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Keeping It Real Estate

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

Posted in Real Estate

Proptech Decoded – Pulling the chain on traditional land registration?

HM Land Registry is currently looking into the potential use of blockchain technology as part of its Digital Street project.  This supports HM Land Registry’s aim to “become the world’s leading land registry for speed, simplicity and an open approach to data”.

But how would this work in practice and what are the issues which will need to be resolved to make this a reality?

What advantages could blockchain technology bring to land registration?

Blockchain presents clear advantages over the existing land registration system, specifically:

• Security: blockchain is considered secure and could significantly reduce property fraud.  Records are cryptographically protected, with each property being given a unique code and linked to a smart key held by the owner.  The database is distributed across a network of computers, making it hard to hack.

• Speed: changes in property ownership would be recognised almost instantly, speeding up the time taken to complete transactions.  Smart contracts could take this a step further and allow a transaction to be completed automatically once the specified contract pre-conditions (eg payment of funds) are satisfied.

• Cost savings: completing transactions more quickly and securely would inevitably lead to cost savings for land registries and the parties concerned.  Further, having real-time property information available would facilitate better decision making and more efficient property management.

Will it make the conveyancing process redundant?

No.  Whilst any change in ownership could be recorded instantly, parties will still want to carry out prior due diligence and agree the terms on which the transaction is to be completed.  It is usually this part of the process which takes the time and blockchain doesn’t eliminate the need for this.  Blockchain may make it easier to access due diligence and title information about a particular property if such information is also recorded on the blockchain.

How will it protect confidentiality?

This is one of the biggest challenges.  One of the advantages of blockchain is its transparency, as it requires all members of the network to view and approve changes.  In practice, this would be a largely automated process, with nodes checking that each transaction submitted to the ledger is valid and that the chain has not been corrupted.

However it raises questions regarding how access to data would be controlled.  Currently, most property ownership information is publicly available and it is unlikely we would see a situation where blockchain would make this more restricted.  Most likely, there would need to be a public site (like the current HM Land Registry website) where the public could access title information held on the blockchain.  However steps would need to be taken to ensure that confidential transaction information (eg personal side agreements) are not made publicly available – whether by keeping this information off the blockchain in the first place or restricting access to such information to specified members of the network.

Does it completely eliminate the risk of fraud?

No.  It has been argued it would be harder to hack information contained on a blockchain given there are multiple copies of the database, however hacking is not impossible and for determined hackers the stakes will be temptingly high.

Are there are any other hurdles to overcome?

Yes.  Legislative change would be needed to support blockchain transactions in a real estate context as currently, for example, certain transactions can only be effected by deed. There will also be time and cost implications to HM Land Registry in implementing blockchain technology.

The future

The UK is not unique in considering the use of blockchain to modernise its system of land registration.  Internationally various other countries (including the Ukraine, Georgia, Sweden and Dubai) have all announced plans involving blockchain.  The case for modernisation is arguably more compelling in countries which do not have an established and well-respected centralised system for land registration as we have in the UK.  However there are still clear benefits to using blockchain technology which HM Land Registry is right to explore.  As the technology continues to evolve, it is vital that our transactional process continues to keep pace.

Ever wondered what PropTech was all about? Our PropTech event on Thursday 4 October will decode what it’s really about and how to stay ahead of the game. If you are interested in attending please contact Lauren.Boyle@hoganlovells.com

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Posted in Real Estate

Proptech Decoded – Proptech and its impact on the logistics sector

Robots; underwater warehouses; airships releasing drones for deliveries. No, this isn’t a pitch for a science fiction film but the future of distribution centres. The rise in global e-commerce together with shifts in customer delivery expectations and technological innovation are driving major developments in the logistics sector. In this blog we explore three such developments.

The location and shape of distribution centres

The near future could see distribution centres underwater or even taking to the skies!

A shortage of land is a constant and pressing issue for the logistics sector. Coupled with the growing need to ensure last-mile and last-minute deliveries, the price of traditional warehouses located in the vicinity of big cities is likely to increase drastically. Technology may offer alternative solutions.

Online retailers are already filing patents for airships to release drones or parachute deliveries, and underwater warehouses in lakes.

Coming back down to earth (quite literally), Hounslow Council has granted planning permission for a 2million sq ft underground warehouse alongside the Parkway (A312) near Heathrow Airport. The potential for subterranean development has already been spotted in America with the world’s largest underground business complex, “SubTropolis” located in Kansas City. This is housed in an excavated mine the size of 140 football fields and provides 6million sq ft of lettable space, with more than 8million sq ft available for expansion.

Developers are also looking at taller distribution centres as automation allows for higher racking systems as square footage is looking increasingly expensive. The natural way is up. All new P3 warehouses for example have 12m clear internal heights, which is 2m more than the current norm. This increases storage capacity by 20%.

Robots and smart tools

Technology is also changing how existing distribution centres operate.

Robots already play a significant role and this is set to increase. Certain retailers’ distribution centres are now almost fully automated and can process millions of items a week. Ocado Technology is trialling “CargoPod” autonomous vehicles to deliver groceries in residential areas of Greenwich. A growing shortage of labour, potentially exacerbated by Brexit, may lead to Wall-E lookalikes working in warehouses and handling our groceries before long!

The introduction of AI management systems also allows for the receipt and dispatch of more goods through quicker loading turnaround times. While current warehouses may need about 25 loading bays, warehouses of the future may use drones leading to higher site density and ultimately greater value.

Powering the future

The main challenge will be to ensure the warehouses of the future have enough power. Some owners have set out ambitious solar panel installation projects on the roofs of distribution centres, hoping to see as much as 80% of their energy generated in this way. IM Properties has built a 69,000 sq ft warehouse in Birmingham with photovoltaic roof panels which is fully electricity-cost neutral.

The world’s first carbon-neutral warehouse was launched in Enfield, Middlesex in 2016. The 173,000 sq ft development has reduced its power consumption through the use of motion controlled LED lighting and creates its own power through photovoltaic panels across its three buildings.

By enabling self-sufficiency, businesses can keep operating costs down and provide customers with cheaper warehouses.

Conclusion

Technological innovation is likely to face greater demand due to changing consumer behaviour as well as the redesign of logistics networks.

It is important to note that the road to automated distribution centres has been littered with obstacles, such as high costs, inflexibility, and non-scalability. As such, only 8% of warehouses in the grocery retailing industry are currently automated. But the future is coming …

Ever wondered what PropTech was all about? Our PropTech event on Thursday 4 October will decode what it’s really about and how to stay ahead of the game. If you are interested in attending please contact Lauren.Boyle@hoganlovells.com

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Posted in Real Estate News

Radical proposals on enfranchisement rights

The sale of houses on a leasehold basis has been criticised in some quarters because of its apparent unfairness to leaseholders. Leaseholders, in contrast to freeholders, lease a property for only a number of years. The question then being, what happens at the end of the term?

Enfranchisement rights provide leaseholders who hold a lease of 21 years or more with the right to buy the freehold of their house or obtain an extended lease of their house or flat. The procedure for doing so is not, however, universally popular. Leaseholders argue that it is complex and expensive, leading to unnecessary conflicts, litigation and delay.

In light of this, the Law Commission has recently published a position paper on proposed reform of the enfranchisement process.

The current enfranchisement rules are contained in over 50 Acts of Parliament. Moreover, there are different rules for leaseholders of houses and of flats, and the qualification criteria are complex and scattered across several statutes. Bringing an enfranchisement claim, even if there is no dispute between the parties, often brings about legal and other costs because of the complexity of the process. To make matters worse, leaseholders of houses are required to contribute towards the landlord’s non-litigation costs. Even if these costs are considered unreasonable, leaseholders are often left with no other option than to pay because of the disproportionate cost of disputing the sums.

The scheme is also unpopular due to its highly technical nature; simply beginning a claim can give rise to difficulties for a leaseholder. Minor errors in the tenant’s initial notice may invalidate the claim. Landlords might be difficult to identify, and there can be disputes about whether a notice has been validly served. Professional advice (plus the associated costs) is often required at an early stage.

Leaseholders argue that the valuation approach in the scheme is overly complex and difficult for the layman to understand. Leaseholders also state that where ground rents are high, the need to enfranchise is even more important for the leaseholder, but premiums are also too high.

In response to all this, the Law Commission has proposed several changes. These include changing the formula for calculating the valuation of the property and removing the requirement for leaseholders to have owned the property for two years before trying to buy it. The Law Commission also proposes replacing the right of leaseholders of houses to purchase a one-off 50-year lease extension at a high ground rent with a right to purchase an unlimited longer lease extension without a ground rent and to generally simplify the procedure in a bid to save both parties’ costs.

The Law Commission has stated however, that the intention behind the proposals is not to remove the requirement for leaseholders to pay landlords an appropriate price but rather to improve the process and reduce premiums payable by leaseholders, while ensuring sufficient compensation is paid to landlords. They must also take care not to cause damage to the leasing market at a time when supply is not meeting demand. Perhaps though, this is easier said than done… We shall find out later this month when the Law Commission plans to publish its full consultation paper!

Posted in Real Estate

Putting the “Smart” in Smart Cities

It is acknowledged by most, that cyber security is of paramount importance in any technological advancement and Smart Cities are no different.

The Mayor of London recently unveiled his plan to make London the world’s smartest city; recognising that Londoners treat digital connectivity as importantly as they do other basic utilities. The Mayor’s “Smarter London Together”, published in June 2018, emphasised the importance of cybersecurity in one of its five key missions. Mr Khan plans to support public service providers with data-led initiatives through a designated London Office for Data Analytics and establish a city wide strategy for cybersecurity.

The prioritisation of cybersecurity seems to be a smart move. According to ISACA’s 2018 Smart Cities Survey, energy, communications and financial services are the three critical infrastructure systems most susceptible to cyberattacks. Of those attacks, malware/ransomware and denial of service attacks were found to be most crippling. These systems form the very foundations of any city, be it smart or otherwise.

What does all this mean for the property owner?

The hot topic at the moment is data breach, following the introduction of the General Data Protection Regulation and potentially eye-watering fines. It’s easy to see why. Property managers should certainly keep their own house in order and consider the data they collect from tenants, employees and service providers etc. They should also give thought to the data that they may be less aware of, such as information collected for security purposes from CCTV cameras, ID cards, passes and security gates.

There may be an even weaker link: the building management system (BMS). BMSs are increasingly sophisticated and the systems they control have become ever more connected. These cyber “bridges” linking the various services of the building not only offer a platform to launch a widespread data breach but also expose the property owner to physical disruption. It’s not difficult to imagine the chaos that could result from a hacker or terrorist gaining control of the lifts, heating and cooling systems or access controls to a property.

What should I do?

Property owners need to ensure that they have the appropriate level of security in place, both physically and virtually. They should review the data they hold and how they use it. Finally, they should have an eye to the future when entering into new leases and insurance policies to make sure they cover the emerging risks and costs as well as the existing ones.

No city is smart without cyber security.

Ever wondered what PropTech was all about? Our PropTech event on Thursday 4 October will decode what it’s really about and how to stay ahead of the game. If you are interested in attending please contact Lauren.Boyle@hoganlovells.com

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Posted in Planning, Real Estate

PlanTech Decoded – the Tech is here, so let’s Plan to use it!

We can fly around the world with a tap; find a soulmate with a swipe and buy a house with our thumb print, so why is the UK so old school when it comes to getting planning permission?

The good news is that we needn’t be. The technology to revolutionise the planning process is already here and is being used in other countries around the world to build the homes, offices and infrastructure they need to flourish.

The benefits are wide-ranging: developers can secure a more robust consent, more quickly; communities are better informed and feel properly engaged and ultimately better places are created.

Here are a few examples of how technology can be used to improve the planning and development process:

Blockchain

This ledger technology allows instantaneous and inviolable sharing of data by the use of timestamped blocks. This could be used to speed up the grant and implementation of planning permission by using it to validate a planning application and to record compliance with planning conditions, Section 106 obligations and Community Infrastructure Levy payments.

The beauty of blockchain is that it can be updated in real time and can sit behind various formats. City Zenith, a Chicago-based company has recently launched a platform creating an interactive 3D city model. The idea is that, in time, users will be able to access the data embedded in the model and see all the property and planning information relating to the buildings.

2. 3D Printing

Blockchain can also ensure a smooth and timely transition to construction and fits particularly well with 3D printing. The planning requirements can be fed into the computer linked to the printing robots, who will proceed with the build, ensuring that it is planning compliant.

3D printing is advancing at a fast pace. In the Netherlands the first 3D printed neighbourhood is expected to be up and running next year. Houses are being printed by robots that can a complete a building in 12 hours. Models currently cost around $10,000 in materials but the company producing the houses expects to reduce this figure to $4,000.

The Dubai Government announced its 3D Printing Strategy in April 2016 and expects 25% of Dubai’s construction to be 3D printed by 2030. Its new ‘Office of the Future’ took only 17 days to print and was installed on site in two days.

3. Virtual and Augmented Reality

Another exciting advancement in the PlanTech world is the use of virtual reality (VR) and augmented reality (AR). What’s the difference? AR superimposes a computer-generated image on a user’s view of the real world. VR on the other hand, is an all surrounding computer-generated experience in a simulated environment, so VR is much more immersive.

One of the key aspects of the planning process is the assessment of the impacts of a development. This often involves lengthy Environmental Statements and reports which take a long time to put together and a significant amount of time to review.

The use of VR and AR can reduce this markedly by replacing the written word with visual examples which provide a lifelike replica of the completed development, allowing planners, councillors, developers and local residents to understand more about how the building will look and operate. It is already being used in planning inquiries in the UK and particularly in relation to daylight and sunlight modelling.

Providing a working model of the development dramatically increases the chances of ensuring that a quality product is ultimately produced, which is excellent news for the built environment.

4. Drones

According to PwC, the global market for business services using drones is worth more than £96 billion, with a sizeable chunk going to real estate management. As well as addressing compliance and transparency issues, the use of drones can help developers to show the current state of a site and existing issues which might be affecting it.

The surveying benefits which drones offer could mean that a developer is able to demonstrate the positive effects of its development compared to the existing site.

5. AI

The amount of data within planning applications, local plans and development plan documents is colossal. Harnessing this information in an effective way provides a fantastic opportunity to reform the planning system.

Artificial intelligence products can review and collate data at an astonishing pace. If other industries are embracing this latest technology to innovate and grow, the planning world needs to ensure that it is not left behind.

Companies like Google and Facebook are already designing their own cities using this technology and local planning authorities need to get behind this too, particularly as resources and staffing numbers are squeezed.

Back to the Future

Such new technology gives the government and the real estate industry the means to revolutionise the UK planning process, but is there the will to do so? I certainly hope so.

Yes, it will take some time and effort to put these new systems in place, but investing in this area now could dramatically improve the success of our economy and the places that we live, work and play. After all, opportunity doesn’t knock on your door anymore – it sends you an email.

By Kathryn Hampton and Steven Minke

Find us at what3words

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Posted in Real Estate

PropTech Decoded – Ten Top Tips for Taking Flexible Working Space

With a boom in co-working across the world, getting the best deal on the space you occupy and understanding the small print is top ticket for flexible leasing. Before signing on the dotted line, ask yourself these key questions to make sure you get the most out of your flexible workspace:

  1. What space do you get? Will it be the same desks/offices every day or is it just first-come-first-served? Does the arrangement meet your specific technology security and confidentiality requirements? Does the provider guarantee you the space?
  2. For how long are you tied in? Can you leave early, and if so is any deposit refundable or a minimum fee still payable?
  3. Can the provider evict you early?
  4. Can you stay in the space for longer, or take more space? If you can, what will it cost you to do so and what can or should you agree upfront?
  5. Is any deposit payable when you sign the contract? What must you do to get it back at the end?
  6. Can your staff enter the building or the working space immediately, and what can you do in advance to save time on the first day?
  7. Do you pay extra for office services (e.g. printing, scanning, photocopying, telephones, internet data services and IT support) and refreshments? If so, what can or should you negotiate in advance to keep control of the bills?
  8. What “hidden” costs might the provider seek to pass on to you, and is there anyone else who might seek to charge you directly for something?
  9. Do you need to bring your own IT equipment/telecoms cables etc. into the space? If so, do you have all the rights you need, or is a third party (e.g. the provider’s landlord) also going to have to be involved? Make sure you can arrange everything before you commit to taking the space otherwise you might end up paying your provider for space you can’t use.
  10. Finally, are there hidden traps in the agreement? Clauses on things like anti-money laundering, bribery and corruption, the use of brokers are often found there.

Ever wondered what PropTech was all about? Our PropTech event on Thursday 4 October will decode what it’s really about and how to stay ahead of the game. If you are interested in attending please contact Lauren.Boyle@hoganlovells.com

Find us at what3words

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Posted in Real Estate News

Call for Evidence on EPCs

On Thursday 26 July 2018, the government published a Call for Evidence on Energy Performance Certificates.  The deadline for responding is 19 October 2018.  The government is particularly keen for responses from building owners and occupiers (both domestic and commercial), estate agents and others involved in the sale or letting of buildings, anyone involved at any level of the energy efficiency products supply chain (such as EPC assessors, accreditation bodies, software providers and enforcement bodies) and anyone else who regularly uses EPCs.  If that’s you, this is an opportunity to influence how future government policy affects you and your business.

This Call for Evidence comes hot on the heels of the Call for  Evidence – helping  businesses to improve the way they use energy which was published by the government on 18 July and which is open for responses until 26 September 2018.  Both Calls for Evidence are a result of the government’s continued thinking and policy development following the Clean Growth Strategy  published in October 2017.

EPCs

EPCs were originally introduced in 2007, via a European Union Directive, with the intention of enabling individuals and businesses to compare the energy performance of different properties and to use this as a factor in choosing where to live/rent.  However, since then the uses to which they are put have expanded significantly. In particular, since 1 April 2018, the asset rating in an EPC is of critical importance to landlords because of the prohibition against granting new leases, and renewing leases, of premises with a “sub-standard” asset rating (of F or G, shown on a valid EPC).   The government therefore wants to ensure that it understands all the uses (both regulatory and commercial) to which EPCs are now put.  It is also trying to improve their quality, the way in which they encourage building owners to improve the energy performance of existing building stock, and the availability of EPCs.

Quality

The government wants to reduce the degree to which EPCs are inaccurate and/or unreliable and it needs to understand the causes of this and how they can be addressed.  The Call for Evidence contains a number of suggestions, such as improving assessors’ access to relevant data to reduce the number of errors or assumptions made when producing EPCs.  This could mean providing EPC assessors with data from previous EPC assessments, data held by public bodies (such as Building Control and the local planning authority), and possibly smart meter data (although the Call for Evidence acknowledges this may cause data protection and consent issues).

There is also a clear intention to address perceived attempts to “game” the system and obtain a higher asset rating than might be appropriate.  The government thinks that the MEES legislation in particular may have resulted in building owners pressurising assessors to produce inaccurately favourable EPCs, possibly by making it appear that features such as insulation exist when in fact they do not.  Clearly the government wants to prevent this.

Whilst this seems perfectly proper, there may be difficulties in practice.  For instance, an EPC assessor preparing a new EPC on second hand retail space in a “white box” condition cannot currently assume that the future occupier’s fit-out will comply with modern building regulations (he can assume this for newly developed space), and so will have to make worst-case assumptions.  This will often result in the space having a sub-standard asset rating, making it difficult for the building owner to let the space without breaching MEES.  A common solution to this is to install temporary LED lighting, which allows the assessor to displace the worst-case assumption of tungsten lighting and normally results in a substantial improvement in the asset rating.  Preventing that sort of practice will make it much more difficult for building owners to relet second hand retail space in a “white box” condition.

The government also acknowledges that a lot can happen to premises without triggering the need for a new EPC to be prepared, which can mean that an existing, and lawfully valid, EPC may not be accurate as it does not reflect changes since it was prepared.  Several new triggers for obtaining a new EPC are therefore proposed, such as major renovations and minor works (for instance the installation of wall insulation, or the replacement of windows or a boiler), and it is also suggested that there could be triggers linked to renting out a room in a House in Multiple Occupation and to accessing a green mortgage.

How EPCs encourage action

The Call for Evidence asks about how consumers engage with the recommendations reports produced with EPCs, and how this process can be improved.  In particular, the government is seeking views on the Green Finance Taskforce’s recent suggestion that there should be mandatory operational energy ratings, and a public reporting mechanism, building on the (limited) current use of Display Energy Certificates.

The government also wants to make EPCs more relevant in the decision to buy or take a lease of a property, and suggests that property comparison websites could allow users to filter by asset rating.

There is no suggestion in the Call for Evidence that MEES might be made stricter, although we know from other government publications in the past 12 months that this is on the agenda.

Availability

The government wants more EPCs generally. The more EPCs there are, the more useful the data they provide about existing UK building stock and the more effective policies and legislation will be.  MEES, for instance, only applies if there is an existing, valid EPC so one simple way of avoiding it is not to have an EPC at all!

The Call for Evidence seeks suggestions on encouraging building owners and other stakeholders to access and use EPC data and clearly implies that there is a pattern of non-compliance with the current legislation requiring an EPC to be provided on the sale or letting of premises.  This leads to the suggestion that enforcement should be improved (possibly by increased regulation of estate agents and letting agents).

Finally, the government would also like to know whether there are barriers to obtaining an EPC that can be addressed, such as how easy it is to get an assessment undertaking and the cost.  The Call for Evidence recognises that some of its suggestions may result in increased costs, which it says the government will consider when making any changes.

Go on, respond!

It is likely that most developers, building owners and occupiers will have a view on some or all of these topics.  The Call for Evidence is their opportunity to make their voices heard!

Posted in Real Estate News

Whose property is it anyway? Government publishes plans for beneficial ownership register

Draft legislation to implement the government’s proposals for a “beneficial ownership register” has finally been published and the government is seeking views on the detail. The Registration of Overseas Entities Bill follows hot on the heels of last year’s consultation on the proposed register and provides some much needed flesh on the outline plans.

The government’s preferred option is a register showing the owners and controllers of overseas entities that own property in the UK. This will affect freehold and leasehold property (where the term is more than seven years) and will apply to all overseas entities except governments and public authorities.

Beneficial ownership will need to be registered with (and verified by) Companies House who will then issue a unique identification number (an overseas entity ID). Without the ID, the overseas entity will not be registered at the Land Registry as the owner of property. The overseas entity will need to comply with an “updating duty” (at least every 12 months) in order to retain its status as a “registered overseas entity” and restrictions will be put on the title registers of its properties that will prevent the registration of certain transactions (transferring the title, granting leases with terms of more than seven years or granting charges) unless the overseas entity is registered (or is exempt from registration).

Overseas entities who already own UK property will be given 18 months from implementation of the new law to register and obtain an ID. After that a restriction will be put on their property registers whether or not they have done so.

The diagram below (published as part of the government’s impact assessment) sets out how the proposed system will work:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Bill is open for consultation and views are specifically invited on the following topics:

  • Whether there are any types of overseas entities that may not have beneficial owners or managing officers.
  • Whether it is reasonable that foreign governments and public authorities should be exempt from registration and whether there are any other types of overseas entities that should be exempt.
  • Whether the requirements should be modified for any types of overseas entities so that the information they have to produce would be changed or reduced.
  • Whether registration should still be possible in the rare circumstances where an overseas entity is unable to identify their beneficial owners (the government envisages that this may be needed, for example, where an entity is incorporated in a jurisdiction that allows “bearer” shares).
  • Whether the scope of the prohibited dispositions are sufficient.
  • Whether there should be power to disapply the effect of the prohibitions in specific circumstances (the government envisages that there may need to be an “appeal” process which could be invoked on a case by case basis).
  • Whether the proposed exceptions to the prohibited dispositions (court order, statutory obligations, prior contract and power of sale/receivership dispositions) are sufficient.

The government describes the register as a “world’s first” that will tackle money laundering and increase transparency. It is especially quick to highlight the criminal sanctions that will follow for those who illegally profit from the UK’s real estate market through the illegal use of overseas shell companies.

The government expects the beneficial register to become operational by 2021.

This is another key step on the road to greater transparency. It will still be important to ensure that the proposals are workable and will not cause undue problems with the proper operation of a real estate market.

The closing date to submit your views is 5pm on 17 September and you can respond by clicking here.

Posted in Case Updates

Tangled in Knots – Beware of Japanese Knotweed

Japanese knotweed has blighted UK properties for over a century. The invasive plant’s roots and stems spread rapidly and have the capacity to smash through concrete, damaging a building’s foundations. Eradicating the knotweed is another headache entirely. As a result, securing finance on blighted properties can prove to be very tricky.

These issues were at the heart of the recent Court of Appeal case of Network Rail Infrastructure Limited v Williams and Waistell. Williams and Waistell each owned a bungalow neighbouring part of Network Rail’s estate from which Japanese knotweed had spread.

The County Court originally held that for “encroachment” type nuisance claims to succeed, physical damage has to have been caused to property. The difficulty faced by the respondents was that they could not prove that the knotweed had damaged their properties’ foundations. Despite this, the respondents were awarded damages in excess of £30,000 in connection with a “loss of amenity” type nuisance claim. This sum was based on the loss in the value of the respondents’ properties caused by the presence of the knotweed.

On appeal, the Court of Appeal agreed with the outcome of the decision at first instance, but for different reasons.

The Court of Appeal held that private nuisance claims, at their very core, concern the protection of the owner of land and their use and enjoyment of it, rather than protection of the market value of property. As such, damages for nuisance should not be linked to the diminution in value but should instead compensate for loss of use and enjoyment of property. The presence of the knotweed would increase the costs incurred by the respondents when developing their land (whether or not such development was currently intended). It is this increase in cost that should form the basis of the damages claim.

Crucially, the Court of Appeal also clarified that the categorisation of nuisance claims into “types” (such as “loss of amenity” type) is archaic, and the constituent parts of a valid claim are the same irrespective of “type”. As such, physical damage isn’t necessary as a pre-requisite to a successful nuisance claim as long as there is some identifiable loss of amenity.

The fact that an owner’s liability can arise prior to physical damage being caused to neighbouring property, in particular, will alarm landowners. A more proactive approach to estate management will need to be adopted by landowners who already have a knotweed problem, to identify areas of risk at an early stage so that potentially costly claims can be avoided.

 

Posted in Real Estate News, Uncategorised

The CRC is dead: long live Streamlined Energy and Carbon Reporting

On Wednesday 18 July, The CRC Energy Efficiency Scheme (Revocation and Savings) Order 2018 was laid before Parliament.  This Order will come into force on 1 October this year and will abolish the CRC when its current Phase ends.  This means that, from 1 April 2019 onwards, there will be no further obligation to monitor gas and electricity supplies under the CRC. The final CRC allowances must be purchased and then surrendered by the last working day of October 2019.

Few, if any, in the property industry will mourn the passing of the CRC.

However, we now need to gear ourselves up for Streamlined Energy & Carbon Reporting instead!  Also on 18 July, the government published its response to the consultation it launched in October 2017 on what could replace the CRC.  Government has already legislated to increase the Climate Change Levy in 2019, so that the abolition of the CRC is fiscally neutral to the Treasury.

The consultation response shows a clear policy intention to replace the reporting aspects of the CRC with a new mandatory reporting regime that broadly follows the existing reporting regime under the Energy Savings Opportunity Scheme (ESOS). However it will be implemented through the existing mechanism of directors’ reports within annual company accounts rather than requiring additional filings with Companies House (or other regulator).  This follows the recommendations of, in particular, The Financial Stability Board’s Taskforce on Climate-related Financial Disclosures, that climate-related disclosures should be part of mainstream financial filings.

This means that the reporting obligation will normally fall upon the highest UK company in a corporate group (as that is usually the entity that submits group accounts) and that non-UK companies will be exempt from reporting.
The proposal is that all quoted UK companies and all “large” unquoted UK companies and LLPs will be required to report their energy consumption and greenhouse gas emissions.  The proposed thresholds for triggering the reporting obligation are:

– 250+ employees; or

– an annual turnover greater than £36m and annual balance sheet total greater than £18m.

The consultation response suggests this will catch about 11,900 companies, 230 LLPs, and up to 50 unregistered companies who will need to include SECR information in their directors’ reports.  However, there will be an exemption for “very low energy users”, which the government suggests will be entities that use 40,000 kWh or less in a 12 month period.  There will also be an exemption for entities who cannot practically report.  This all aligns, broadly, with ESOS and mandatory greenhouse gas reporting.

SECR information must include a section on energy efficiency action taken in the financial year.  There will be no compulsory disclosure of ESOS recommendations and how they have been acted upon, although reporters can of course comment on this if they wish to do so.

It will be interesting to see how the property industry responds to these proposals and how the government develops and fleshes them out in legislation.  As the new reporting regime will need to come into effect in 2019, expect to see draft legislation published soon to give effect to the outcome of the consultation.  More on that when we have seen it!