Practical Property Guide 2017: Navigating the road to recovery (of possession)

Written by Freeths on 27/03/2017

In the final instalment of our Practical Property Guide series, we look at the difficulties that can arise where an owner of commercial property allows someone into occupation of their property, without documenting such occupation adequately.Curved asphalt road

This is a common occurrence in practice and often happens when:

  • a landlord does not want to incur the time and cost of negotiating a new lease; or
  • an occupier is allowed into a property before the terms of the proposed occupation have been finalised; or
  • the parties have not considered the actual nature of occupation.

Whatever the reason, this can cause issues for both parties, particularly when a landlord wishes to recover possession of a property.

What legal interest has been created?

The most common interests that can arise are:

  • A licence to occupy. This does not create an ‘estate in land’ and the occupier does not enjoy exclusive possession. This merely creates a personal right which can be revoked by the Landlord and the occupation brought to an end.
  • A tenancy at will. This does grant exclusive possession to the occupier and can be revoked by either party at any time. Tenancies at will are often used where a person is allowed into occupation of a property whilst a new lease is being negotiated (or where a person remains in occupation at the end of a lease, again whilst a new agreement is negotiated).
  • A periodic tenancy. This can be created by express agreement and can also arise by implication where there is deemed to be a landlord and tenant relationship due to the fact the tenant has exclusive possession and is paying rent. The period of the tenancy is based on how often the rent is paid (if the rent is paid weekly there will be a weekly periodic tenancy and if paid monthly there will be a monthly periodic tenancy etc).

Unlike with a licence or a tenancy at will, a landlord cannot simply terminate a periodic tenancy and obtain vacant possession. It must serve a notice which must be at least equal to the period of the tenancy and expire at the end of the relevant period (i.e. with a monthly periodic tenancy, the landlord must give one month’s notice expiring on the last day of the period).

However, with a periodic tenancy it is not possible to contract out of the security of tenure provisions of the Landlord and Tenant Act 1954 (“the Act”) and so if a property is occupied for business purposes, the occupier will automatically gain the protection of the Act after 6 months of occupation. This means the landlord is faced with a secure business tenancy. It can therefore be very difficult for a landlord to obtain vacant possession where a periodic tenant does not want to leave a property.

Which document to use?

The absence of the correct documentation can lead to unintended relationships being created. Where the parties intend occupation to be brief (under 6 months) the best course of action is to enter into either a licence to occupy or a tenancy at will, as both can be brought to an end immediately. Where occupation is to be for a longer period then a lease that has been contracted out of the Act should be entered into at the outset. This would allow the landlord to have control over the way in which the property is used and the date on which it is to be returned.

In particular, if an owner does not want an occupier to obtain security of tenure under the Act, it should ensure that the occupier occupies by way of a licence, a tenancy at will or a ‘contracted out’ lease.

And if in doubt, document, document, document!
Claire Lees H&S (1)small
Claire Lees
Trainee Legal Executive
Real Estate Group

“They’re back…” Is possession really 9/10′s of the Law?

Written by Freeths on 22/03/2017

As a property litigator, when you get a message from a client you are not expecting to hear from asking you to call urgently at 7.30am on a Friday morning, you know that your day is not going to go the way you thought it was.  “They’re back” was the message.
IMG_2442
Our client had bought a 3.5ha site for development and in May last year, before putting a spade in the ground, a number of trespassers got onto the land and began fly tipping waste on it. It appeared that these individuals were collecting rubbish from people for a price and then dumping it on our client’s site. Our client asked the Police to get involved but they declined to do so.

We urgently commenced Court proceedings seeking an order for possession in the County Court.  By the time the order was granted and the trespassers left, they had dumped over 1000 tonnes of rubbish on the site which cost the client circa £150,000 to clear.  The photos show the state the trespassers left the site in.IMG_2440

Fast forward to last Friday morning.  When our client told me “they’re back“, this of course referred to the return of the trespassers to the site.  Our client had previously secured the site with locked gates and erected concrete blocks to prevent access but the trespassers simply cut through the locks and broke through the concrete blockade and had begun dumping waste on the site.  Once again, the Police declined to act and directed our client to obtaining an order for possession in Court.

In view of the urgency of the situation, we decided to make an application for permission to issue a claim for possession in the High Court and shorten the time for the service of the claim. We wrote a letter advising the trespassers of what we were doing and asked them to attend the High Court in London at 2pm that afternoon.  We then quickly prepared all the paperwork and arranged for Counsel to go to Court.  Whilst the Judge took some persuading, he agreed that in view of the history of fly tipping and the potential for further damage to the site, it was appropriate for the claim to be issued in the High Court and for the time for service to be shortened. A key factor in this was that the trespassers had been given notice of our application. The Judge ordered that the trespassers give up possession immediately, that the claim documents be served at the same time as the order for possession and issued a writ authorising High Court Enforcement Officers to remove the trespassers from the site.

By 7pm on Friday evening, all of the trespassers had been removed and the site made secure. All in all, a fantastic turnaround for our client given the potential nightmare of having the trespassers on site dumping waste whilst the matter made its way through the County Court system.

So what lessons can be learnt from this?

1.  The vast majority of trespass cases still must be issued in the County Court.  This process can take a number of weeks for a trespass order to be granted and in the intervening period, the trespassers can cause extensive damage to the property they occupy without any real recourse for the owners on the basis the trespassers are “Persons Unknown“.  The Police rarely get involved leaving the site owner with potentially huge clean-up costs whilst the trespassers walk away scot- free. The law desperately needs reforming so that the cards are not stacked so much in the trespassers’ favour.

2.  The High Court issued a guidance note in September 2016 as to the types of trespass cases it considers would be appropriate for issue in the High Court.  One of the specific circumstances referred to is fly tipping of waste so if you can prove there is a real danger of extensive fly tipping by trespassers, it may well be possible to issue in the High Court. However, the Court will need persuading the matter is sufficiently serious to merit issue in the High Court.

3.  By moving quickly great results can be achieved.  Here this was possible due a collective team effort between our client, the High Court Enforcement Officers (Constant & Co), Counsel (Jamal Demachkie of Harwicke Chambers) and ourselves.
Paul Tomkins
Paul Tomkins
Partner
Property Litigation…

Hope Living

Written by Freeths on 21/03/2017

On Friday I attended the launch of Hope Living, and assisted with a presentation by Phil Woolas and Jason Highet at the Conservative Party Spring Conference at the SSE Swalec stadium, Cardiff.Hope Living

‘Hope’ is an initiative to relieve ‘bed-blocking’ by making available accommodation on a long term basis to Local Authorities and Clinical Commissioning Groups (CCGs) at a rental linked to Local Housing Allowance (LHA) rates, the rent for which is met by Housing Benefit. The way in which the private funding is made available makes it possible for £15,000 to be applied to refurbish each unit of accommodation. Tenants are nominated by the Authority, who are then granted an assured shorthold tenancy.

The Mirror online reported on this over the weekend but please also see Hope Living’s website for further information on the initiative.
Matthew Grocock
Matthew Grocock
Partner
Real Estate Group…

EPC Ratings: as easy as A B C?

Written by Freeths on 20/03/2017

We’re taking a brief hiatus from our Practical Property Guide, with the final instalment returning next week. In the meantime, the Department for Business, Energy and Industrial Strategy (BEIS) have recently published their long awaited guidance on the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 (SI 2015/962) (MEES Regulations) and its application to non-domestic privately-rented property.

The MEES Regulations set a minimum level of energy efficiency for privately rented property, being an energy performance certificate (EPC) rating of at least ‘E’. Where a property has an EPC rating of ‘F’ or ‘G’ the MEES Regulations mean that:ABC - Small

a)    from 1 April 2018, landlords are restricted from granting new leases or renewing / extending existing leases; and
b)    from 1 April 2023, landlords cannot continue to let the property;

without carrying out works to improve the energy performance of the property to raise its rating to at least an ‘E’ rating or alternatively, registering an exemption (where one applies).

When do the Regulations apply?

The MEES Regulations apply to all non-domestic properties in England and Wales which are legally required to have an energy performance certificate and are let under any type of ‘tenancy’. The Regulations also state that the provisions will not apply to a tenancy which is:

a)    granted for a term not exceeding 6 months (except where the tenancy contains provision for extension or renewal beyond 6 months or where the tenant has been in occupation for a period of more than 12 months); or
b)    granted for a term of 99 years or more.

It is worth noting that as the Regulations only apply to properties which are let under a ‘tenancy’, lettings of sub-standard properties under a licence or agreement for lease arrangement are unlikely to be caught by the provisions.

Recap: When is an EPC required?

Ordinarily, the owner or landlord on the sale, letting or construction of a property is required to make an EPC available to the prospective buyer or tenant.

An EPC may not be required in a number of circumstances, such as temporary buildings, buildings used as places of worship, buildings due to be demolished and protected / listed buildings.

BEIS have provided clarification in respect of the exception relating to listed buildings, confirming that although some listed buildings may be exempt from the requirement to provide an EPC, this is not automatic. An EPC will not be required only in so far as compliance with energy performance requirements would unacceptably alter its character or appearance.

Exemptions

In limited circumstances, an exemption may apply to the prohibition on letting a sub-standard property. The landlord will need to provide details and evidence of the exemption to a centralised self-certification register (the PRS Exemptions Register).

Some exemptions that may apply include where the energy efficiency measures would reduce the market value of the property by more than five percent, or where consent is legally required to undertake the improvement works (i.e. from a lender, planning authority or superior landlord) but that consent is not forthcoming.

The exemptions will usually only apply on a five year temporarily basis and it must be noted that any exemptions claimed by a landlord will not pass to a new owner or landlord upon sale, or transfer of the property. Any new owner must either carry out the improvement works to bring the property up to the minimum standard or, if they intend to continue to let a ‘sub-standard’ property, must register an exemption where one applies.

A date for the diary!

With just over a year to go until the first wave of minimum energy efficiency regulations come into force, commercial landlords should at least bear in mind the current EPC rating of their properties, particularly where any might fall foul of the minimum requirements.

An enforcement authority may impose financial penalties of up to £5,000, or 10% of the rateable value of the property whichever is greater (to a maximum of £50,000) where the landlord has been in breach for less than three months. Where the landlord has been in breach for three months or more, penalties increase to £10,000 or 20% of the rateable value (to a maximum of £150,000).

So if you’re a Landlord make sure you learn your ABC’s of EPC ratings…
Thomas Goodwin
Tom Goodwin
Legal Assistant
Real Estate Group…

Save the Date: Business Rates – Have you overpaid?

Written by Freeths on 17/03/2017

In October 2015 we considered the implications of a Court of Appeal case on business rates for buildings that were vacant and undergoing extensive refurbishment in our blog, Testing the Case for Business Rates. The appellant argued that the rateable value should be nominal because the relevant property could not be occupied. However, the Court of Appeal decided that a vacant property will not automatically be listed with a nominal rateable value. calendar, date, month, year, diary

The decision was reversed by the Supreme Court who adopted what many consider to be a ‘common sense’ approach. The Supreme Court held that buildings undergoing significant construction works (for example, a refurbishment or development to another use) will not be liable for business rates whilst such works are ongoing.

This unanimous ruling will be welcome news for developers as business rates add significant costs to development projects. The Supreme Court decision also means that developers who have been paying business rates during significant construction works may be able to recoup money already paid. Developers will need to act fast as the deadline to submit an application to claim a refund is 31 March 2017.

If you need further advice then please get in touch. Otherwise, get your skates on to make a claim…

Hannah Westcott 2015 H&S small (2)
Hannah Westcott
Legal Assistant
Real Estate Group…

Practical Property Guide 2017: Don’t Bury Your Head(s) in the Sand

Written by Freeths on 13/03/2017

In the latest Practical Property Guide 2017 instalment, we are considering the benefit of ‘good’ Heads of Terms.

Land agents or the parties themselves often produce the draft Heads of Terms for a deal, which in many cases follow a standard template or precedent that someone has seen or used before. However, as lawyers, we sometimes get asked to input on (or approve) aspects of the Heads of Terms. Unsurprisingly this tends to happen on more complex transactions.

CaptureWhen preparing or evaluating Heads of Terms, it’s important to ask yourself “what’s missing?” Most experienced land agents will identify key areas which a ‘standard’ set of Heads of Terms doesn’t address. Some of these gaps can then be covered by lawyers and other real estate advisors who may have certain knowledge of a property or the client itself. This can help to prevent any nasty surprises further down the line.

One of the main reasons that we find transactions do not proceed, is because one party learns something during due diligence or the negotiation of the legal documents which either it didn’t expect or doesn’t like. Most of the time, solutions can be found (and / or ‘views taken’) - but that’s not always possible. Heads of Terms should therefore be as accurate as possible in framing the deal that the parties have agreed. Spending a little bit more time on Heads ‘up-front’ can prevent costly and time-consuming negotiations during the legal process. Of course, it’s a balance. You don’t want to negotiate the deal in its entirety in a set of Heads, but does one page with some address and contact details tell both parties all they need to know?

The following aide memoire may assist when drafting and agreeing Heads of Terms:

H – honest and candid detail of the transaction;
E – exclude information at your peril;
A – accurate terms help minimise negotiation and (potentially) conflict later on;
D – devil is in the detail (don’t leave all the flesh to be put on the bones later on);
S – stop and think; is the deal properly captured and is it right?

O – ok, you get the message….

There is no one size fits all with Heads of Terms. Each deal is different and each party has its own priorities and aspirations. The key is not to treat them as just a signpost that the deal is going in the right direction. When done properly, they help all involved ultimately get to the end goal quicker and more cost-effectively.

So focus on the detail and on what’s important – and don’t bury your Heads in the sand!!
James Clamp 2015 H&S large (3)
James Clamp
Senior Associate
Real Estate Group…

French Toast

Written by Freeths on 09/03/2017

Yes it’s here again. MIPIM. Is it really a year since the rain sheeted down and the price on the cocktail stick brollies from the street sellers trebled in 10 minutes?!
French Toast
Freeths are out there as usual and are flying out with Marketing Birmingham on Tuesday and back on Friday.  The UK looks pretty well represented with combined display areas and presentations. I’m predicting a busy and bustling one. Our diaries are as full as ever and a lot of people seem to be positive about it despite the Brexit backdrop.

Here’s to the sun staying bright and a bit of a flashback from last year with this photograph.

I hope to see you all there…
Darren Williamson H&S large
Darren Williamson
Head of Real Estate…

Practical Property Guide 2017: Take Cover

Written by Freeths on 06/03/2017

Indemnity Cover – What is it?

Indemnity policies provide cover against defects relating to a property. They protect against the cost implications of a third party making a claim in relation to the relevant defect. Solicitors often use them on sales / purchases of property where a potential risk has been revealed (especially when time is of the essence).

What is the cost?Risk button pointing between low and high level,

An indemnity policy attracts a one off premium which is charged on a sliding scale depending on the value of the property and the nature of the defect. The benefit can then be transferred automatically to successors in title (and lenders / tenants).

What is the limit of indemnity?

When a policy is first put on risk, the limit of indemnity is normally equal to the purchase price or gross developed value of the property (or even the amount of a bank’s loan in terms of property finance matter). If the property is later sold for a higher value, the limit of indemnity can be increased by ‘topping-up’ the initial premium. Alternatively, some insurers automatically increase the limit of the indemnity by a specific rate over the first few years of the life of the policy.

What types are there / When are they needed?

Indemnity policies cover a wide range of risks. Common examples include:

  • Lack of planning permission / building regulations – provides cover against the risk of a Local Authority taking action in respect of work that does not comply with a planning permission or building regulations.
  • Breach of covenant – required when the freehold title of the property contains a restrictive covenant that has been breached.
  • Problematic easements – needed where the property title is subject to third parties easements that could hamper or prejudice development or use of the property.
  • Absence of access – required where access to a property may be needed over private land, but no legal right exists.
  • Missing information - required when important documents containing unknown restrictive covenants or restrictions has been lost or were not submitted as part of the initial registration of a property at the Land Registry.

The above is by no means an exhaustive list and many other policies are available.

What are the advantages?

  • Quick and cost effective. They are a simple way to unlock the transaction, but they do not actually solve the problem. Nonetheless, the premium is often seen as a price worth paying in order to get a sale / purchase agreed.
  • Prevents the price of a property being reduced due to the defect and helps to prevent long-winded discussions between solicitors as to whether the issue will / will not become a problem in reality.

But beware…

  • Policies are not always available (depending on the level of risk). It is also crucial to ensure that the relevant policy is carefully checked and that the risk is adequately covered.
  • Indemnity policies work on the basis that no third party has been made aware of the defect or potential risk – so if you are asked to provide an indemnity policy, you must not contact any third party as this will invalidate the cover.

You should always make sure that you check the small print of any insurance policy but if you’re feeling exposed to a risk then indemnity policies are good way to cover up…


Ben Gant
Solicitor
Real Estate Group…

Practical Property Guide 2017: You’re Served (correctly)!

Written by Freeths on 27/02/2017

In this week’s edition of our Practical Property Guide series, we look at how to minimise the problems caused by the incorrect service of break notices.

As well as complying with a number of other conditions, a break notice must clearly communicate to the other party that the person entitled to exercise the break is determining the lease on a particular date. The Courts will take an objective approach and ask how a reasonable person, in light of the background information reasonably available to the parties, would have understood the notice.Served

This is a complex area of law where technicalities do matter. Every lease will have its own quirks and so it has to be read, understood and followed precisely. If a tenant is seeking to exercise a break option, the following questions will be relevant:

 Who is being served?

  • Who is the landlord and have they changed since the lease was completed?
  • Lawyers should:
    • get up-to-date details from the Land Registry if the property is registered, or look at the deeds if it is unregistered to check the proprietor
    • carry out a search at Companies House to check the landlord’s current company name, company number and registered address
    • check an up-to-date rent invoice to confirm the landlord’s identity

Who is serving the notice?

  • Make sure you check who the tenant is, as the correct tenant entity must serve the notice. If the original tenant has changed (or has changed name), make sure you have up-to-date details

What should it contain?

  • It should refer expressly to the lease, break clause, break date, name(s) of the landlord and the tenant

When should it be served?

  • Where possible, notices should be served in good time. However, check the wording of your lease to work out if service must be on a specific day, any time before a specific day, during a window from one specific day to (and possibly including) another or perhaps even something different
  • Take into account any deemed service provisions in the lease and bear in mind that some methods of service can take time, particularly when the landlord is based overseas
  • Remember to put a key date in your diary to leave enough time to prepare and serve the notice at the correct time

Where should it be served?

  • Check the lease; the address for serving the notice may be the registered office of the landlord, their solicitors or somewhere else
  • In any event, send copies of the notice to all of the addresses on record for the landlord and their agents

How should it be served?

  • Check the lease to see whether this is by special delivery, in person or by some other method
  • Where there are no provisions regarding service, it may be necessary to prove that the notice came to the landlord’s attention

 Is the option to break conditional?

  • Check the lease; if the break is conditional, those conditions must be strictly complied with
  • Common conditions include:
    • payment of outstanding rent
    • payment of other sums
    • providing vacant possession
    • payment of a premium
  • You may be required to pay a full instalment of rent prior to the break date, or remove items from the property prior to the break date such as demountable partitioning, so make sure you leave yourself enough time to comply

 Safely received?

  • If the notice was sent by tracked mail keep a copy of the delivery receipt
  • Always request from the landlord acknowledgement of the notice and confirmation that the notice was effective

This is a complex area of law and failure to serve a valid break notice can have serious consequences so always seek legal advice in good time before serving a break notice.

Our blogs are only a summary of and / or commentary on the law in force at the present time and are not exhaustive, nor do they contain definitive advice. Specialist advice should be sought from a member of the Freeths Real Estate team in relation to any queries that may arise.

Stephanie Gozney H&S small (6)

Stephanie Gozney
Trainee Solicitor
Real Estate Group…

Practical Property Guide 2017: Mind the Gap

Written by Freeths on 20/02/2017

It’s easy to think that once you have completed a transfer of land, all legal rights in the property have been obtained and the matter is concluded. However, people often forget that legal interest in property is not transferred until the documents have been registered at Land Registry. This is equally true of any interest or ‘disposition’ of land such as leases, mortgages, easements and so on.

The ‘registration gap’ is the time period between completion of a matter (i.e. the dating of a transfer or lease etc) and the registration of the transaction at Land Registry. The considerable backlog of applications at Land Registry (with the more complicated transactions taking several months to register) has meant that the ‘gap’ is ever widening.

Silhouette of young man jumping over a cliff

Issues often arise, particularly in leasehold transactions, on the serving of notices. Notices must be served by legal owners of land (meaning that they must be registered as the legal proprietor) which leaves uncertainty about who should serve notices in the time between completion and registration. A recent case highlighted this issue: a buyer of agricultural land, which was subject to a lease, completed a purchase and then served a notice to quit on the tenant. The notice was served after completion of the transfer but before the buyer had been registered as the proprietor of the land. This meant that the notice was served by the wrong person (as the buyer was not the legal owner at the time) and the court held that the notice to quit was invalid.

Similarly, a bank’s mortgage is not perfected until such time as it is registered at the Land Registry. In the interim, the bank’s position is one of weakened (equitable) security.

Much of this area is out of the hands of lawyers and down to the speed of the Land Registry. However, there are practical tips for all parties in managing the situation – such as the following:

1. For solicitors it is important to lodge applications to register transactions as soon as possible and try to anticipate any requisitions that might be raised by Land Registry.

2. If buyers envisage that they may have to serve notices straight after completion then they should make their solicitor aware at the outset so that additional provisions can be added to the sale contract. For example, provisions could be added that enable the buyer to serve notices during the registration gap as the seller’s agent or requiring the seller to serve notices itself.

3. Sellers and landlords should be aware that they will remain liable as the legal owner until the transfer/lease is registered. By way of protection an indemnity in the transfer/lease or a contractual right to join the buyer/tenant in any action may be added.

4. Lenders can be protected by ensuring that they have adequate priority (by way of Land Registry priority applications) over any subsequent transactions of the land.

Given the current system of land registration, a period of time between completion of a real estate transaction and registration is unavoidable, but there are ways to minimise problems. We will explore this topic in greater detail with a further blog later on in the year but in the meantime be sure to ‘mind the gap’…
Hannah Westcott 2015 H&S small (2)
Hannah Westcott
Legal Assistant
Real Estate Group…