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Keeping It Real Estate

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

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)

Posted in Real Estate News

Higher MEES on the horizon?

On 15 October, the government published a consultation on tightening minimum energy efficiency standards (MEES) for commercial properties.

Click here for a copy of the consultation.  Responses must be submitted by 7 January 2020 and we strongly encourage all interested parties to respond.

The consultation focuses on two key questions:

  • What should the minimum standard of energy efficiency for all commercial properties be in 2030; and
  • How should we get there?

The government’s clear preference is that the minimum standard should be an EPC band B by 2030, but it is also consulting on an EPC band C as an alternative (it is currently EPC band E).

Implementation would be based on current MEES legislation so existing exemptions would still apply, such as the consent exemption.  Landlords would not be forced to undertake energy efficiency improvements that did not meet the existing seven year payback test for cost-efficiency.  However, the government asks whether there is a better tool than the EPC rating to achieve its policy objectives.  It intends to consult in 2020 on introducing mandatory in-use energy performance ratings for commercial buildings.  Details of what this entails will follow.

The government’s preference for an EPC band B rating is driven by two things.  First, this should bring approximately 85% of commercial properties within the scope of MEES (compared with 42% if the minimum standard is an EPC band C).  This would make a substantial contribution to reducing the UK’s carbon emissions and would help to achieve net zero carbon emissions by 2050.  Second, this would be a major boost to the energy efficiency market by stimulating demand.  Improving the commercial building stock to an EPC band B rating is estimated to require capital investment of about £5bn between 2019 and 2030, compared with an estimated investment of only £1.5bn to improve it to an EPC band C.

The consultation recognises the split incentive between landlords (who spend the capital) and tenants (who achieve the savings) and suggests that an EPC band B rating will address this issue by instigating “a closer correlation between the rental value of a non-domestic building and its energy efficiency”.

The government asks whether the route to the new minimum energy efficiency standard (whether EPC band B or EPC band C) should be incremental, with one or more phased increases in the 2020s, or achieved in a single increase in 2030 from EPC band E to EPC band B/C.  The consultation identifies benefits and disadvantages in each approach.

There are a number of challenges with the current MEES legislation, particularly when it comes to new lettings of shell and core space.  The issue turns on the absence of items (such as lighting) that would normally be part of the tenant’s fit-out.  Without them, the EPC rating is often too low and the landlord cannot legally grant the lease without installing items that the tenant will just remove.   The government asks how challenges like this can be overcome, and also for details of other problems that might arise from increasing the minimum EPC standard.

Finally, for this strengthened policy to be effective, it must be enforced.  The government seeks views on how enforcement of MEES could be improved.  A pilot project is currently being run with seven local authorities, all of whom are looking at the enforcement of MEES in the domestic sector but four of whom are also looking at its enforcement in the commercial sector.  Results from that pilot will be used to improve the enforcement of MEES by local authorities generally.

The stated policy objectives are good, namely that businesses should reduce their energy use by at least 20% by 2030.  Whether the end-goal is achievable or too ambitious remains to be seen, but innovation in clean energy technology is booming and we must be careful not to look at what might be possible in 2030 through the lens of what we think are the limits of possibility today.

Posted in Planning

CPO compensation – how much will the landowner get?

If someone’s land is compulsorily acquired to deliver a public benefit, it is accepted that they should receive fair compensation. But what that “fair compensation” equates to, is far from straight forward.

How is compensation calculated?

The principle of equivalence is key to determining compensation – a landowner should be left in no worse, and no better, position. They should not end up out of pocket because of the land they have lost, or costs they have incurred (for example in relocating), but equally cannot expect to be left in a better position. This principle permeates the different types of compensation, or heads of claim, available.

The rules used to calculate the compensation are collectively known as the Compensation Code. However, this is extremely misleading – there is no single place where this “Code “ is set out; indeed the rules are spread throughout various Acts, supplemented by case law, with further input from Government guidance. Consequently, it is widely acknowledged as a complex area, requiring specialist advice.

Value of the land

The starting point is usually the value of the land (or rights) acquired. This is calculated as the market value of the land, but calculated in the “no scheme world” – i.e. assuming that the CPO is not proceeding. What exactly this hypothetical scenario looks like can be a cause of dispute between the acquiring authority and the claimant and has its own plethora of rules. It can also lead to perceived injustice. It is not uncommon for a landowner compensated at values ignoring the CPO to find itself unable to afford a replacement property in the same area, as market value for those properties climbs to reflect the benefits delivered by the CPO.

There also needs to be agreement on the basis of valuation. In addition to the value of the land in its current use, compensation should reflect value attributable to any other planning permissions in place, and in cases where “hope value” can be claimed, to reflect the expectation that planning permission would be granted for a more valuable use. There are procedures available to confirm what hypothetical planning permissions would have been granted in the hypothetical “no scheme world“, so that valuations can also cover this.

Costs and losses

Phrases like “injurious affection” and “disturbance costs” are used to describe other heads of compensation that can be claimed. In short, these are the other losses a landowner suffers as a result of a CPO, such as loss of rents, relocation costs, and the professional costs incurred as a result of the CPO (although not those incurred objecting to the CPO).

It isn’t simply a case of handing over receipts and being reimbursed. A claimant must demonstrate that all costs are reasonable, and that they appropriately mitigated their losses. If it can be shown that a reasonable claimant would have acted differently, and consequently incurred lower costs, a landowner could end up out of pocket. If, for example, an occupier has to pay over the odds in relocation costs because it left everything to the last minute, the onus will be on it to demonstrate why that was reasonable in the circumstances.

There are also statutory payments such as interest (albeit at a very low rate), and certain fixed payments, based on the use and rateable value of the property, payable.

When will I receive my compensation?

There is no entitlement to compensation before the acquiring authority takes the land (although a claim can be made earlier). In reality, though, it is often many years after possession is taken before the final compensation figure is fixed. This can cause significant difficulties for landowners who have had to fund their own relocation, or other costs in the interim.

There is, though, a right to claim an Advance Payment. This is 90% of the acquiring authority’s estimate of compensation, but it is difficult to challenge the estimate at this stage, so Advance Payments are often based on seemingly low starting estimates. This payment should be made within two or three months of request, depending on when the CPO was made (provided possession has been taken), but there’s no way to enforce it, and payments are often late. New rules to curb this are yet to take effect.

If the parties cannot agree the compensation figure, they are encouraged to explore alternative dispute resolution and the (non-binding) Compulsory Purchase Association Protocol contains best practice on how the parties should engage to try to reach agreement.

Ultimately, if all else fails, either side can refer the matter to the Lands Chamber (Upper Tribunal) who will determine the compensation payable based on expert evidence. This, though, is a potentially lengthy and expensive procedure and although the starting point is that an acquiring authority is responsible for these costs too, where they make a sealed offer for compensation the situation can become more complicated. This is not, therefore, an option which should be embarked upon lightly.

Whilst compulsory purchase orders are a valuable tool to deliver much needed regeneration and infrastructure, they can place a significant burden on those whose land is taken, and anyone embarking on the lengthy, complex and potentially expensive journey, must ensure that they have the appropriate expert guides to help them secure the best possible outcome.

 

 

 

Posted in Real Estate News

Reacting to a CPO – what do you need to do?

In the second of our series on compulsory purchase, we turn to what you should do if your property is at risk of compulsory acquisition.

The first thing to do is brace yourself – the process is long, often slow and can frequently feel stacked against you. There are, though, key steps which can, and should, be taken to minimise any negative impacts.

It’s good to talk

It’s imperative to engage with the acquiring authority (i.e. the authority with the compulsory powers). It may be that, in discussing why the acquiring authority needs your land, there is in fact no need for compulsory acquisition – if, for example, it is only required temporarily for a site compound and you’re willing to grant those temporary rights of use. If the acquisition isn’t avoidable, you may at least be able to agree the terms (including the timing of) any transfer, helping to maintain some control of the process, and minimising disruption to your business.

Tactical objections

It is very rare for an objection, or even multiple objections, to put a stop to a CPO. So why bother? Given that an objection by a landowner can compel an inquiry, if used wisely it can significantly enhance your position.

An acquiring authority will usually want to minimise the number of objectors by the time the inquiry arrives for a variety of reasons. Shorter inquiries are usually cheaper and the authority may be concerned about the PR harm of significant objections. If an inquiry can be avoided altogether, more the better. So an acquiring authority is often most willing to reach agreement with landowners during this crucial window. In fact, in recognition of these benefits, government guidance even confirms that it may be “best value” for an authority to pay slightly more than may otherwise be due to a landowner, to remove their objection before the inquiry.

And a “deal” needn’t always be about compensation – it may be that your primary objective is protecting the operation of your business. Examples of benefits we’ve secured during this crucial time include protecting retail tenants by preventing acquisition of their units until after the festive period, and avoiding significant highways works which could deter shoppers.

Laying the foundation for a robust claim

Given the complexity around CPOs, having an expert team to support you is imperative. As well as good legal advice, this will usually include a specialist valuer, able to navigate the many nuances of CPO compensation. This will help to ensure that you don’t trip up procedurally or lose out financially. The good news is that the reasonable costs of these professionals are recoverable as part of your compensation, so you shouldn’t end up out of pocket in the long run.

As we’ll explore in the next blog, there are many other costs which can be recovered as part of your compensation. However, all of these need to be evidenced, and this is where many claimants come unstuck. It’s much easier, and often more persuasive, if details of these costs are collated as you go along, instead of trying to pull everything together when you make the final claim. Try to keep full records of all the time and money spent as a result of the CPO.

Prepare for the worst

There will be times when the compulsory acquisition of property is inevitable, and despite the often lengthy process of getting the CPO, the actual taking of possession can happen relatively quickly.

Once a CPO has been confirmed, the acquiring authority has various procedural steps to follow, but can ultimately take possession of land with only three months’ notice – and even less for some older CPOs which may not have been fully exercised yet. Trying to relocate a business in that timeframe can be extraordinarily challenging, and it is often necessary to take preparatory steps such as identifying potential new premises even before the powers are confirmed, and certainly before the relevant notices are served.

A note of caution though – although these costs are recoverable, it is rare to receive them until after you are dispossessed, meaning that a landowner effectively needs to fund their own relocation with the expectation of recovering the cost.

We’ll explore this and some of the other complexities around CPO compensation in our next blog in the series.

To see our first blog in the series, “CPO Basics- what’s all the fuss about?” please click here.

 

 

 

Posted in Planning

CPO Basics – What’s all the fuss about?

Compulsory Purchase Orders might not seem the most glamorous of topics, but with the urgent need for more homes, and a new Prime Minister showing great enthusiasm for big infrastructure projects, now’s the time to get to grips with CPOs whether you’re a promoter, landowner or have any other interest in property.

In this short series of blogs we aim to demystify CPOs, provide some practical tips for landowners and promoters, and address the thorny issue of compensation.

So what is a CPO?

CPOs grant a person (or body) the power to acquire someone-else’s land or rights over land.  This could include, for example, erasing rights of light or rights of way over land. In addition to “typical” CPOs, CPO powers can be found in various Acts of Parliament (as with HS2), or development consent orders, and many of the principles explained here will apply in those cases too.

Although CPOs are usually thought about in the context of large regeneration or infrastructure projects, they have a very wide application, and can crop up in all sorts of scenarios ranging from high speed rail lines to listed buildings that are not being properly cared for.

However, given the serious nature of these powers, they can’t be exercised on a whim and there are legal tests which must be satisfied in each case.  Although the tests will vary depending on the purpose of the CPO, there are some common factors:

The public interest

The exercise of the compulsory purchase powers must be in the public interest.  However, public benefits are given a pretty broad interpretation and it can sometimes seem like any “improvement” to an area is adequate.

Deliverable

There must also be a realistic prospect that the relevant scheme and its benefits will be delivered.  This usually means that any significant project needs to have planning permission in place and the promoter will need to identify where the funding will be coming from.

Necessary

Use of the powers should also be necessary.  CPO should be a tool of last resort.

However, disparate ownership of a site is often cited as a reason why the CPO is needed and in practice, many authorities, use the threat of the CPO to bring landowners to the negotiating table.

Even so, a promoter should actively engage with landowners at the outset and try to acquire the land/interest by agreement. Failure to do so can count against it when the CPO application is considered.

Failure to satisfy any of these, or any other elements of the relevant tests, may ultimately lead to the CPO powers not being confirmed.

Who can use the powers?

Generally local authorities and government departments have potential compulsory purchase powers as do some public bodies, such as statutory undertakers.

However, it is not unusual for acquiring authorities to make a CPO on behalf of a private developer in return for the developer covering all costs.  Where this happens, the relevant tests must still be satisfied – it is not enough that a developer simply wants to build a new shopping centre; they must also be able to demonstrate that this will deliver benefits for the area.  However, given the broad interpretation of this test, it is often pretty easy to satisfy.

What happens when there’s a CPO?

The seeking, granting, and exercise of compulsory purchase powers is a long and procedurally complex process. The exact details vary depending on matters such as: the powers being sought; when the CPO is made (this is an area where governments love to tinker), and whether the powers are granted by a standard CPO or via another route.

In most instances, there will be a public forum to voice opposition to the CPO (such as a public inquiry) as well as a raft of notices and other documents served at different times as the procedure nudges forward.  The nature of the process means that specialist advice should always be sought, as failure to engage as necessary can have serious implications.

How long will it all take?

It is not at all unusual for the whole process to take a number of years.  This can have both pros and cons for landowners.  If someone is to be dispossessed of their business, the time can be taken to find alternative premises, causing less disruption to operations.  However, in most cases the uncertainty of success whilst waiting for the powers to be confirmed and exercised can bring their own complications.

In the next blog in this series we will consider some of the key steps that a landowner can take to minimise the impact of an impending CPO.

Posted in Real Estate News

Time to weed out knotweed – is Europe leading the way?

Are we overly cautious when dealing with Japanese knotweed? Are other countries more proportionate in their approach? And do we need a new risk assessment to better reflect the situation on the ground? Read on to find out what the government’s Select Committee has concluded in an area where policy looks set to change …

In December 2018 we blogged on the UK Science and Technology Commons Select Committee’s plan to consult on “the science behind the effects of Japanese knotweed on the built environment”. The Select Committee was keen to obtain evidence surrounding the practical impact that the presence of knotweed has on buying and lending decisions in the UK and, more importantly, the reasoning behind those decisions. The results are in and the overriding conclusion is that we need to change our approach, but more evidence is needed before a revised policy framework can be set to deal with knotweed affected land.

So what did the Select Committee actually conclude following its consultation? Despite the fact that other plants cause a similar level of physical damage to property as Japanese knotweed, the stigma attached to the latter in the UK means that the reaction to its presence (as evidenced by property valuations) is often over-exaggerated. The only feature of Japanese knotweed which could potentially explain this excessive stigma is that it is more difficult to completely eradicate than other invasive plants. Despite this, the general consensus is that the UK’s approach to knotweed is “overly cautious” compared with other European countries.

Our colleagues in Germany, for example, report that knotweed is simply not a hot topic. They tell us the approach there is a pragmatic one – due to costs, landlords rather than tenants are responsible for its removal. There is also a “self-help” remedy available if a neighbour allows knotweed to encroach on your land, allowing you to remove it and be compensated appropriately.

Similarly in Hungary Japanese knotweed does not seem to have a major influence on buying or lending decisions. Anyone who allows knotweed to grow and spread may be fined and required to eradicate it. If the person responsible can’t be identified, the owner, tenant or manager of the property is obliged to deal with it. But our colleagues tell us it is not a hot topic or an issue in the same way as it continues to be in the UK.

In France the approach is even more “hands off”. There are certain non-native species of plants which cannot be introduced into the environment. However, Japanese knotweed doesn’t even make it onto the list. It is not considered as an invasive alien species and can be planted in France. There are certain rules on environmental practice which state that farmers mustn’t plant it near watercourses, but that’s about it.

So is our approach “overly cautious” compared to our European neighbours? Should this be rectified and if so, how? This is proving difficult to agree. The Royal Institution of Chartered Surveyors (RICS) risk assessment from 2012 is credited with improving lenders’ attitude to properties affected by Japanese knotweed – many lenders simply refused to lend at all in such circumstances prior to the risk assessment’s publication.

That being said, some of the standards set in the risk assessment have been widely criticised as arbitrary. The “seven metre rule” (i.e. if knotweed is visible within a seven metre radius of any building or the property boundary, then the property is deemed higher risk) which is one of the key tenets of the risk assessment, is not based on scientific evidence.

As a result, many commentators have demanded a more nuanced approach to risk classification. Such classification should take into account: the size of the infestation, the distance of the knotweed from the property and the type of property (among other factors). This plea for an amended risk assessment is currently being considered by RICS but any revised content has not yet been settled.

In general, it’s been agreed that more evidence is needed:

(a)          to establish the physical effects of Japanese knotweed on the built environment; and

(b)          on the way in which Japanese knotweed is treated in other jurisdictions.

Such evidence is needed to inform future policy and regulation so that it is both proportionate and rational.

The UK government’s Select Committee has tasked the Environment Agency, the Department for Environment Food & Rural Affairs and RICS (among others) with investigating the issues set out above. Stay tuned to find out more as these knotty issues are unravelled!

Posted in Real Estate News

Electric Vehicle charging – regulation that sparks a charge towards a better network

The UK government has published its Road to Zero strategy last year, paving the way for a significant expansion of both on and off-street electric vehicle (EV) charging facilities in the UK. The EV revolution is happening and the revenue streams and technologies available are driving the emergence of different business models and opportunities for the roll out of EV charging infrastructure.

All vehicles sold in the UK by 2040 must be zero carbon emissions. Although only 3-4% of all vehicles are now plug in, the demand for EVs is clearly rising. In 2011, only 1,000 EVs were sold in the UK. By 2018, this had increased to 485,000. EV sales increased 30% year-on-year to October 2018, and now constitute 5% of all new car sales.

The EV revolution also presents new opportunities. Potential revenues include direct sale and installation fees, and user charging fees. A wide range of retail revenue opportunities include vehicle to grid (V2G), vehicle to business (V2B) and vehicle to consumer (V2C) electricity off-take revenues.

Free charging may be offered in support of the host’s sustainability agenda or to attract footfall and increase dwell time. Fast charging (7-22kW) could be offered in locations such as shopping centres or car parks, rapid charging (43-50kW) is common in motorway service and petrol stations and ultra-fast (350kW) can offer 200km of range in 8 minutes.

On 15 July 2019 the government published two EV consultation papers which identified three main problems in providing EV charging infrastructure:

  1. the network is currently at a low density, at only around 15,000 charge points in the UK in contrast to 1 million EVs predicted to be on the road by 2023;
  2. EV charging at peak times could put an unsustainable strain on electricity networks and generation capacity, placing more reliance on smart charging (charging at different times of the day in response to signals such as electricity tariff information) and on V2G, V2B, V2C and utility scale battery storage to balance the demand; and
  3. without standardisation, the market will become fragmented in its development.

Without government intervention it is unlikely that the rate of transition to EVs set out in the Road to Zero strategy will be achieved. As a result, the government has proposed regulatory changes which will:

  1. require all new homes with a car parking space to have an EV charge point;
  2. set minimum requirements for EV charging infrastructure in new non-residential buildings with more than 10 car parking spaces and existing non-residential buildings with more than 20 car parking spaces; and
  3. require that private charge points comply with the British Standards Institution’s standards.

The majority of current EV charging demand is at home and overnight which allows demand on the grid to be balanced however, 30% of UK households do not have direct access to a garage, drive or car-port so for many, home charging will not be an easy option.

Key to the success of EVs will therefore be the engagement of local authorities, retailers, hotel chains, corporate landlords, property developers, the automotive industry, network providers and infrastructure stakeholders, all of whom have a vested interest in benefitting from these substantial opportunities.

Posted in Real Estate News

Back to basics: what to do when you receive a break notice

In the current climate, all types of occupiers including occupiers of retail, office and warehouse space, will be considering their leasing requirements and looking to rationalise their property portfolios.  As a result, landlords may find that they are seeing an increase in the number of tenants seeking to operate break rights in leases.

For obvious reasons, receiving a break notice from a tenant is often not what a landlord wants.  However, if as a landlord you do receive a purported break notice from a tenant, it is worth bearing in mind that there are a number of hurdles the tenant will still need to overcome before it successfully brings its lease to an end.

Has the break notice been validly served?

Landlords often receive break notices that, for one reason or the other, are arguably invalid:

  • Has the notice been served on the correct party?

Often tenants will fail to properly identify the landlord, or they may serve the notice on a party other than the landlord, most often a managing agent or the landlord’s solicitor.  This may result in the break notice being invalid.

  • Has the correct method of service been used?

The ‘service of notices’ provision in any lease may require the tenant to serve a notice on another party as well as the landlord, or at more than one specified address, or adopting a particular method of service (e.g. by hand).  If the tenant fails to strictly comply with any mandatory service requirements in its lease, then the break notice is likely to be invalid.

  • Has sufficient notice been given?

Invariably break provisions will require a tenant to give a certain amount of notice, whether this be three months, six months or some other period.  Tenants will sometimes fail to give sufficient notice, often by either a day or two if the tenant has simply miscalculated a notice period.  Failure to give sufficient notice will invalidate the notice.

  • Has too much notice been given?

There is case law to suggest that a tenant cannot serve a notice too far in advance.  For example, if a tenant has to give six months’ notice and, in fact, gives notice a number of years in advance, this may, depending on the specific wording of the break clause in question, invalidate the notice.

There are, of course, many other deficiencies which may invalidate a break notice.  Therefore, if a landlord does receive a notice purporting to break a lease, it is worth seeking advice as to its validity before corresponding further with the tenant.

Has the tenant complied with any break conditions?

Most leases will impose certain break conditions on a tenant.  Two usual break conditions will be that the tenant has paid all rent due under the terms of the lease, up until the break date, and that, on or before the break, the tenant has given up occupation of the premises.

It is important to remember that, if a break is due to operate midway through a quarter and there is a condition requiring that the tenant must have paid all rent due under the lease up to the break date, the tenant must have paid the full quarter’s rent in order to satisfy the break condition.  Further, in the absence of an express provision in the lease to the contrary, the landlord will not be obliged to repay any overpaid rent.

It is also worth noting that some leases will have particularly onerous break conditions, such as requiring a tenant to give up vacant possession (as opposed to just occupation), or to carry out certain reinstatement or repair works.  Such conditions could well provide a landlord with the opportunity to argue that a tenant has failed to operate a break.

If a tenant fails to comply with any break condition (no matter how onerous) then, unless the landlord waives such non-compliance, the lease will continue.

So what should landlords do?

If a landlord receives a break notice, it should not just assume that it is valid or accept that the lease is going to terminate on the date specified in the notice.

It is often worth a landlord seeking advice on the validity of a break notice and also any break conditions, which may provide it with an opportunity to challenge a tenant’s ability to break its lease.