An £85 fine for exceeding a two hour parking limit is neither unfair nor unenforceable, the UK Supreme Court ruled today. This won’t be a welcome decision for car owners but it will be for car park managers and landowners who may have had to re-negotiate car park contracts if the court had found otherwise.
In reaching their decision, the court redefined the test for deciding whether payment under a contract is a penalty and therefore unenforceable. No longer will parties need to consider whether the charge is a genuine pre-estimate of damages but whether “the impugned provision is a secondary obligation which imposes a detriment on the contract-breaker out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation”. In other words, the court is looking for a commercial justification and the charge must not be extortionate.
In the present case, chip shop owner, Barry Beavis had a contractual licence to park in a retail park in Chelmsford. The terms were set out in notices posted at the entrance, including a two hour limit and an £85 charge if this was exceeded. Mr Beavis overstayed by nearly an hour. The car park was managed by ParkingEye, who demanded payment of the £85 charge. Mr Beavis disputed that it was payable on the basis that it was excessive and therefore a penalty.
The Supreme Court found that the charge had two main objectives: (i) the management of the efficient use of parking space in the interests of the retail outlets and their users by deterring long stay or commuter parking and (ii) the generation of income in order to run the scheme. On that basis, the court held that both ParkingEye and the landowners had a legitimate interest in charging overstaying motorists even if that extended beyond the recovery of any loss.
The court went further and said the charge was neither extravagant nor unconscionable having regard to practice around the UK and taking into account the clear wording of the notices.
This doesn’t mean carte blanche for car management companies demanding overstay charges. Supreme Court President, Lord Neuberger made it clear that: “None of this means that ParkingEye could charge overstayers whatever it liked. It could not charge a sum which would be out of all proportion to its interest or that of the landowner for whom it is providing the service. But there is no reason to suppose that £85 is out of all proportion to its interests.”
Penalties have long been a bone of contention in commercial contracts. This is the first time in a century that we have a definitive ruling on the scope and continued application of the doctrine in both commercial and consumer dealings. The test has been redefined so that parties need to consider both whether the charge protects a legitimate interest and whether it is extortionate. Yet, without government intervention, the thresholds remain open to interpretation. What will be classed as extortionate and where will the limits lie? Whilst commentators pick over the bones of the case to gain further enlightenment, it’s business as usual in Chelmsford.
Early engagement with the community and the planning authority is key. It helps to bring order and information to the process. It can prevent issues mushrooming, with some careful explanation of the proposal.
Engagement helps to break down barriers; communities need a voice and it’s right that they should have one. But engagement also presents an opportunity to show them what an onshore drilling operation looks like and to explain things in a way that the layman can understand. For example: what will it look like; what is the noise level; just how much water is needed? The community will have to have the benefits clearly spelled out to them if there is any hope of the developers obtaining the elusive social licence to operate.
The shale gas sector wants quicker planning decisions. Local Planning Authorities are chronically under resourced. How can the industry navigate a planning process which has integrity without offending the “fifth official” – the public?
The European Shale Gas and Oil Summit has seen many questions debated, but not many answers. Panel member, Claire Dutch (Hogan Lovells Planning Specialist), summarised the feeling of the room neatly: “Planners and promoters can expect a bumpy road ahead but the sector will get there. There may be call ins and judicial reviews along the way, but it will get there”.
Should shale gas operators be able to opt for an NSIP (Nationally Significant Infrastructure Project) decision process with the certainty of time line (even if a long one)? Should Planning Performance Agreements (for promoters to fund Planning Authority’s consultant’s costs) be embraced or do they jeopardise the integrity of a decision? Views were split on these and other topics.
What is universal? The public needs to buy into the decision making and perhaps the industry more generally. It will be interesting to see how the sentiment lies when Hogan Lovells’ industry consultation results come in.
From 1 October 2015, landlords must use a new, prescribed form of notice when ending an assured shorthold tenancy (“AST”) granted on or after that date. Additionally, landlords will not be able to recover possession unless they have previously provided certain documents relating to the property and the tenant’s rights and responsibilities.
An assured shorthold tenancy is a type of residential tenancy granted to an individual that allows the landlord to repossess the property at the end of the term by service of 2 months’ notice under section 21 of the Housing Act 1988. If no notice is served, the tenant can continue to occupy the property under what is known as a statutory periodic tenancy (with the period usually depending on the frequency of rent payments, whether monthly or annual) until notice has been served.
A significant change for landlords is that they can no longer serve section 21 notices on the date the AST begins, as has been the usual, convenient practice. Instead, they must wait until the tenant has occupied the property for at least four months before serving a notice. Also, a section 21 notice will expire after six months for a fixed term AST and four months for a statutory periodic tenancy. This means that a landlord will have to wait 6 months before serving notice to terminate a 12 month AST. This is likely to increase the administrative burden on landlords who are juggling large portfolios of residential properties.
There are a number of other regulatory requirements imposed as part of the government’s on-going campaign to regulate more closely landlords of assured shorthold tenants. These include a requirement that, before issuing a section 21 notice, the landlord has to have supplied the tenant with:
an Energy Performance Certificate;
a copy of a Gas Safety Certificate; and
a copy of the Department for Communities and Local Government’s booklet: How to rent: The checklist for renting in England.
Although not mandatory, it would be best practice to supply the tenant with these documents at the start of a tenancy to avoid any delay when later serving a section 21 notice.
For now, these changes do not affect ASTs predating 1 October 2015 or any statutory periodic tenancies arising after the expiry of such ASTs. However, as of 1 October 2018, the Regulations (except the provision of a DCLG booklet) will apply universally, regardless of when the tenancy was granted, so landlords are advised to get their house in order as soon as possible.
The government’s penchant for home ownership shows no sign of abating. First we had the Right to Buy and now Starter Homes is again stealing the headlines.
Starter Homes is a new government programme to build low-cost homes for first time buyers who are under 40. Prices are at least 20% lower than the market rate; capped at £250,000 outside of London and £450,000 in London. However, these are not currently classed as “affordable” housing under existing planning rules meaning that Starter Homes do not meet builders’ obligations to provide an element of affordable housing in new development schemes.
The Conservatives are changing the rules to include Starter Homes in the definition of affordable housing and local authorities will not be able to hold out for one type of affordable housing over another. This change will be introduced alongside measures to ensure Starter Homes are built on all reasonably sized sites (i.e. those above a certain unit threshold). By introducing more flexibility the hope is that more sites will be developed and as a result, more affordable housing will be provided. Indeed, if the government is to be believed, this change in the planning rules will provide 200,000 new homes by 2020 marking a move from “generation rent to generation buy”.
Last week, Hogan Lovells hosted the 2015 Strategic Land Debate. Members of the development industry listened to a panel of leading property and planning individuals debate key questions on how the provision of housing can be increased to meet the enormous shortfall faced in the UK.
A thought-provoking keynote introduction from Andrew Jones at AECOM was followed by a lively panel discussion chaired by Nick Ferrari, journalist and LBC broadcaster. On the panel were:
Andrew Jones – AECOM
Trudi Elliott CBE – Royal Town Planning Institute
Robert Evans – Argent LLP
Marc Vlessing – Pocket Living
Andrew Telfer – Willmott Dixon Regen
A range of issues relating to the housing crisis were discussed including, not surprisingly, urban extensions, proposals to create entirely new settlements, the role of the Northern Powerhouse in solving the crisis and the continued protection of the Green Belt.
Whilst the audience heard a diverse range of views from the panel, the key message was clear: little progress will be made in solving our housing crisis without meaningful input from a government with a clear commitment to tackling the problem. Until then, developers and other key players can only really skirt around the edges of the problem. Whether this government is willing to take the matter to hand remains to be seen.
As from 1 October, landlords of residential properties in the private rented sector must ensure that their properties are kitted out with working carbon monoxide detectors and smoke alarms. Although the House of Lords was concerned that the legislation is poorly drafted and the changes have not been well publicised, the draft Regulations were approved and passed by Parliament. Click here for the Regulations. Failure to comply risks a £5,000 fine.
The Department for Communities and Local Government (DCLG) has published two booklets containing guidance for local authorities, landlords and tenants on the new Regulations:
The political landscape has seen some seismic changes of late. Jackie Newstead, our Global Head of Real Estate, talks to Steven Norris, former Conservative minister and current Chairman of BNP Paribas Real Estate UK and Soho Estates, about the new political agenda and what this means for the real estate industry. In a series of three short pieces, Jackie asks Steven to consider the challenges faced by government, the merits of the Northern Powerhouse and finally whether planning is still the elephant in the room.
Jackie talks to Steven about the government’s ambitious plans for infrastructure and how he rates the government’s performance so far
Jackie asks Steven for his views on the Northern Powerhouse and whether the concept can be delivered in practice
Finally Jackie asks Steven to elaborate on his view that “planning is the elephant in the room” and hears how he thinks the planning system could be improved
You may recall that earlier this year the government published its response to the consultation on minimum energy efficiency standards for domestic and commercial buildings, a day after laying draft Regulations before Parliament. The Regulations, which became law on 26 March this year, may significantly constrain the way in which owners and occupiers of commercial properties deal with their premises. One of the most important changes for commercial landlords is that from April 2018, it will be unlawful to lease premises in England and Wales that have an EPC rating of less than E. Although this deadline is still nearly three years away, landlords should plan for compliance now and consider what works are required to bring properties up to an EPC E level and whether such costs are recoverable. Similarly, investors should be aware of the potential effect on value of properties having an EPC rating of F or G.
The Regulations will be brought into force in two phases:
From April 2018 landlords will need to ensure that properties are at least an E EPC rating before the grant of new leases (to new or existing tenants, so including lease renewals).
From April 2023 this will extend to all premises, including those where a lease is already in place and a tenant is already in occupation.
There are various exemptions and exclusions such as very long (over 99 years) or short (less than 6 months) leases or where consent cannot be obtained from the tenant, but the exemptions only last for 5 years after which the situation must be re-evaluated. This would mean carrying out further energy efficiency assessments, re-applying for all necessary consents for works that meet the relevant economic tests, and keeping evidence of the outcomes. The government proposes to establish an online “PRS Exemptions Register” to act as a centralised database for exemptions. Landlords who consider that they are exempt will be required to notify their exemption on the Register and lodge supporting evidence.
As the new regime will be relevant to all landlords, including tenants who have sublet premises, its effects could be significant and far-reaching. Not only will it impose a compliance burden on landlords, but it also has the capacity to affect value. In practice, it may be difficult to police precisely due to its far-reaching nature. Despite this, one thing is for sure, EPCs are here to stay and climate change is still very much on the agenda.
In Spielplatz Ltd v Pearson and another  the Court of Appeal had to decide whether a chalet was a chattel (movable possession) or had become part of the land on which it was situated. The Court decided it was part of the land.
In 1992, the freehold owner of a naturist resort granted an annual tenancy of a plot of land to the Pearsons. The tenancy agreement described the premises as “the plot or clearing in the grounds”. The previous tenants had built a chalet on the land and the Pearsons separately purchased the chalet from them.
During 2011 and 2012, the Pearsons carried out extensive renovations to the chalet but after some unfriendly correspondence between them and the freeholder, the Pearsons were served with a six-month notice to quit.
The case revolved around whether the chalet formed part of the plot of land. If so, the tenancy would include both soil and chalet and not just the land itself. This would make it a tenancy of a separate dwelling and protected under the Housing Act 1988as an assured tenancy. A landlord of an assured tenancy can only recover possession by following the procedures set out in the Act and demonstrating one of the statutory grounds for possession. Spielplatz had done neither as it asserted that the Pearsons had an unprotected tenancy of the plot which it had ended by the notice to quit. The Pearsons won the first round. The freeholder appealed.
The Court of Appeal referred to the well-established House of Lords decision in Elitestone Ltd v Morris  1 W.L.R. 687, which held that whether a structure could be removed from the land without being demolished was of significant importance. If not, then the structure could not have been intended to remain a chattel and must have been intended to form part of the land.
Expert evidence adduced at trial had indicated that the chalet could not be removed without dismantling it into its constituent parts. This evidence, together with the fact that the purpose of the chalet was to enable its occupiers to enjoy the amenities of the land, left the Court of Appeal in no doubt that the chalet was part of the land. Further, the fact that the tenancy agreement did not refer to the chalet did not prevent the chalet from becoming part of the land.
The Court of Appeal reiterated that it was immaterial that both parties believed that the chalet belonged to the Pearsons to sell on to any purchasers of their lease. This misplaced belief, the court said, “amounts to nothing more than evidence of their subjective beliefs and intentions upon which Elitestone shows no reliance can be placed”.
The result was that the Pearsons had the protection of statute and the freeholder’s possession claim failed.
The question of what has become part of the property and what is merely a chattel is frequently relevant to commercial property in the field of dilapidations claims. In the residential sphere, any landlord finding itself in a similar situation to Spielplatz may wish to comply with the requirements of the Act before seeking to recover possession as otherwise it could find itself feeling rather exposed.