Header graphic for print

Keeping It Real Estate

News and Trends in UK Real Estate, Disputes and Planning Law

Posted in Planning

Assets of Community Value: Testing Times?

In 2012 we blogged on the introduction of the nomination and listing of Assets of Community Value. At the time, there was some uncertainty as to whether the legislation would be used for genuine community enhancement, or as a stick to beat developers.

In a move that will be well received by community groups, the First-Tier Tribunal clarified the test to determine when a building can qualify as an ACV in the case of Evenden Estates v Brighton and Hove City Council.

At the centre of the case was the question of whether a closed pub could have a community use in the next five years, particularly where an application for planning permission for conversion into residential use was still pending determination. In defending its decision to make the listing, Brighton and Hove City Council simply had to demonstrate that: “it is realistic to think that there is a time in the next five years when there could be non-ancillary use of the building or other land that would further (whether or not in the same way as before) the social wellbeing or social interests of the local community.”

The Tribunal found that the community use test was met. Whilst the planning application remained undetermined, it was not unrealistic to imagine that, were the application to be refused, the pub would be marketed under its existing permitted use, either as a pub, or another use that furthered social interests.

The ruling may be of concern to developers who have purchased closed pubs and are awaiting planning permission, particularly those facing strong opposition from local pressure groups. Such groups may make applications to register the sites as ACVs, knowing that registration would mean a potential, disruptive, six-month moratorium if the developer were to try to market the property before redevelopment takes place.

Case: Evenden Estates v Brighton and Hove City Council and another [2015] UKFTT CR_2014_0015 (GRC).

Posted in Real Estate News

Legal A-Z: “F” is for Forfeiture

I am a landlord of commercial premises and my tenant has not paid its service charge contributions, despite repeated demands. Can I forfeit the lease?

Quite probably but there are a number of points to check first.

Does your lease expressly allow you to re-enter the premises and, if so, what triggers that right?  If the lease contains no express right, it is unlikely that you can forfeit. Typically, leases do reserve the right to forfeit for non-payment of rent or breach of covenant, but usually there is a grace period before the right arises.

Next, are the service charge contributions reserved as “rent”? If they are, and any grace period has expired, you will be entitled to forfeit the lease. If not, you must serve a “section 146 notice” on the tenant specifying the breach and requiring him to remedy it and pay compensation. If the tenant fails to do so within a reasonable time, you will be entitled to forfeit. What amounts to a “reasonable time” will depend on the facts.

The tenant will be entitled to apply to Court for relief from forfeiture. Generally the Court will order the tenant to settle any arrears as a pre-condition to granting relief. If the arrears are disputed, it may not order forfeiture – if that is the case, you should be wary about forfeiting as you may be liable to pay damages or costs.

For further information:

Section 146, Law of Property Act 1925

(An earlier version of this article was previously published in hard copy in RICS Property Journal, formerly known as the Commercial Property Journal).

Posted in Case Updates

Buyers beware: forgo the survey and pay the price

The importance of carrying out a survey before exchange of contracts was illustrated in the recent case of Hardy v Griffiths.  The sellers (Hardy) successfully brought a claim against the buyers (Griffiths) for failing to complete the purchase of a house.

The facts were as follows: In March 2011, Mr and Mrs Hardy accepted an offer of £3.6m from Mr and Mrs Griffiths and contracts were exchanged the following day, on 1 April 2011. A deposit of £150,000 was paid. The contract provided that the buyer had to top up the deposit so that it equalled 10% of the purchase price if the buyer failed to complete on the agreed completion date.

A completion date of 31 October 2011 was agreed, later extended to 30 April 2012. When this date was missed, a notice to complete was served on the buyers who were also reminded that the balance of the 10% deposit had become due.  When the buyers still failed to complete, the sellers sought to rescind (set aside) the contract and recover the balance of the deposit.

The buyers objected.  They claimed that the sellers had made false representations about the condition of the property.  They sought repayment of the deposit already paid and damages for the sellers’ “reckless misrepresentation” in not revealing damage due to rising damp and dry rot costing £600,000 to rectify.  The court applied the principle of caveat emptor or “buyer beware”.  This meant that the buyers accepted the property in the physical condition it was in at the date of the contract and there was no onus on the sellers to disclose any physical defects.  It was for the buyer to discover them.  In this case, the buyers did not commission a professional, structural survey prior to exchange and therefore failed to discover the problems with dry rot and damp.

As to misrepresentation, in the replies to pre-contract enquiries the seller had stated that they were not aware of any issues relating to rot or rising damp and the court found that this was a true answer.  In any event, there was no evidence to suggest that the buyers had even read the replies.  If not, they could not have relied on them and reliance is an essential part of any claim in misrepresentation.

The final decision was in favour of the sellers: the contract had been rescinded, the deposit of £150,000 forfeited and payment of the £210,000 deposit balance had to be made.  The buyers had argued that the balance was not payable because the contract no longer existed.  The court disagreed, finding that the right to recover the balance survived rescission.  Although the buyers argued that this would bring a “windfall” to the seller, the case is a salutary warning to buyers who do not complete a purchase on time and fail to fully investigate the physical condition of the property.

Case: Hardy v Griffiths [2014] EWHC 3947 (Ch)

Posted in Real Estate News

SDLT to LBTT – am I bothered?

Tomorrow, Stamp Duty Land Tax will be no more – but only in Scotland.  On 1 April the new Land and Buildings Transaction Tax (LBTT) comes into force, an example of one of the revenue-raising powers devolved to Holyrood following the passage of the Scotland Act 2012.  LBTT will be administered and collected in Scotland through the newly established “Revenue Scotland” rather than by HMRC.

The rates and bands for LBTT have finally been approved by the Scottish Parliament and for many commercial transactions LBTT will be higher than SDLT.  The top rate of 4.5% will apply to any consideration above £350,000 and this may result in a significant increase compared to the 4% charged on purchase prices over £500,000 elsewhere in the UK.

So, for any land transaction in Scotland with an effective date on or after 1 April 2015, it’s goodbye SDLT, hello LBTT.  So far, so good but how does this impact on portfolio deals where some properties are in Scotland and others are elsewhere in the UK?

First, transactions which relate to land in Scotland will no longer be “linked” (for SDLT purposes) either with:

  • land transactions elsewhere in the UK; or with
  • Scottish land transactions which were subject to SDLT.

This means that where a transaction involves land in both Scotland and elsewhere in the UK, only the non-Scottish interests will be included in the SDLT return and if the price isn’t specified  for each property, it has to be apportioned on a just and reasonable basis to work out the non-Scottish amount.

Second, transitional provisions will apply to contracts entered into on or before 1 May 2012 to ensure that transactions are not taxed twice (by both SDLT and LBTT) and to ensure that tax is payable under LBTT if it is no longer payable under SDLT.

Finally, watch out for land swaps involving the exchange of land in Scotland for land elsewhere in the UK.  The usual SDLT “exchange” rules (which say that the chargeable consideration is the market value of the interest acquired) won’t necessarily apply.

So where does that leave us?

It’s clear that, just as the triggers for SDLT can be complicated and unexpected, LBTT will have similar complexities and – if you are entering into a transaction which will relate to an interest in land in Scotland – you will need Scottish law advice in relation to LBTT.  As Scottish land law is already entirely different to the law elsewhere in the UK, you should already have Scottish legal input in any case.

So this year, if you have entered into or are about to enter into a transaction involving interests in land north of the border, April Fools’ Day is no laughing matter – it’s time to get bothered.

Posted in Real Estate News

MIPIM 2015: 750 ducks, 700 party guests, 100 balloons, 32 lawyers from 13 offices, 4 HL band members, 1 location…

Between 10th and 13th March 2015, 32 lawyers from 13 offices of Hogan Lovells attended MIPIM in Cannes, the world’s largest property conference and networking platform for all real estate professionals.

boat

Our annual after dinner MIPIM party – this year entitled ‘Rock of Ages’ – was held on the evening of Wednesday 11th March, on the quayside by the Motor Yacht, Fairbird. Our legendary Hogan Lovells rock band performed a two hour set covering classic anthems spanning the history of rock ‘n’ roll. This year’s party attracted 700 attendees and lasted until the early hours of the morning.

MIPIM band cropped

Our yacht was a focal point for many meetings with clients and contacts, as was our stand in the Palais des Festivals which proved an attraction in itself thanks to the reappearance of the famous Hogan Lovells’ ducks.

ducks

Also launched at MIPIM were our Global Investor Guide and London Investor Guide, new publications recently produced in partnership with Estates Gazette. Digital versions can be found here:

At the launch of the London Investor Guide a panel debate was organised by Estates Gazette in which our global head of real estate, Jackie Newstead, participated alongside architect Sir Terry Farrell and representatives from Capco, City of London Corporation and Cushman and Wakefield.

The Global Investor Guide was launched at Cushman & Wakefield’s lunch party at MIPIM. Click here to watch an interview with Jackie Newstead and our New York partner, Lee Samuelson.

MIPIM 2015 may have drawn to a close but preparations will soon be underway for MIPIM 2016!

Posted in Planning

Expedited approval procedure for planning conditions

For developers, the stage of the planning process at which conditions are discharged before the development gets underway can often be the most frustrating.  Delays by LPAs responding to the submission of details which require approval can upset project timetables and hinder delivery.  New measures introduced by the Infrastructure Act 2015 will provide some comfort in this respect.

The focus of the new arrangements is the concept of ‘deemed discharge’.  This will apply to conditions requiring LPA approval of specified matters before commencement.  Its effect will be to treat such a requirement as having been met where the LPA fails within a certain period – to be set by future legislation – to respond to a request for approval.

Certain categories of condition will be exempted, probably including those concerning development for which an environmental impact assessment is required and development likely to have a significant effect on designated sites such as SSSIs (Sites of Special Scientific Interest).  Conditions relating to flood risk, highway safety, contaminated land and archaeological investigations are also likely to be excluded, as are those requiring reserved matters approval, or a section 106 or section 278 agreement.

There will be a right for LPAs and applicants to contract out of the new procedure, allowing for slower determination where agreed, and the new rules will apply where planning permission has been granted after the new rules come into force – on a date to be determined in due course.

These measures reflect, for the most part, consultation proposals published by the government last summer.  They should be welcomed.  Discharging conditions is a phase of development that ought to be dealt with swiftly given that the principle of development has, by that stage, already been established.  In practice, however, it often leads to delays that can be commercially damaging and frustrate the delivery of much-needed development.  This can impact on the availability of finance and the sequencing of development and, at the very least, can lead to expensive down time whilst construction is delayed.  And yet it is easy to see why such results are common – there is little incentive for under-resourced LPAs to deal expeditiously with requests for approval and other matters are often prioritised.

In the circumstances the measures proposed should assist.  LPAs will be encouraged to allocate sufficient resources to this critical stage of the process and, for the first time, there will exist a real incentive to deal with applications promptly.  On the other hand, there must be a risk that some LPAs will resort to refusing applications simply in order to avoid running out of time.  Whilst the new legislation appears to offer no disincentive to such an approach, overall the picture is positive and the changes will offer a significant and much needed procedural improvement.

Posted in Real Estate News

…And justice for all (who can afford it)

A revolution is taking place in the way that litigants are charged for using the court system and it is shaping up to be a noisy one.

Historically, government’s aim has to been to charge court fees on a “cost” basis, designed to cover the cost to the Ministry of Justice of providing the court service.  From today, in a radical departure from that practice, fees for starting proceedings at court to recover a sum of money will be charged on an “enhanced fee” basis.  This means that fees will not just be calculated to reflect the cost to the public purse, but also the value of the proceedings to court users. Continue Reading

Posted in Real Estate News

The Future of Fund Management: David v Goliath

Hogan Lovells hosted the Reading Real Estate Foundation Breakfast Forum (RREF) on 4 March. RREF is a registered charity that provides support for real estate and planning education at the University of Reading.

The event featured presentations by:

  • Andrew Creighton, Head of Segregated Property Mandates, Aberdeen Asset Management;
  • David Paine, Head of Real Estate, Standard Life; and
  • Jos Short, Founding Partner and Executive Chairman, Internos Global Investors.

The question to be debated was, with the continuing M&A activity in the fund management sector, is bigger always better or will there continue to be room for the small players to make their mark?

Perhaps predictably Andrew Creighton (from Aberdeen who have £324.4bn assets under management) and David Paine (from Standard Life who have £266.2bn assets under management) were of the opinion that bigger is better, whilst Jos Short (from Internos who have just 110 staff) made his case for the small guys.

Andrew Creighton supported his view with his STRIPE theory: that bigger fund managers benefit from Scale, Teamwork, Research, Investment process, Performance and Expertise.

Key themes to emerge in favour of the larger companies were the broad range of expertise and specialist skills, economies of scale and sophisticated investment processes.  The attraction of brand often attracts clients and opens doors to emerging markets.

Jos Short countered these arguments with the view that smaller fund management firms are more innovative and entrepreneurial in their approach to fund management, can make decisions more efficiently and are therefore more responsive to the needs of clients.  Jos also noted that he believes senior personnel in smaller firms are highly involved with funds on a day to day basis.

The presenters all agreed that there is always a place for the players who spearhead creativity and entrepreneurialism regardless of size.

Posted in Real Estate News

Turning over a New Leaf – the impact of multichanneling on turnover rents

We all know that multichannelling is having a major impact on the retail industry and the negotiation of leases is not immune from this.

One of the main areas affected is the capture of turnover rent and, increasingly, tailored drafting is required to reflect the differences in tenants’ businesses. For those who weren’t able to make our Retail Property Disputes Seminar last week, here are some of the key questions to bear in mind when agreeing turnover rent provisions at heads of terms stage:

  1. How does the tenant allocate its online orders – to the nearest store or to a separate online company?
  2. Which channels does the tenant use at the moment and how might its business evolve during the life of the lease?
  3. How will online returns to the store be dealt with and how can this be policed?
  4. How will the turnover provisions deal with click and collect orders that are picked up from the store?
  5. What about group companies which comprise a number of separate retail brands operating from their own stores, who allow customers to collect items ordered online from a designated store regardless of the brand? Convenience is key to the customer but if retailers are charged turnover rent on these items, they might be tempted to only allow collection from a store with no turnover rent provisions even if it is not as convenient or, in the worst case, not allow collection at all.
  6. How will the lease deal with orders placed on devices within a shopping centre but outside a tenant’s premises?
  7. How will the landlord audit information provided by the tenant and does it know enough about the tenant’s business to do this effectively?

The key to effective turnover rent is greater understanding and communication between landlords and tenants, a trend which started during the recent downturn and which is of growing importance.

It is also worth landlords and tenants bearing in mind the rent review provisions. Over time, it is likely that retailers will carry less stock in their stores as sales continue to migrate online. The upshot of this trend is that the optimum demise size is likely to decrease as less back of house space is required.

There is also an increasing trend towards shops becoming showrooms, where customers come to inspect and learn about goods that are then purchased online using a variety of devices. Over time, it will be interesting to see how this change of use affects rental levels, particularly in places such as shopping centres, where conventional retailers are mixed with multichannel operators.

Posted in Planning

TVG hopes left on the beach

The Supreme Court ruled on Wednesday that a beach in Newhaven could not be registered as a town or village green (TVG).

Opponents to development have long been using the TVG route to thwart unwelcome works, as once land is registered as a TVG it is effectively sterilised for redevelopment.  In order to register land as a TVG, members of the public must be able to demonstrate that a significant number of local inhabitants have used the area “as of right” for lawful sports and pastimes for at least 20 years.  However, over recent years, case law interpreting this test has tended to lessen the burden on applicants, making it easier for land to be registered as a TVG.  This recent decision takes a welcome step in the other direction.

The application related to a beach which was part of the operational port (and had indeed only been formed as a result of the construction of a breakwater).  There were many controls on the operation of the port, including various statutory provisions and byelaws regulating its use by members of the public.

Although the principle that a beach could be registered as a TVG was not argued at Supreme Court level, the operators of the port argued that the relevant byelaws granted an implied licence for members of the public to use the beach, provided they did so in accordance with certain conditions.  This position was accepted and it was further held that the byelaws did not need to be brought to the public’s attention for an implied licence to exist.

As it was held that there was an implied licence for use by members of the public, this use became “by right” and not “as of right”, and the beach was not registered as a TVG.

According to the Court, where a landowner can show that land used by members of the public is regulated by statutory provisions or byelaws, even if members of the public are not aware of them, there will be an implied licence in place. This means that any such use is not “as of right” and will ultimately defeat any application to register the land as a TVG. Therefore this decision will be welcomed by the development industry.

Case: R (on the application of Newhaven Port & Properties Limited) (Appellant) v East Sussex County Council and another (Respondents) [2015] UKSC 7