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Keeping It Real Estate

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

Posted in Real Estate

Rights of Light – A new dawn?

On 25 October 2016, the Hogan Lovells Real Estate team hosted a panel debate: Rights of Light – A New Dawn? The panel of industry specialists debated topical issues including:

(a) the likelihood of adjoining owners obtaining an injunction to prevent interference with rights of light;

(b) whether recent developments in case law mean that developers need to adjust their strategy for addressing rights of light;

(c) the role of insurance; and

(d) the impact of the new section 203 of the Housing and Planning Act 2016.

The consensus amongst the panel was that recent case law, such as Coventry v Lawrence [2014] and the very recent Court of Appeal decision in Ottercroft v Scandia Care [2016], has made clear that the courts have a broad discretion in deciding whether to grant an injunction to prevent interference with rights of light and that this may make the outcome of any claim more difficult to predict. It is also clear that the conduct of the parties will be put under close scrutiny – developers who fail to engage properly with their neighbours, even in respect of minor infringements, could find themselves faced with an injunction. On the other hand, well-advised developers who engage openly and reasonably from an early stage perhaps have some cause to feel more confident when it comes to defending injunction claims from adjoining owners seeking a ransom payment.

The panel felt that the current uncertainty has brought into focus the role which insurance has to play in any rights of light strategy. Fraser Pratt, Head of Rights of Light and Legal Indemnities at PIB Insurance, commented that the insurance market has moved on considerably over recent years to provide products which fit within the current legal landscape and that developers would be well advised to engage with insurers at an early stage in the process.

The panel agreed that the powers of the local planning authority also have a key role on large schemes. The local authority’s powers to override rights of light under section 237 of the Town and Country Planning Act 1990 have been replaced by section 203 of the Housing and Planning Act 2016. The panel felt that the new powers were likely to be the same in scope as the previous powers under section 237, despite some changes in the wording. However, Oliver Law, Founding Director of The Chancery Group, commented that local authorities may take time to get used to the new powers and may be more cautious in exercising them in the interim.

Overall, the panel agreed that a key aspect of successfully addressing rights of light claims was to put together a joined-up strategy from day one, involving not just rights of light surveyors but also the legal team, insurers and planning consultants.

The panel comprised of:

Jonathan Karas QC – Barrister, Falcon Chambers
Greville Healey – Barrister, Falcon Chambers
Oliver Law – Rights of Light Surveyor and Founding Director, The Chancery Group
Fraser Pratt – Head of Rights of Light and Legal Indemnities, PIB Insurance
Paul Tonkin – Senior Associate, Hogan Lovells

Chair: Mathew Ditchburn – Partner, Hogan Lovells

Posted in Case Updates

A costly lesson in consent

When a tenant wants to assign its lease but needs the landlord’s consent, the law (if not the lease) prevents the landlord from acting unreasonably.  The landlord may want to withhold consent or impose conditions, but how does it know whether that is considered reasonable?

Earlier this month the High Court considered this question in No.1 West India Quay (Residential) Ltd v East Tower Apartments Ltd.   The landlord refused consent to assign unless:

  1. the proposed assignee provided bank references;
  2. the landlord was permitted to inspect the premises and recover its costs of doing so (£350 plus VAT); and
  3. the tenant provided an undertaking to pay the landlord’s costs of dealing with the application in the sum of £1,600 plus VAT.

The Court said that if the landlord had imposed only the first two conditions, then the tenant’s failure to agree them would have provided reasonable grounds for refusing consent.  A landlord is entitled to see whether a proposed assignee is going to be able to meet its obligations under the lease.  Landlords should also be able to examine the premises to ascertain whether the tenant has breached any of its lease covenants.

However, the Court found that the landlord’s decision really turned on the third condition, which was unreasonable because the sum of £1,600 was excessive in the circumstances.  Furthermore, the unreasonableness of that condition cancelled out the other two reasonable conditions.  The tenant was therefore free to assign without consent.

The landlord in the case may have fared better if it had followed the Alienation Protocol, which offers practical tips for landlords and tenants on how to manage the process of applying for and either giving or withholding consent.  Every case will turn on its facts, of course, but following the best practice and helpful guidelines set out in the protocol should help minimise the risk of landlords and tenants falling foul of needless and avoidable disputes in future.

Posted in Real Estate News

Business rates – VOA guidance published

In 2015, the Supreme Court held that an occupier of separate floors in an office block which were not contiguous (sharing a common border) or interconnected, and could only be accessed via common parts, were separate units or “hereditaments” for ratings purposes. Previously the Valuation Office Agency had suggested that the tenant at the top of a multi-let building could have all of its contiguous floors treated as one hereditament.  However, the VOA has now formally endorsed the Supreme Court’s approach and provided a number of examples in order to illustrate the position.

The key principles are as follows:

  1. a tenant who is the sole occupier of a whole building will have one assessment for ratings purposes;
  2. a tenant of a number of floors in a multi-let building will have a separate assessment for each floor (where they are accessed by communal areas);
  3. an owner of a building who leases out one floor will have a separate assessment for each floor (where they are accessed by communal areas) and the tenant will have an assessment for its floor;
  4. a tenant of a number of floors in a multi-let building will have one assessment where the floors are self-contained, for example where they are accessed by private staircases; and
  5. a tenant of two adjacent but unconnected units separated by a communal yard will have a separate assessment for each unit.

No doubt the guidance has clarified what constitutes a hereditament; however, the real question is what impact this will have in practice.

A business which occupies more than one floor in a multi-let building is likely to be hit with separate bills for the different areas and possibly an increased overall rates bill (unless the floors are self-contained). The same is true for an occupier of two adjacent, unconnected units. However, the VOA has failed to confirm when the revaluations are to take place and so businesses can’t yet be certain what the increased liability will amount to or when to expect it.

The changes are set to have retrospective effect. The VOA confirmed that any change in assessment will be backdated to the more recent of (i) 1 April 2015 in England or 1 April 2010 in Wales and (ii) the date of occupation. This will be of concern to many businesses, many of whom may not have made provision for these increased liabilities.

The VOA has stated that a business need not do anything unless it hears from them; however, businesses need to be able to prepare for future increased liabilities and to devise a plan to deal with any backdated costs. Few will be happy to sit and wait for the VOA to contact them but the guidance suggests there is little more that can be done.

Guidance: https://www.gov.uk/government/news/changes-to-how-we-value-some-non-domestic-properties-with-more-than-one-occupier

Our previous blog on the Supreme Court decision:

Business rates: the Supreme Court decides on rating practice for separate floors in a building


Posted in Real Estate News

A Game of Drones

The use of drones in the UK is rapidly increasing. Construction companies use drones to survey sites, local authorities use them to assist with planning applications and the retail sector will no doubt be revolutionised by aerial delivery. There is even a suggestion that drone visits will replace site viewings by 2025.

Operators must be particularly wary when flying over land they don’t own.  Equally, landowners should be aware of their airspace and property rights. Regulation breaches, aerial trespass and nuisance claims, impact property damage (with related buildings insurance claims) and data protection infringement are all potentially relevant.

Aviation regulations differentiate drones by weight. Small drones (under 20kg) must be operated with direct and unaided visual contact at all times. For drones weighing between 20–150kg, both airworthiness approval and Civil Aviation Authority (CAA) registration are required. Drones over 150kg fall within the remit of the European Safety Agency while drones weighing anything below 150kg are regulated by the CAA.

While a drone operator doesn’t require a licence, CAA permission is required to fly a drone for “aerial work”, which broadly includes surveillance, data gathering, or flying within 50 metres of any person, vessel, vehicle or structure not controlled by the drone operator.  Breach of the aviation regulations is a criminal offence and the CAA has successfully brought prosecutions in respect of drones.

We watch with interest to see how the law develops in months to come (particularly as Brexit plays out, given that much of the aviation framework is governed by EU law). Ultimately, a balance will need to be struck between reassuring the public that security, property and privacy are protected without overregulation.

For further information see here.

Posted in Real Estate News

Hogan Lovells wins Real Estate Legal Team of the Year at the EG Awards!

We are delighted to have won the inaugural Real Estate Legal Team of the Year category at the 2016 Estates Gazette Awards!

We were recognised for our work across the full spectrum of real estate, including development, investment, planning, and disputes.  A panel of leading real estate industry judges praised our work on headline-grabbing deals over the past year, from the BBC’s sale and leaseback of Media Village to Argent/Related’s £4bn redevelopment of Brent Cross South, as well as our commitment to real estate as a sector, including asset management work.

Jackie Newstead, Global Head of Real Estate said “I am delighted for the whole real estate team here at Hogan Lovells that all the hard work everyone puts in on a daily basis has been recognised in being awarded the first ever award for Real Estate Legal Team of the Year by Estates Gazette.  It is a real honour to be chosen by the judges, who come from right across the real estate industry.”

The award was presented at a full house of property’s leading lights at the Grosvenor House Hotel on London’s Park Lane. To view all the winners, please click here.

This fantastic news followed hot on the heels of our promotion to the elite top band in Legal 500 UK for commercial property, where we are also top-ranked for development, hotels and leisure, and property litigation.

Jackie Newstead, Nicholas Cheffings, Oliver Chamberlain and Gill McGreevy collecting our awardegawards16-winners_Real-Estate-Legal-Team-of-the-Year

Jackie Newstead, Nicholas Cheffings, Oliver Chamberlain and Gill McGreevy collecting our award.

Posted in Real Estate News

SDLT filing: faster & easier or an even greater headache?

HMRC has issued a consultation on various proposed changes to the filing and payment process – in particular a reduction in the time limit for filing and payment from 30 days to 14 days.  However, the introductory blurb suggests that the government has already decided to make this reduction, having announced it in the Autumn Statement 2015.  Their main concern is therefore to seek views on whether and what issues might arise as a result of the reduction.

In our opinion, the process of preparing the forms to report complex commercial transactions is complicated and can be extremely time-consuming.  In time-pressured transactions, it is often not possible during the course of the transaction to engage with the approval of the significant amount of information which needs to be included on the returns.  It is not unusual for transactions to be completed where required information about a property (for example, details of leases/subleases) is simply not known and has to be ascertained following completion.

We also believe that the decision to reduce the filing and payment window to 14 days might exacerbate the number of returns submitted with incomplete information and the significant processing costs incurred by HMRC will be further heightened.  Whilst we file our returns electronically, currently over 40% of paper returns are submitted with “errors”.  We feel that substantial simplification of the forms and of the amount of information required should be undertaken in order to mitigate this risk and we hope that the government will take this on board when the result of the consultation is announced.

The full title of the consultation is: “Stamp duty land tax: changes to the filing and payment process”.  The consultation closes on 7 October and can be found on the website.

Posted in Planning

Why Planning is good for your health….

The link between good planning and good health is unequivocal. There is a clear correlation between the quality of the built and natural environment and community health and wellbeing. National Planning Policy Guidance, the London Plan and a number of local planning policies already encourage the submission of “health impact assessments” as part of the planning application process, but could we see health playing a bigger role in planning?

The political pressure to address health concerns suggests so. On Friday 2 September 2016, Sadiq Khan and 29 other mayors from major global cities called on national leaders to “build a low carbon, climate safe world“, urging governments to secure the ‘Paris Agreement’ (the world’s first global deal to fight climate change).

On Thursday 1 September 2016, the Health Select Committee published a report recommending that local authorities be given more power to create healthier communities. It asked the government to enshrine health as a “material consideration in planning and licensing laws“, saying that “the current planning process continues to be a major impediment“.

On the same day, the Commons Environmental Committee published a report seeking the retention of the EU renewable energy target for 2020. It reported that transport emissions have increased for the last two years and that transport is now the largest emitting sector.

Improving air quality is one of the new Mayor of London’s key aims, and is also on the Department for Transport’s (DfT) “to do” list. The DfT confirmed that it is creating Clean Air Zones in five city centres and is looking at other initiatives to reduce emissions. Improvements to the UK’s cycle network are expected, particularly following the recent letter from various Olympians calling for infrastructure improvements in the UK’s towns and cities.

With consumers and investors more engaged than ever on this topic, developers are also looking at “green initiatives” to stay in the race. As the Health Select Committee has acknowledged, with the right support, the planning system can help to achieve change in this area, for a happier and healthier society.

Posted in Case Updates

Better late than never? Relief from forfeiture after 14 months

The High Court has granted relief from forfeiture to a tenant 14 months after a landlord exercised his right to forfeit by peaceable re-entry. Whilst delay may ultimately be a decisive factor against granting relief, the Court has a wide discretion in reaching that decision.  In this instance, the Court considered it wrong to base its decision on delay in isolation, without having regard to all of the circumstances.

The case concerned a lease of industrial premises granted for 125 years at a premium of £90,000 and which had a value of £275,000. In April 2014, with arrears amounting to £24,000, the landlord forfeited the lease for non-payment of rent. At the time of forfeiture, the tenant company’s sole director was suffering from depression. In June 2015, the tenant applied for relief.

Generally, a tenant needs to apply for relief from forfeiture for non-payment of rent within six months. On that basis, it is surprising that relief was granted. However, where forfeiture is by peaceable re-entry, the High Court can still grant relief after the six month period, which is used as a guide rather than a strict time limit.

The Court took the following factors into account in reaching its decision:-

1. A high premium was paid for the lease.

2. The arrears amounted to less than 1% of the value of the lease, meaning the landlord would gain a disproportionate windfall.

3. The tenant’s ill-health meant that he did not appreciate the risk and associated consequences of forfeiture.

4. The tenant had not sought legal advice at the time of forfeiture.

5. The lack of prejudice to the landlord, who had not taken any steps to market or re-let the property.

6. The steps the tenant was taking to satisfy the arrears and the landlord’s costs (including a family member selling his home).

As such, the Court considered that the tenant’s application was made with “reasonable promptitude”, which was an “elastic concept which is capable of taking into account human factors”. The tenant was granted relief subject to the condition that the arrears, interest and the landlord’s costs were paid by a specified date.

This decision demonstrates the approach taken by the Court when using its broad discretion, but should not be misinterpreted as enabling tenants to disregard the amount of time taken to apply for relief. Each case will be decided on its own merits and the courts will have regard to all the circumstances when determining whether the application has been made with reasonable promptitude.

Landlords may, however, be concerned with the potentially longer period of uncertainty following forfeiture by peaceable re-entry, particularly where a lease has market value and the property is not being relet.

Pineport Ltd v Grangeglen Ltd [EWHC] 1318

Posted in Case Updates

Private tenants’ claims – Human Rights won’t wash

The Supreme Court has clarified that Article 8 of the European Convention on Human Rights (ECHR), an individual’s right to respect for private family life and their home, has no bearing on the court’s decision to grant a possession order against a private sector tenant.

Fiona McDonald occupied her home under an Assured Shorthold Tenancy (AST) granted by her parents, who owned the property subject to a mortgage. The mortgage lender appointed a receiver when the parents fell into arrears. Ms McDonald also failed to pay the rent under the terms of the AST, causing the receiver to issue possession proceedings against her.

At first instance, the court made a mandatory possession order under section 21 of the Housing Act 1988 (the 1988 Act) which was upheld by the Court of Appeal.

By the time the case reached the Supreme Court, there were two main issues for consideration:

  1. Was the court, as a public authority, required by the Human Rights Act 1998 to act in a way compatible with the ECHR, such that it had to consider the proportionality of the possession order and the interference with Ms McDonald’s rights under Article 8? Ms McDonald argued that it was and the fact that she suffered with a personality disorder was a relevant consideration that should have been taken into account.
  2. If so, could section 21 of the 1988 Act be construed in a way which was compatible with the ECHR?

On the first point, the Supreme Court ruled against Ms McDonald. Treating the courts as a public authority for this purpose would effectively mean that the ECHR was directly enforceable between private citizens in contract disputes. The 1988 Act already reflects the legislature’s efforts to balance the competing interests of private landlords in the residential sector and their tenants. The Supreme Court went on to say that if it had agreed with Ms McDonald, it would have had to make a declaration of incompatibility on the second issue.

Private sector landlords, and especially those who let their property under ASTs, will welcome the ruling.

McDonald v McDonald [2016] UKSC 28

Posted in Case Updates

Minor loss of light can prove very costly for the less than scrupulous Developer

Developers should beware of costly penalties for less than scrupulous behaviour when it comes to infringing their neighbours’ rights to light.  In the appeal of Ottercroft Ltd v Scandia Care Ltd and anr, the Court of Appeal ruled in favour of the claimant whose rights to light were infringed by the defendant developers.

The defendants had given undertakings not to develop their property so as to cause interference with the neighbouring claimant’s rights to light.  In breach of these undertakings, the defendants built a metal staircase which caused a relatively minor loss of light (valued at less than £1,000) to the claimant’s restaurant.  Notwithstanding the fact that the infringement was minor, the appeal judges concluded that the trial judge was correct to grant an injunction rather than damages in light of the defendants’ unneighbourly actions.

What was the first instance decision?

Back in January 2015, the Court held that the staircase interfered with the claimant’s rights to light.  He ordered a mandatory injunction for the defendants to alter, remove or replace the staircase so that it no longer infringed the claimant’s rights.  Although the infringement was relatively minor, his reasons for awarding an injunction rather than damages included:

  1. The defendants acted in a high-handed and unneighbourly manner.  They deliberately misled the claimant in respect of their plans for development.
  2. The defendants gave undertakings not to interfere with the claimant’s rights to light, which discouraged the claimant from seeking interim relief from the Court.
  3. Despite being fully aware that their actions would affect the claimant’s rights, the defendants proceeded to build the staircase in deliberate breach of their undertakings.

What were the defendants’ arguments in the appeal?

The defendants argued that the judge failed to carry out a fair and objective balancing exercise in deciding whether to award damages in lieu of an injunction.  In particular, he failed to take into account the fact that the minor change to the staircase from that specified in the planning permission did not make the loss of light appreciably worse.  They claimed that the judge made a series of unfounded assumptions which were oppressive to the defendants.

The Court of Appeal’s decision

The appeal judges dismissed the defendants’ appeal.  They approved the trial judge’s decision on the basis that:

  1.  The trial judge is entitled to exercise his discretion and it should not be overturned by an appellate court unless he has made the wrong decision on the principles.
  2. The four criteria in Shelfer v City of London “open the door” for the judge to exercise his discretion to award damages in lieu of an injunction.  They do not, however, compel him to do so.
  3. An injunction was granted based on the defendants’ poor behaviour and breach of undertakings.  The judge was entitled to consider the defendants’ actions in the round when exercising his discretion and he was not shown to be wrong in his characterisation of the defendants’ conduct.
  4. The injunction is not oppressive to the defendants.  Moving the staircase to avoid the infringement is feasible and the costs are likely to be less than £6,000.

The Court made clear that there had been no error in the judge’s exercise of discretion in this case.  Lord Neuberger stated in the Supreme Court case of Coventry v Lawrence that an injunction may be necessary to do justice and warn others, especially if the defendant has acted in a high-handed manner.  His reasoning fits the facts of this case exactly.  The defendants had breached their undertakings and the judge had been right to hold them to their contractual obligations.

It is clear that the courts will not look kindly upon any potentially misleading actions by developers.  When it comes to rights to light, developers should ensure that their conduct is demonstrably scrupulous in their dealings with neighbours.