable by the tenant, are common.  However, care is to be exercised when applying them.  Each clause will turn on its own wording which the courts will interpret strictly.

The usual format is to determine the lease on or after a particular date upon service of a notice given within a specified time frame.  Time is of the essence.  There may, additionally, be conditions attaching to the break e.g. that the tenant pay a lump sum on or before the termination date or pay all rents due up to the termination or, difficult or even near impossible to fulfil, that the tenant comply with all of its covenants pursuant to the lease.

A claim that only nominal damages are recoverable will not save a tenant who defaults in complying with conditions (see Bairstow Eves (Securities) Ltd v Ripley [1992] 32 EG 52).  Either the tenant has complied or it has not.  Hence, draftsmen add words such as “materially” or “reasonably” to “comply”.  Arguments can still arise according to the degree to which a covenant has or has not been complied with (as evidenced by Fitzroy House Epworth Street (No 1) Ltd and another v The Financial Times Ltd [2006] EWCA Civ 329) or over the terms of any settlement reached (see for instance Legal & General Assurance Society Ltd v Expeditors International (UK) Ltd [2007] EWCA Civ 7).

Nevertheless, in today’s market, many a tenant will grasp the opportunity of exercising a break if only to attempt to renegotiate the terms of its existing lease.  Want to hear more?  Why not contact Hatherleigh Training?

As we all struggle to keep up with changes and proposed changes in the law and the implications of them on the property market, numerous consultations are taking place for yet more change.

The Law Commission published on 28 March 2008, its consultation paper on proposals for change to easements, covenants and profits a prendre.  Recent Land Registry figures suggest that at least 65% of freehold titles are subject to one or more easements and 79% are subject to one or more restrictive covenants.  The Law Commission recognises that there are significant problems with the current law and believes the need for comprehensive reform is long overdue.  They aim to “modernise and simplify the law, removing anomalies, inconsistencies and unnecessary complication where they exist” and to produce a law that is “as coherent and clear as possible”.  When one considers the present law, one can only support the Commissioners in their aim.  This consultation period ends on 30 June 2008.

The Government Department for Environment Foods and Rural Affairs’ (”Defra”) consultation on the Marine Bill ends on 26 June 2008.  Whilst most of us might think that this will have minimal impact upon the individual, we could be wrong.  The Environment Agency believes proposals will better conserve fish stocks for recreational and commercial purposes.  And the at times politically charged “right to roam”, introduced under the Countryside and Rights of Way Act 2000, is proposed to extend to coastal land including the foreshore.  Whilst Defra make much of the right for families to walk, paddle and play along the entire UK coastline (see the Defra Factsheet published for individuals on the Marine Bill), one has to question whether the Department has forgotten what a dangerous place coastal lands can be and how the leisure activities of human beings can impact on biodiversity.

The Communities and Local Government Department, too, is consulting - this time in relation to proposed changes in building control.  The Department recognises that more and more burdens are being placed on building control departments (for instance in relation to carbon emissions) and perceived weaknesses in the system need to be addressed.  This consultation ends 10 June 2008.

Consultation is all around us and this newsletter does not even scratch the surface.  If you want to hear more about proposed changes in the law, why not consult with Hatherleigh Training?

Time limits cause one to stop and think.  Will they be strictly applied?  The first port of call must be the agreement.  Did the parties intend that time be of the essence of the contract?

The House of Lords found in United Scientific Holdings v Burnley Borough Council [1977] 2 EGLR 61 that generally speaking, time is not of the essence in rent review provisions.  However, if a lease contains a contra-indication, the general presumption will be over-ridden.  In Secretary of State for Communities and Local Government v Standard Securities Ltd [2007] EWHC 1808 (Ch), rent was to be reviewed every seven years.  Agreement on the rent was to be reached not less than two months before the review date or it was to be determined by an independent surveyor appointed at the landlord’s request.  If no request was made before the review date, the rent was to remain at the same level for the next seven years.  The judge found that the provisions clearly indicated time to be of the essence.

In Legal & General Assurance Society Ltd v Expeditors International (UK) Ltd [2007] EWCA Civ 7, tme was stated in a lease to be of the essence with regard to operating a break clause.  The tenant’s option to break was conditional upon it paying the yearly rent, complying with the relevant covenants up to the date of expiry of the notice and delivering up the premises on that date with vacant possession.  Notice was given and the landlord agreed a settlement sum to be paid by the tenant in exchange for which it was released from its liabilities pursuant to its covenants.  However, the tenant failed to vacate on the expiry date.  The Court of Appeal held that to give business efficacy to the settlement, the lease would come to an end whether or not the tenant succeeded in yielding up vacant possession by the end of the expiry period.

Would you like to hear more about timing?  If so, why not ask Hatherleigh Training to conduct a training session with you?

REITs (real estate investment trusts) have been with us now for more than one year. Their aim was to offer investors income and capital appreciation from rented property in a tax efficient way. They enable distribution of taxable income through dividend payments, thus avoiding double taxation (corporation tax plus tax on the dividends).

REITs are aimed at both the commercial and residential markets. However, due to the higher returns, and hence higher levels of investment, offered by the former, the residential market has not, it would seem, taken REITs to its heart. The British Property Federation (”BPF”) hopes that the recently announced Government review of rented housing, announced by the then housing minister, Yvette Cooper, on 23 January 2008, will “pave the way for greater investment from institutions, which could fund large scale, professional ‘build-to-let’ developments and put an end to the housing crisis”.

Before that can happen, the regulations surroundng REITs need amendment says the Property Industry Alliance (”PIA” - an alliance of four trade bodies i.e. the BPF, the British Council of Offices, the Investment Property Forum and the RICS). The PIA’s recently issued report calls on the Government to amend the REIT regulations to encourage the formation of residential REITs. The PIA says that it is “widely accepted that corporate residential investment and ownership could improve efficiency in housing by adopting the business models used for running offices and shopping centres”. The PIA states the Government needs to amend rules on stamp duty, VAT and restrictions on borrowing in order to encourage the formation of REITs specialising in residential property investment.

The PIA goes further. In his letter to HM Treasury dated 10 December 2007, Ian Coull, the chairman of the PIA REIT Committee, expresses some “significant concerns” that without Governmental proactive development, the REIT regime as a whole could stagnate at its current level.

Is this all news to you? If so, why not consider asking Hatherleigh Training to tell you more about this and other aspects of the property market?