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Keeping It Real Estate

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

Posted in Real Estate News

Coming soon: New electrical safety standards for PRS landlords

New draft Electrical Safety Regulations have been laid before Parliament but what do they mean for landlords in the private rented sector?

When and where will they apply?

If passed, these regulations will apply in England to most new residential tenancies from 1 July 2020 and all existing residential tenancies from 1 April 2021.

They will apply to premises let to one or more people who are occupying the premises as their only or main residence and paying rent. This means that they won’t capture holiday lets and second homes.

However, certain tenancies are excluded, including tenancies granted by social landlords, long leases or tenancies granted for a term of seven years or more, student housing, and tenancies of hostels, refuges, care homes, hospitals or hospices.

What will be required?

Under the draft regulations, private landlords will be required to carry out checks and ensure that their electrical installations comply with requisite electrical safety standards.  These are set out in the 2018 edition of the IET Wiring Regulations.

The electrical installations must be tested and reported on by a qualified person.  The first test must be carried out before a new tenancy starts or by 1 April 2021 where the tenancy is already in place.  Further testing must then be done every five years.

Landlords must give the report to existing tenants within 28 days of the inspection.  New tenants must receive a copy before they occupy the premises. In addition, where a local housing authority requests it, the report must be supplied to them within seven days.

How long do I have to complete any remedial works required?

If the report states that remedial works are required, the landlord must carry out such works within 28 days of the inspection (or sooner, if indicated by the report). The landlord must then confirm to the tenants and the local housing authority that the remedial works have been done.

If the landlord fails to carry out remedial works within the specified time period, the local housing authority will be able to carry out the works itself and recover costs from the landlord. Where non-urgent remedial works are required, the local housing authority must have served a remedial notice on the landlord giving the landlord an opportunity to carry out the works (within 28 days) before it does them itself.

What are the consequences for non-compliance?

As well as having the power to complete works themselves, the local housing authority will be able to impose a financial penalty on landlords for breach of their obligations, up to a maximum of £30,000.

Ouch! Sounds expensive.

It certainly could be as electrical installations fitted prior to the publication of the 2018 edition of the electrical safety standard may not comply with the new standard and there is a very small window of opportunity in which to carry out any remedial works.   This could prove to be yet another thorny issue for PRS landlords to get to grips with.

Posted in Real Estate

Interim Code rights – the Telecommunications Infrastructure (Leasehold Property) Bill

What are interim Code rights?

Operators have been having issues in relation to non-responsive owners of multi-let buildings where the Operator’s customer occupies part of the building as a tenant. This means that there is often a delay in the tenant of those multi-let buildings getting internet services.

In order to tackle this issue the government has published the Telecommunications Infrastructure (Leasehold Property) Bill.  This Bill was published before the general election and has now been carried over into the new Parliament.  At the time of writing, the Bill is in the House of Commons. When enacted it will permit the court to make an order to grant interim Code rights (under the Electronic Communications Code) for leasehold premises relatively quickly where:

(a) the rights are required in respect of land which is connected to the leased premises; and

(b) the land owner or other person with an interest in the land has not responded to repeated notices given by the Operator seeking an agreement.

This will be known as a “Part 4A Order”.

What’s the process?

The Operator makes a request to the land owner for a Code agreement (“Request Notice”). Following the request there are provisions for two warning notices and a final notice.

The warning notices must be in writing and they must:

(a) include a copy of the Request Notice;

(b) state which notice it is e.g. first, second or third of three notices; and

(c) explain the effect of a Part 4A order.

What are the timings?

Notice Timing
First Warning Notice Seven days following the date that the Request Notice was served.
Second Warning Notice Seven days following the date that the first warning notice was served.
Final Notice Within the “Permitted Period” which is the later of:

i) the period of seven days beginning with the day on which the second warning notice was given; and

ii) the period of 28 days beginning with the day on which the Request Notice was given; and

ends at the end of the period of 28 days beginning with the day on which the second warning notice was given.

If the land owner doesn’t respond to the Operator and 14 days have passed since the final notice was given, the Operator can apply to court for the Part 4A Order.

The Operator must then give the landowner notice that he/she has applied to the court.

What happens next?

The court may grant the Order if the requirements set out above have been met and the land owner hasn’t responded to the Operator.

Once granted the Part 4A Order will grant the Operator the Code rights specified in the request and the Operator will be permitted to install the electronic communications apparatus for the benefit of the tenant.

Do the rights expire?

Yes, Part 4A Code rights expire when:

(a) a replacement agreement comes into effect;

(b) the court refuses an application by the Operator for the imposition of a replacement agreement, in accordance with that decision; or

(c) a period of no more than 18 months has passed following the grant of a Part 4A Order.

What are the implications of the interim Code rights?

The Operator may be given Code rights to install electronic communications apparatus in premises without the consent of the land owner.

What do you do if you receive any notice from an Operator?

Acknowledge the request as soon as possible and seek professional advice. Once an acknowledgment has been made the Operator cannot apply for a Part 4A Order.

Posted in Real Estate News

Don’t take it personally: Is the benefit of an agreement for lease personal to the landlord?

In Bella Italia Restaurants Limited v Stane Park Limited, Bella Italia had entered into a conditional agreement for lease with its prospective landlord, the Trustees of the Churchmanor Pension Scheme.

As you would expect, the agreement contained a right for the landlord to grant a lease, on the terms agreed, with a corresponding obligation on the tenant to accept this lease.

The Trustees then sold the property to Ropemaker. In the sale contract, the property was sold with the benefit of the agreement for lease and Ropemaker covenanted to comply with the Trustee’s obligations.

Bella Italia later attempted to terminate the agreement for lease on the grounds that the right to grant the lease was personal to the Trustees and that it was entitled to refuse to accept a lease from a new landlord. The Trustees refused and Bella brought proceedings for a declaration that the agreement was terminated.

The judge had to consider whether the right was personal to the Trustees, or whether Ropemaker was entitled to enforce completion of the lease under the agreement.

As a matter of contractual interpretation, it was found that the right was not personal to the Trustees and could be assigned.

The judge noted that a large number of provisions in the agreement were expressed to be personal to the parties. For example, the agreement stated that the benefit of the agreement was non-assignable by the tenant. The judge ruled that the absence of any equivalent provision in relation to the landlord was evidence that the parties did not intend any such restriction.

The fact that the landlord was defined in the agreement as the Trustees did not prevent assignment of the benefit to a new landlord. If the definitions had such effect, it would render redundant any provision in the agreement expressing an obligation to be personal.

The draft lease, attached to the agreement for lease, also stated that references to the landlord included its successors in title. This was further evidence that the agreement was not intended to be personal to the Trustees.

Ropemaker was therefore entitled to a declaration that the agreement was not validly terminated and that Bella Italia was liable to complete the lease offered by Ropemaker or be in breach.

This is an important reminder of the basic legal principle of the “freedom to contract”. Parties are, generally, entitled to assign their benefits or rights under a contract unless expressly stated otherwise. It is important fully to understand what you and the other side are entitled to do and, when it comes to an agreement for lease or any other contract, ensure that any intended restrictions on assignment are expressly incorporated.

Posted in Real Estate News, Uncategorised

Unleashing real estate’s potential: what follows next?

The real estate sector will welcome the stability, at least in the short term, that such a decisive election result brings. Jackie Newstead, our Global Head of Real Estate, predicts a post-election bounce in investment following a return of confidence to the market and a busy Q1 in 2020.  Deals which were on ice can be resurrected and pent-up investment unleashed.  So, what key policies lie in store for the real estate sector?

Brexit

One thing is clear:  Brexit will be a top priority.  The government has promised to start pushing the deal through Parliament before Christmas and leave the European Union in January 2020.  But there are many hurdles still to cross.  Not least is finalising a new trade agreement before the implementation period runs out at the end of December 2020.

Retail

The nose dip in retail values has reflected the increasingly broken high street. Vacancies have hit their highest rates since 2015, with more than one in ten shops sitting empty.  Retail insolvencies are at a five year high, up more than 30% compared to the year before the Brexit referendum.

There is a glimmer of hope at least in the fact that it was a Conservative manifesto pledge to overhaul business rates to help revive the high street.  But for those retailers, restaurants and leisure outlets struggling with waning consumer confidence and a squeeze on discretionary spend, an end to Brexit uncertainty can’t come soon enough.

Housing

The Conservatives have promised a million homes in the next five years with affordable housing high on the agenda.  Boris Johnson will encourage councils to use planning contributions to discount homes by a third and will produce a social housing white paper outlining further reform.

Leasehold reform

The Conservatives are committed to continuing their programme of leasehold reform including a ban on the sale of new leasehold houses, restricting ground rents to a peppercorn and strengthening consumer redress for tenants.

Private rented sector

The government will repeal section 21 of the Housing Act 1988 and effectively end the assured shorthold tenancy regime and so called “no fault evictions”.  This means that landlords will only be able to obtain possession of their property in specific circumstances and not automatically at the end of the term.  In compensation the government would strengthen rights of possession for landlords.  Also on the agenda is a commitment to one “lifetime” deposit which moves with the tenant.

Overseas investment 

A stamp duty surcharge on non-UK resident buyers will be introduced.  This will apply to companies as well as individuals.  The 3% charge has been increased during the election campaign from the 1% originally suggested.  Further detail on this will be awaited with interest.

Another five years

With some pertinent proposals and a personal guarantee to get Brexit done in January it will be interesting to see just what gets unleashed in the months and years to come and how the real estate sector responds.

Although we now have a clearer road-map of the future and anticipate a return of confidence to the market, the post-election feel good factor may be short-lived if the Conservatives can’t negotiate a trade deal by the end of December 2020 in which case we may be facing another cliff edge this time next year.

Click here to see more information on what happens next.

Posted in Real Estate News

Confirmation from the Court of Appeal: Exercising CRAR will waive a right to forfeit

In an earlier blog we discussed the High Court decision in the case of Thirunavukkrasu v Brar & Brar. The High Court confirmed that taking action pursuant to the Commercial Rent Arrears Recovery regime (CRAR) would amount to a waiver of a right to forfeit. The landlords subsequently appealed to the Court of Appeal, which has handed down judgment this week.

By way of background, Thirunavukkrasu was the tenant of premises in Teddington, London and the Brars were the landlords. The rent was due quarterly on the usual quarter days and the tenant had allegedly failed to pay the December 2015 quarter’s rent. The landlords decided to exercise CRAR on 1 February 2016 and subsequently purported to exercise their right to forfeit for non-payment of rent on 12 February 2016.

Forfeiture and CRAR are two important remedies that landlords may have recourse to when faced with a tenant in arrears:

  • Forfeiture: A right of forfeiture provides a landlord with a right to bring a lease to an end early upon the default of a tenant. In the case of non-payment of rent, for which landlords often have a right to forfeit, a landlord can forfeit by peaceable re-entry without notice to the tenant. A landlord can waive a right to forfeit by unequivocally confirming the existence of the lease and communicating this confirmation to the tenant.
  • Commercial Rent Arrears Recovery regime: CRAR is a statutory regime which allows a landlord of commercial premises to recover rent arrears by taking control of a tenant’s goods at the leased premises. Importantly, CRAR requires notice to be given to the tenant 7 clear days before sending a certified enforcement agent to attend the premises.

It was previously settled by case law that a landlord levying distress (a similar process to CRAR, which was replaced by CRAR in 2014), would waive a right to forfeit. Therefore, unsurprisingly, in this case the High Court held that exercising CRAR amounted to a waiver of the right to forfeit. In the judge’s words, the “exercise of CRAR…contained an unequivocal representation that the lease was continuing”.

The Brars decided to appeal to the Court of Appeal on a number of grounds. Their primary ground was that previous authorities on distress were not binding on the Court of Appeal and that exercising CRAR was not an unequivocal act affirming the existence of the lease but, instead, a “neutral act”. The Court of Appeal rejected this analysis, considering it be “flawed on several grounds”.

One of the other grounds that the Brars sought to argue was that because they had not given the tenant notice before sending enforcement agents to the property to exercise CRAR, rendering the exercise of CRAR invalid, they had not waived the right to forfeit. The Brars argued that, in the absence of the required notice, the tenant was not aware that the landlords had purported to exercise CRAR, meaning that no unequivocal representation that the lease was continuing had been made to the tenant.

Unfortunately for the Brars the Court of Appeal considered there to be “no merit in this ground of appeal”. The Court of Appeal considered that the High Court was perfectly entitled to form the view that the tenant “knew that CRAR had been commenced by [the Brars] by the presence of the enforcement agents [at the property]”, notwithstanding the fact that no formal notice had been given to the tenant.

The Court of Appeal’s decision simply reiterates what was already understood to be the position. However, it serves as another useful reminder for landlords, when faced with a tenant in arrears, that they need to consider their options carefully before embarking upon a course of enforcement action.

Brar & Brar v Thirunavukkrasu [2019] EWCA Civ 2032

 

 

 

 

Posted in Real Estate News

Court of Appeal confirms that telecoms operators can obtain Code rights to carry out site visits

A second case has been decided by the Court of Appeal under the 2017 Electronic Communications Code (the “Code“). The Court upheld the decision of the Upper Tribunal that an approved operator under the Code has a right to access and carry out investigations on a site’s suitability for installation of electronic communications equipment (known as a “multi-skilled visit” or MSV). The Court also confirmed that the operator may apply under paragraph 26 of the Code for the imposition of an interim right solely to do a MSV. An operator is not required to link this application to an application for permanent Code rights to install the equipment.

The Court of Appeal considered at length the purpose and intention of the Code. At its heart is the push for efficiency and improvement in the country’s telecommunications network. Included in this aim lies the power of the Tribunal under Part 4 of the Code to impose a Code agreement on a site provider on both a permanent basis (paragraph 20) or an interim basis (paragraph 26) .

Specifically, the Court of Appeal was asked to consider two issues:

  1. Whether an MSV is capable of constituting a right under the Code; and
  2. If so, whether this Code right can be time bound and granted on an interim basis.

On the first issue the Court held that an MSV can amount to a Code right. The “works” in the definition of Code rights was construed widely enough to include a MSV, even though it was completely non-intrusive. Bearing in mind the purpose and intention of the Code, the Court had no trouble in finding that a MSV was a necessary first step to be “works” for the installation of telecoms equipment.

On the second issue, the Court of Appeal clarified that an application for interim rights under paragraph 26 to carry out an MSV can be made on a standalone basis and need not be in connection with a full application under paragraph 20. If granted, the interim Code right would not however have the security of tenure protection under the Code that full rights granted under paragraph 20 enjoy, which explains why the test for imposition of interim rights is lower. In practice, an operator would not require security of tenure for a Code right to carry out an MSV. Once it has completed the site visit, it will either decide to pursue an application under paragraph 20 for the full suite of installation and maintenance Code rights, or it will conclude that the site is not appropriate in which case the Code right for the MSV simply expires in accordance with its terms.

This case clarifies the Code for both site providers and operators, where previously a dispute may have arisen over the right to, and term of, access for an MSV. As the right to carry out an MSV can be a Code right, any consideration payable by the operator will be limited to the statutory “no scheme” valuation methodology, removing any ransom premiums.

University of London v Cornerstone Telecommunications Infrastructure Limited [2019] EWCA Civ 2075

Posted in Real Estate

Telecoms operators do not have a choice between the Code and the 1954 Act on renewal of rights

The Upper Tribunal has considered for the first time the relationship between the new Electronic Communications Code and the Landlord and Tenant Act 1954, ruling that an operator in occupation under a lease protected by the 1954 Act is not entitled to ask the Tribunal to impose Code rights.

The new Code came into force in December 2017, replacing the original Electronic Communications Code (as amended in 2003). Under the original Code, telecoms operators who occupied land under a lease which had not been contracted out of the 1954 Act had security of tenure under both regimes. Whilst the point was never considered by the courts, this created a potential catch-22 situation where a landowner who wanted to redevelop their land was unable to terminate the operator’s Code rights because of the subsisting 1954 Act tenancy, but was also unable to terminate the 1954 Act tenancy due to the Code rights.

The new Code removes the uncertainty by asking the following question for leases granted after December 2017:

Q: Is the primary purpose of the lease to grant Code rights?

A: If yes – The agreement is protected by the Code. The 1954 Act does not apply, even if the lease has not been contracted out

A: If no – The Code does not apply and the lease will be protected by the 1954 Act in the usual way (unless it has been contracted out)

By way of an example, the primary purpose of a lease of a retail store, with ancillary rights to install a microcell to boost signal for customers in the store, is not to grant Code rights.

However, the new Code is not retrospective. Transitional provisions apply for subsisting leases protected by the 1954 Act granted before the new Code came into force. The Tribunal has now confirmed that an operator in occupation under a continuing tenancy protected by the 1954 Act would only be entitled to renew the tenancy under that regime. It is not able to choose between the 1954 Act and the Code. Once the new lease is granted, assuming the primary purpose is the grant of Code rights, the lease would no longer be subject to the transitional provisions and the operator would be entitled to use Part 5 of the Code to seek renewed Code rights when the new lease expires.

Aside from providing clarity on the interaction between the Code and the 1954 Act for subsisting agreements, why does this matter in practice? One reason is that an operator who is forced to renew its rights under the 1954 Act does not benefit from the lower valuation methodology or the automatic sharing and assignment rights under the new Code and so the decision is likely to strengthen the bargaining position of landlords in these cases.

Cornerstone Telecommunications Infrastructure Limited v Ashloch Ltd (1) and AP Wireless II (UK) Ltd (2) [2019] UKUT 0338 (LC)

Posted in Case Updates

Landlord consent case splits the Supreme Court

Property cases do not often make it all the way to the Supreme Court, let alone cases relating to a landord’s refusal of consent under a lease.  For that reason alone, the Supreme Court Justices’ decision in the case of Sequent Nominees Limited v Hautford Limited this Autumn is valuable reading. That said, it was a case that divided the Supreme Court, with three of the five judges finding in favour of the landlord, and two judges dissenting.

The case concerned a tenant’s request for landlord’s consent to the making of a planning application. Consent was required under the terms of the tenant’s lease, but it was refused by the landlord.  The landlord was required under the lease not to unreasonably withhold consent, and the tenant applied to court for a declaration that the landlord’s consent had in this case been unreasonably withheld.  The High Court and Court of Appeal agreed with the tenant, but by a 3:2 majority the Supreme Court found that the landlord’s reasons for refusing consent had been reasonable.

So, what were the landlord’s reasons for refusing consent, and how was it that this issue should go all the way to the Supreme Court?

The tenant’s lease was of the whole of a six storey terraced building, and the user clause permitted a wide variety of uses, including office, retail and residential use.  The ground floor and basement had previously been used for retail purposes, with offices on the first and second floors and two storeys of residential premises above.  When the tenant decided to convert the first and second floors for residential use, they therefore didn’t need the landlord’s consent for the alterations or the change of use.  They did, however, need the landlord’s consent to the planning application that would be necessary to render the change of use lawful for planning law purposes.

The landlord was concerned that having residential user on the first and second floors as well as the third and fourth would render the whole premises susceptible to the process of “enfranchisement” (ability to buy the freehold – see below) by the tenant.  By exercising the right to refuse consent to the planning application, the landlord was seeking to limit the residential user.

Under the Leasehold Reform Act 1967 (“LRA 1967”), a tenant with a long lease of a “house” can exercise a statutory right to acquire the freehold of the property in return for a premium calculated under LRA 1967.  This can be a very valuable right for the tenant, but many landlords understandably feel that the mere risk of enfranchisement will devalue their reversion.  After all, a prospective buyer of the freehold would be taking a big risk if they paid more for the freehold on the open market than they could receive by way of statutory premium in the event that their tenant exercised the right to buy the freehold.

In order to qualify for enfranchisement, the building must be a house “reasonably so called”.  That nebulous definition has been the subject of extensive judicial analysis. (Please see our previous blogs A brace of cases on the right to enfranchise, Radical proposals on enfranchisement rights and Consultation launched on enfranchisement rights). For present purposes, it’s enough to say that the building does not have to be wholly adapted for use as a house in single occupation in order to qualify as a “house” for the purpose of LRA 1967.

In this case, the landlord was clearly worried that more residential accommodation would bring the building closer to being treated as a “house”, and so susceptible to an enfranchisement claim.  Unable to exercise direct control over the tenant’s right to change the use of the building under a qualified user covenant, the landlord resorted to refusing consent to the planning application, so as to prevent residential use on the first and second floors.

One of the main arguments in favour of the tenant was the absence from the lease of an express right for the landlord to exercise control over change of use (that is to say, a covenant prohibiting change of use without consent). However, the majority of the Supreme Court Justices decided that the right to refuse consent to a planning application should be read together with the user covenants in the lease: so that a change of use could only be permitted if the new use was permitted under planning law.  Therefore, the landlord was entitled to use the planning permission clause to exercise control over change of use.  In addition, it was reasonable for the landlord to exercise that control to mitigate against the damaging effect that the risk of enfranchisement would have for the landlord’s reversion.

Notwithstanding the close decision, which divided the Supreme Court, there are a handful of key points that landlords and long leaseholders can take away from this decision:

  • As was already generally accepted, it can be reasonable as a matter of principle, for a landlord to exercise a right to refuse consent under a lease, in order to protect the value of their reversionary interest from potential damage and loss.
  • That includes reasonably refusing consent in circumstances where the giving of consent might give rise to an increased risk of enfranchisement, whether or not the incumbent tenant intends to exercise that right at the time of the application.
  • When looking at a case like this, you must consider all of the tenant covenants in the round.  Whilst at face value the tenant had a broadly unfettered right to change the use of the premises, the purpose of a landlord’s right to oppose a planning application is to give the landlord some control over alteration works and changes of use, to the extent that they require planning permission.
Posted in Case Updates

Don’t overstep the mark: what can an independent expert decide in a rent review determination?

The old saying goes “if you give them an inch, they’ll take a mile”, but the Court of Appeal has reaffirmed that an independent expert appointed by parties to make a binding determination in relation to their dispute is not entitled to anything more than that inch. The scope and nature of an expert’s powers are granted to him/her by the contract between the parties, so where the contract does not confer express rights on the expert, he/she simply does not have them.

It is usual for parties to a commercial lease to agree in advance how they want to settle any dispute over a rent review, with the typical choices being a referral to an arbitrator or an independent expert for determination. Both options have the benefit of confidentiality over court proceedings, as well as typically being quicker. However, an independent expert appointed by parties to a rent review dispute must be sure he or she has the jurisdiction to determine all of the issues in dispute.

In Great Dunmow Estates Ltd v Crest Nicholson Operations Ltd, the parties entered into a contract for the sale of land. The contract was conditional on a number of things, including the parties agreeing the value of the property or referring the valuation to an independent expert valuer. The parties submitted a statement of agreed facts, recording their agreement of the valuation date. The expert appointed a legal assessor, who mistakenly gave his opinion on the correct interpretation of the valuation date (as it was not in dispute between the parties), which differed from the parties’ agreement. The expert based his determination on the legal assessor’s advice, instead of sticking to the date in the statement of agreed facts.

The claimant applied to court to set aside the determination, arguing that (a) the statement of agreed facts was binding on the expert; and (b) the expert did not have the jurisdiction to determine a matter of legal interpretation, as the parties had not granted him such rights.

Before the case reached the Court of Appeal, the Supreme Court’s decision in MWB Business Exchange Centres Ltd v Rock Advertising laid the first argument to rest. The contract provided that it could only be varied in a specific way. As the statement of agreed facts did not comply, it could not be binding on the parties and the expert.

However, the Court of Appeal agreed with the claimant on the second argument. The interpretation of the correct valuation date was a legal issue and the parties retained the right to access the courts to decide the point. There was nothing in the contract which granted jurisdiction to the expert to override this right.

The lesson to learn? The parties to a rent review dispute should take care when referring a matter to an independent expert that he does in fact have the jurisdiction to determine all issues put to him. As for the expert, it would be prudent to raise with the parties any apparent “agreements” in a statement of agreed facts which relate to legal interpretation to avoid accidentally overstepping the mark.

 

Posted in Real Estate News

Electronic signatures: a warning sign

How do you sign your emails? If your name and contact details are automatically generated at the bottom of an e-mail, do you consider you have signed the e-mail and should be contractually bound by the contents? This was the issue for the county court in the recent case of Neocleous v Rees.

The facts

The defendants had agreed to transfer a part of their land to the claimants for the price of £175,000. The terms of the agreement were recorded in a chain of emails sent between the parties’ solicitors. Each email in the chain was signed off using an automated corporate signature tool which recorded the name, role and contact details of the solicitors. Under law, a contract for the sale of land must be in writing, incorporate all the terms of the contract and must be signed by or on behalf of each party. The claimants argued that the email chain comprised a contract which had been signed by the insertion of an automatically generated footer containing the name and contact details of the sender.

The decision

The court decided that an automated electronic signature could be valid. It was the intention of the parties at the time of correspondence for the transfer of land to take place, and the automated nature did not prevent the signature authenticating this intention. The court ordered specific performance of the contract.

The court referred to the recent Law Commission report on the electronic execution of documents in which it expressed the view that an electronic signature is capable in law of being used to execute a document, provided that the person signing the document intends to authenticate the document.

It was also relevant that the solicitor had typed the words “Many thanks” at the bottom of his email – this strongly suggested he was relying on the automatic footer to sign off his name and an intention to link the email contents to his name. The test is whether the name was applied with authenticating intent. This was clearly established and the contract was enforceable.

Points to note

Although this is a county court judgment and therefore will not bind other courts, it highlights the increasing scrutiny of electronic signatures and a willingness to accept the Law Commission’s recent report on their validity. Until there is further case law or legislation, senders of emails will need to consider whether to include disclaimer wording or expressly make email chains subject to contract to avoid the assertion of an inadvertent, validly binding contract.

Case: Neocleous v Rees [2019] EWHC 2462 (Ch)