Don’t waste money on space you don’t use! Re-gear

Blog | Real Estate

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With many companies now operating a hybrid working model following the work from home directive in 2020, many businesses no longer need the amount of physical space they once did.  Businesses should not go on paying for unused space, and waiting for their leases to expire, so what is the answer?  Re-gearing a commercial lease could be the financial solution.

What does re-gearing a lease mean?

Re-gearing a lease involves a landlord and a tenant deciding to change the terms of the lease. From the tenant’s point of view, this involves changing the terms consensually with the landlord to meet their interests.  There are often commercial levers on both sides of the negotiating table that make this process an attractive and mutually beneficial arrangement.

In response to the pandemic, businesses quickly invested in technology and platforms which made working from home easier than ever before. Now restrictions have eased many workforces simply do not want to go back into an office environment full time, with a recent survey showing that 57 per cent of employees said they preferred hybrid working – splitting their week between office and home.  With less people onsite every day, offices can now be smaller while still accommodating employees’ needs.

When re-gearing a lease, all terms can be changed/negotiated such as rental rates, length of term, underletting, and issues relating to service charge. From a tenants perspective understanding what works for their business is key to getting the right deal from their landlord.

With inflation at a 40 year high, any way of mitigating the impact of rising inflation has to be worthy of consideration and with premise costs making up such a large proportion of a business’ expenditure – working to reduce that can only be a good thing.

For tenants, re-gearing a lease can allow more flexibility than simply switching to a smaller office, enabling them to transform the space into one that works more efficiently for the business. Many companies are choosing to repurpose their traditional office space into a ‘hub’ for employee collaboration and socialising. This creates the perfect opportunity for companies to really think about the needs of their business and raise any potential layout changes or improvements to the building that may be needed.  Offices can no longer be ‘one size fits all’ but should have features bespoke to the individual needs of the company.

The advantages of re-gearing can be attractive to landlords too, for example they may be persuaded to re-gear the leases to increase the value of their portfolio. Re-gearing a lease can also provide more certainty for landlords, as the lease could be renewed prior to the anticipated renewal date. Landlords would rather have renegotiated leases than vacant premises and have to pay empty business rates. Compromising with tenants and allowing them to adapt offices in line with their needs may mean that they become more invested in the space and are less likely to move in the future. If a tenant wants refurbishment or alterations, then they may want to secure a longer lease term.

A major benefit of re-gearing is that it can be done at any point during the lease term, as long as there is mutual agreement. It is important for both parties to maintain a good relationship and regular dialogue. For tenants, this means ensuring that there are no rent arrears that need to be paid, as well as keeping the space in good condition. Basics like this make it more likely that both parties will be open to negotiation, making the process more straightforward for all involved. If the relationship is strained or logistics mean that negotiation is challenging, it may be possible to be in contact via the agent.

As with any change to legal documentation it is so important for both parties that the re-geared leases are properly documented. The consequences of the new documentation not being properly considered could include the tenant having to pay extra stamp duty land tax, or the tenant losing their security of tenure. Like any legal contract, if any part of the document is unclear, there is greater risk of a lawsuit, costing both parties valuable time, money and resources, so seeking expert advice early on can help to ensure the process goes smoothly.

Re-gearing leases gives both tenants and landlords the opportunity to check that it is still fit for purpose and beneficial for both parties. It can provide an immediate solution to the problem of wasted space and a way of minimising the impact of rising inflation by reducing the business’ outgoings. It can allow companies to modernise, minimise their expenditure and improve their employees’ work/life balance, while simultaneously giving landlords the opportunity to increase their return on investment. Essentially, re-gearing a commercial lease can be a win win situation.

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The new Commercial Rent Arrears bill - not the end to landlords’ woes

Blog | Rent Disputes

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The Commercial Rent (Coronavirus) Bill finally received Royal Assent on 24 March 2022 and has established a legally-binding arbitration process for landlords and tenants to settle certain outstanding debts arising from the national lockdown period between 21 March 2020 and 18 July 2021.

What is the bill?

The bill has been introduced to coincide with the end of multiple restrictions that have been placed on landlords since late March 2020 – preventing them from recovering pandemic-induced rent arrears from their tenants.

It aims to encourage collaboration, keep disputes out of court, and avoid the time and costs of litigation.

For rent debts to be considered for the arbitration process, they must be attributable to 21 March 2020 and 18 July 2021, and the tenant must have been mandated to close by reason of coronavirus during that period.

Any rent debts outside of these dates won’t be subject to such restrictions which means landlords can sue and forfeit leases for rent arrears incurred by tenants who weren’t forced to close during Covid – such as essential retail and pharmacies.

Some sectors – such as non-essential retail and hospitality – were able to reopen before the above stated period due to restrictions being lifted. It is important to bear in mind that rent debts will not apply to those certain time periods for these industries.

The arbitration process

Either landlords or tenants can start the arbitration process. Currently, they have a six-month period from now to refer these protected debts to arbitration.

There are three stages of the process:

Pre-arbitration, which must be commenced within six months of 25 March, although this is likely to be kept under review. Prior to a referral, either the landlord or tenant needs to notify the other party of their intention of doing so.

Within 14 days of receiving this notification, the other party can respond, which will then allow for another 14 days before the formal referral can be made. As the process is currently only for six months, the pre-notification period should be started no later than five months in to allow for this period.

After this, the arbitrator must determine whether the criteria for the process has been met. This includes checking whether the tenant was adversely affected by COVID, if the tenant’s business is viable or would be viable if given relief, whether the debt relates to the protected period.

The arbitrator will then consider what relief should be granted to relation to the owed debts. They will determine how much the tenant can afford to pay and how quickly, as well as take the landlord’s position into consideration and whether any relief will jeopardise their solvency.

Any award the arbitrator makes has a payment deadline of 24 months from the day the decision is handed down.

How will this bill affect landlord and tenants?

The criteria for arbitrators to consider when making their decisions seems, for tenants, to be quite flexible in terms of assessment of their viability, whereas for landlords, these are pretty limited. The act says in assessing the solvency of landlords, the arbitrator must have regard to their assets and liabilities, including any other tenancies to which they are party, and any other information relating to the financial position of the landlord the arbitrator considers appropriate.

While the analysis of assets and liabilities might be familiar territory for landlords and their advisers, the reality is that the bill offers limited protections for landlords in this regard. The bill would appear to simply wish to avoid tipping landlords into insolvency by granting concessions to tenants, rather than positively seeking to improve the position of landlords.

However, it is important to remember that some landlords may be suffering considerably as a result of Covid and unpaid rent, leaving them unable to meet their loan repayments or pay their staff for example.

Within the jurisdiction granted, we would expect arbitrators to not only look at tenants’ viability in isolation and make sure they are seriously considering landlords’ positions during the process to ensure they are not being adversely affected.”

Considerations

Two major cases – brought by BNY Mellon and the London Trocadero – in relation to pandemic-induced rental arrears are currently making their way through the courts, with a decision in the Court of Appeal expected in June 2022.

Should these cases succeed, there is the potential for relevant rent arrears not to qualify as protected debts. And if there is no protected rent debt, arbitrators must dismiss any such referrals.

This means many tenants may not have a strong incentive to refer cases to the arbitration process immediately. Some may hold off doing so until those decisions have been made so an arbitrator doesn’t order them to pay something when they may end up having to pay nothing.

Given the uncertainties and the background, references to an arbitrator may get off to a slow start.

Preparing now

The introduction of this new arbitration legislation will play a crucial part in continuing to help landlords and tenants resolve outstanding rent arrears.

The key thing for landlords is to carry out an analysis of the arrears they are owed – look at the periods they relate to and check whether tenants qualify. Then, speak to a professional to work out what action can be taken in relation to both protected and unprotected debts.

It is also strongly advised that commercial landlords seek early legal advice on their position and strategy to maximise recovery. Advice may also be required throughout the negotiation process.  This can be important in continuing to protect their capital value and maintain bank interest covenants.

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Claiming Empty Property Relief – a tale of two halves

Blog | Commercial Property

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An important case, The Queen (on the application of the Secretary of State for Health and Social Care on behalf of Public Health England v Harlow District Council [2021], has brought some much needed clarity to the claiming of empty property relief on empty property - an area of contention for both landlords, businesses and the councils who benefit from the income.  Harsh words too from the presiding judge.

For many years, landlords have looked at ways of mitigating their exposure to business rates on empty properties. One way of doing this is to have a short-term occupation of the property for a period of at least six weeks, allowing the landlord to take advantage of empty property relief for a period of three or six months.

Over the years there have been a number of ways that landlords and businesses have sought to do this – from pop up businesses to storing documents, installing blue tooth servers transmitting marketing messages and even snail farms (the latter was unsuccessful).

Over time, business rates mitigation has become a business in itself and there are companies who work with landlords and portfolio managers, and when managed and implemented properly on a rolling basis, significant savings can be made.

Reduced income for councils

But, the councils do not like this and understandably so from their perspective. Business rates is a form of income for councils, who get to keep a percentage of the business rates they collect. They do not like giving reliefs and therefore many make it hard for landlords to claim.

To be eligible for empty property relief, the council must be satisfied that the property has been occupied for a period of at least six weeks. Rateable occupation is generally understood as meaning that there must be:

  1. Actual occupation (i.e. physical occupation);

  2. Exclusive occupation;

  3. Some value or benefit of the occupation to the possessor; and

  4. Possession for not too transient a period.
    (John Laing & Sons Ltd v Kingswood Area Assessment Committee [1949] 1 KB 344)

Over time, cases such as Makro Properties Ltd v Nuneaton & Bedford BC [2012] and Sunderland City Council v Stirling Investment Properties LLP [2013] (where Shakespeare Martineau LLP acted for the successful landlord at first instance and on appeal) have made it very clear that the bar for actual occupation is low. For example, in the Stirling case, a small blue tooth server installed in a large warehouse was found to be sufficient for the court to find that the whole of the property was occupied.

The biggest and consistent battle for landlords and tenants is over what amounts to beneficial occupation. Different councils have different interpretations of the rule and case law. Often what is acceptable to one council is deemed insufficient for another. Unfortunately, unless one of the parties is willing to back down, it comes down to a court to make a final ruling.

A process open to abuse?

There is evidence though, that councils abuse this position too. Going to court costs and even if successful, recovering all costs is rare, and the time incurred going through the process will never be recovered. There is also the inherent risk in litigation. For councils, however, the major costs and risks come a lot later. To obtain a liability order against a landlord for non-payment of a business rates bill (due to a dispute over empty property relief), the council only has to submit a list of all alleged debtors to the Magistrates’ Court, who will issue court summonses. The landlord then has to attend court to dispute the making of a Liability Order.

If the court can see that there is merit in the dispute, the matter will go forth to a trial. Unlike with the commercial courts, there is no requirement for the council to set out its case until after the summons hearing. There is also no court fee for the council to pay. Some councils, somewhat questionably, force parties to attend court to dispute the order of a Liability Order without having previously given proper consideration to their case.

The case of The Queen (on the application of the Secretary of State for Health and Social Care on behalf of Public Health England v Harlow District Council [2021], however, provides useful guidance.

The judge in this case had some harsh words for difficult “business rates mitigation hunting” councils and set down some directions on how these disputes should be dealt with.

Importantly, the Judge confirmed that:

What counts as beneficial occupation of a commercial property?

The case of The Queen (on the application of the Secretary of State for Health and Social Care on behalf of Public Health England v Harlow District Council [2021], however, provides useful guidance.

The judge in this case had some harsh words for difficult “business rates mitigation hunting” councils and set down some directions on how these disputes should be dealt with.

Importantly, the Judge confirmed that:

  1. The bar for beneficial occupation is not high. Actual use of the property, even minimal use, combined with an intention to occupy is sufficient for occupation. The use does not need to be substantial, and can be “whimsical or eccentric”.

  2. More importantly, occupation for the purpose of rates mitigation is beneficial occupation, regardless of any view held by a council over the morality of such a business.

The judge also provided a useful summary at Annex A of the judgment on when a property should be considered occupied, as well as a proposed protocol for resolution of these sort of disputes at Annex B. Annex B in particular, stressed that the council’s should provide written reasons for its conclusions and, if it remains in dispute, landlords should not pay the disputed amount.

Despite the judge finishing his judgment by saying that he hoped that “further challenges of this kind in “rates exemption hunting” cases will be few and far between” it is apparent that this message has not reached many councils, and we are still seeing the same arguments over and over. For now, the argument continues.

If you are in dispute with a council in over your liability for business rates, please contact Ben Humphreys at Shakespeare Martineau LLP, who has extensive experience in this area.

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A sigh of relief for landlords and letting agents everywhere – as you were

Blog | Landlord and Tenant

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26 January 2022 saw the Court of Appeal hand down the judgment in the case of Northwood Solihull v Fearn & Ors (2022) EWCA Civ 40, which could have had a major impact on landlords and letting agents.

The Court of Appeal ruled that any authorised employee of a landlord or a letting agent can sign a Section 8 Notice or a prescribed information tenancy deposit certificate and did not have to comply with the requirements of Section 44 of the Companies Act 2006.

Background to the case

In 2019, Mr Fern and Ms Cooke (the tenants) were served a Section 8 Notice (the notice) after they fell in to rent arrears. The notice was signed by the property manager of Northwood Solihull, who was acting in the normal course of her duties as she was employed by the landlord.

The claim for possession was defended and the basis of their defence was that the notice was invalid. They argued that as the landlord was a corporate body and in order for them to rely on the notice it needed to be signed in accordance with Section 44 of the Companies Act 2006.

Section 44 of the Companies Act 2006, sets out that a limited company may execute a document either by affixing its common seal, or by a director of the company signing the document in the presence of a witness or by two authorised signatories.

The tenants  brought a counterclaim relating to the prescribed information certificates for the security deposit, which was only signed by one director of the landlord and without a witness signature, whereas in their view it needed to be signed by landlord.

At the possession hearing, the trial judge granted the landlord an order for possession. However, the judge did uphold the tenant’s counterclaim that the prescribed information did need to be executed in accordance with s.44.

The landlord’s positon was that even if the prescribed information did have a second signature on it, it did not have any impact on the tenant’s position.

The tenants appealed against the trial judge’s findings in relation to the notice and the appeal was dismissed. However, the landlord was granted permission to cross-appeal in relation the tenants counterclaim on the prescribed information.

The Court of Appeal’s decision

The Court of Appeal looked at the issue of the prescribed information certificate and the notice.

The certificate

The Court of Appeal agreed with the landlord’s position with regards to the signature of the certificate.

They held, “if an authorised and authenticated certificate, containing all the information is given to the tenant, I cannot see that any harm has been done”

The certificate was signed by the property manager who was authorised to do so on behalf of the landlord.

The Section 8 Notice

With regards to the notice, the Court of Appeal held “it was signed by an agent in the manner permitted by both the primary legislation and Regulations”.

The notice was signed by the director of Northwood Solihull, who was an agent of the landlord.

Furthermore, the Court of Appeal also considered the implications of non-compliance for both the certificate and notice and it was held that non-compliance would not invalidate the documents.

The Court of Appeal decision is a very welcome one for landlords and agents. Had the judgment not gone in the favour of the landlord, it would have had a detrimental impact on any notices served and prescribed information certificates, which would have been signed on behalf of the landlord.

The decision means that landlords and letting agents can continue in the way they have been doing so, provided that all the required information is provided to tenants on a notice and the prescribed information certificates.

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For information contact Habib Khan in our housing management team, who can guide, help support you and your teams to deal with any housing management and litigation issues you face during these evolving times.

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Further changes to tenant notice periods for possession proceedings

New Legislation

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Key changes for tenant notice periods – rent arrears

 

As of 1 August 2021, the notice period to be given for a Section 8 Notice for rent arrears has reduced from six months down to two months, where a tenant is in arrears of less than four months’ rent. This is applicable when relying on grounds 8, 10 and 11.

My previous article, Key changes for possession proceedings sets out the in detail the notice periods for other grounds which a landlord may seek to rely on, including Section 21 notices.

At present, no further changes have been made to the notice period for a Section 21, which currently still stands at four months’ notice for any Section 21 notice served after 1 June 2021.

The amended notice periods will stay in force until the end of September 2021, where they will revert back to the way there were pre-pandemic. Unless, of course further amendments are announced by government.

It is important for landlords to be aware of the change to notice periods for a Section 8 Notice, to ensure that the correct notice period is given to a tenant.

 

Get your How To Rent Guide

 

On 21 July 2021, the government published an easy read of the How to rent guide for tenants.

As many private landlords will be aware, when granting an assured shorthold tenancy, one of the requirements is that the government’s How to rent guide must also be issued upon commencement of the tenancy agreement.

When granting an assured shorthold tenancy, landlords can also now issue the easy read version alongside the full guidance of the How to rent guide. The new easy read guide has been designed to provide tenants with key information in short statements which is further assisted with use of pictures.

 

For information contact Habib Khan in our housing management team, who can guide, help support and you and your teams to deal with any housing management and litigation issues you face during these evolving times.

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Making sense of deemed contracts

Commercial Landlord Guides & Advice

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Making sense of a deemed contract as a commercial landlord

During the pandemic, many thousands of tenants have chosen to delay payments of their rent. This is adversely effecting cash flow for landlords, who still have outgoings to pay.

As tenants vacate premises in the future, either through choice at the end of the lease, or being forced due to insolvency, the predicament of landlords will worsen as they are faced with vacant premises.

One of the many considerations for the landlord is the cost of the utilities being supplied to the vacant premises.

If there is no contract for supply in place, gas and electricity will be supplied by way of a deemed contract.

What is a deemed contract?

In the context of electricity, a deemed contract is created by the Electricity Act 1989, which states that “where electricity is supplied otherwise than in pursuance of a contract, the supplier shall be deemed to have contacted with the occupier (or the owner if the premises are unoccupied) for the supply of electricity.”

There are similar provisions in relation to gas in the Gas Act 1986.

It follows that where a property is vacant there is a deemed contract between the supplier and the landlord.

A landlord may try to argue that the lease has not been disclaimed and as it is still in place, the deemed contract is with the tenant.

However, as can be seen from above, the legislation imposes a liability on the occupier of the premises and if the premises are unoccupied, the owner.  It does not on the face of it impose a liability upon a tenant who no longer occupies a premises, irrespective of whether the lease remains in place.

Why are deemed contracts important?

They’re important because deemed contracts are legal and enforceable by energy suppliers in many cases.

And even though the premises are vacant, it is still likely that some electricity will be being consumed, by the alarm system or the security system.  Such charges on a deemed contract basis are likely to be higher than on a fixed term contract basis.

There will also be standing charges and other charges which could potentially be substantial. These may include a capacity charge, which is a fee to ensure that there is enough electricity in the system.  Such a charge may be based upon historic consumption and not reflect the current requirements.

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What can landlords do?

The best advice for landlords is therefore, as soon as a property becomes vacant or looks like it is becoming vacant, find out who is supplying the utilities to the property and contact them as soon as possible. It may be possible to agree a fixed term contract with the supplier on significantly lower rates than deemed contract rates.

The landlord may also wish to reduce the capacity available to the property helping to reduce the overall cost. The key point is that this should be done as soon as possible. The longer it takes to reach an agreement with the supplier, the higher the overall likely liability under the deemed contract will be.

How can Shakespeare Martineau help?

We can help landlords review their situation and provide advice in relation to vacant properties.  We can also help energy supply companies review their portfolio and take appropriate recovery action.  Contact Tim Speed or another member of our energy sector team in your local office.

From inspirational SHMA Talks to informative webinars, we also have lots of educational and entertaining content for life and business. Visit SHMA® ON DEMAND.

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Tim advises clients on a broad range of commercial disputes with an emphasis on insolvency disputes, disputes within the energy sector, and corporate and banking litigation.

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Your summer guide to recovery and resilience in COVID-19

Your updated summer guide to recovery and resilience

As the UK takes its first steps to ease the current national restrictions and looks forward to an increase in economic activity and recovery it is vital that businesses are prepared in every aspect.

To support businesses and people navigate their way out of the last year and the current national restrictions, unlock their potential and drive for a brighter future, we have updated our guide to recovery and resilience.

From financial considerations, employees, leadership and premises, to supply chain implications, health and safety and protecting your private wealth, our guide highlights what organisations and individuals should consider when moving from survival to recovery to thrive.

Financial considerations

Whether a large corporate with a highly structured board, an SME or an owner-managed business, the financial viability of a business is key to its future success.   However, as the thoughts turn to the roadmap out of lockdown once again, and what the future may look like, businesses that have got through the last year should consider a range of measures to enable them to cope with what is likely be a recession for some industry sectors of the UK. Prudent business owners will be well aware of the predictions and while there will be a bounce back it may take some time for confidence and stability to return from customers and suppliers.

Your employees

Managing a workforce of any size can have its challenges, let alone one that is recovering from a global crisis. Many businesses will have furloughed employees or made the difficult decision to make a number of their workforce redundant. For those businesses that haven’t, it’s highly likely they will still face having to make difficult choices, albeit further down the line.

The knock-on effects of the COVID-19 outbreak have changed the way employers engage with and effectively manage, their employees. The processes, policies and guidelines that worked previously may no longer be fit for purpose for your business, or for your workforce, in the new working landscape. With the rollout of the COVID vaccine facilitating the gradual return of employees back into the physical workplace, this in itself will bring a host of new opportunities and challenges.

Buildings, workspaces and leases

As the world and economy move forward out of lockdown, owners and investors of real estate as well as occupying tenants will have to consider the adjustments they now need to make whilst the restrictions around social distancing continue.
They will need to find new ways of working and inevitably different ways to use their space over the coming months and, at the same time, consider how to manage the cost of premises in these changed circumstances.

Suppliers and supply chain

Many businesses have struggled to comply with their contractual obligations as a result of the COVID-19 pandemic and may have been forced to rethink their supply chains. A focus in recent years on minimising costs, reducing inventories and maximising asset utilisation has often resulted in a reduced ability to cope with disruption. Whilst the impact of the COVID-19 pandemic is unprecedented in modern times, disruption to the global economy is an increasing risk, whether due to political events such as Brexit, US-China trade tensions, or climate change.

Private wealth, family businesses and family

The effects of COVID-19 will undoubtedly have a huge impact on our economy for years to come, with many businesses collapsing under the strain and the level of unemployment set to rise significantly. However, what is less widely reported on is the effect it is having and will continue to have, on families and personal wealth. We’ve already seen that the pandemic has led to an increase in people looking at how they may pass on their wealth to the next generation –and even more so for those that own family businesses.

Compliance – Health and safety

Employers have clear duties under existing health and safety legislation. Obligations to comply with health and safety at work, and to manage and control workplace risks, includes protecting workers and others from the risk of COVID-19 infection in the workplace. That duty is to do everything “reasonably practicable” to manage these risks. The onus of demonstrating that everything reasonably practicable has been done falls to the employer. The best way to demonstrate compliance with the law is usually to follow government and industry-led guidance wherever possible.

Leadership

Strong leadership is a cocktail of authenticity, collaboration, passion, compassion, and a great deal of bravery. We all know the best results occur when we are pushed out of our comfort zones and the ingredients are shaken up, and COVID-19 has done exactly that. With government guidance signalling the UK’s route out of current national restrictions, the time for positive leadership is now. It’s time to take control of what we can and create an environment with enough certainty where people can feel safe enough to flourish centre stage.

We are here to help

The team here at Shakespeare Martineau remain committed to supporting our clients and our communities throughout these challenging times, with

the depth of experience, collaborative ethos and the creative know-how to lead positively to the future.  We are able to offer advice and solutions on a range of subjects for life and business - from employment and general business matters, through to director’s responsibilities, insolvency, restructuring, funding and disputes to issues affecting family businesses, personal wealth planning and family law. Do contact us on 03300 240 333

 

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Case law update - landlord and tenant | Section 20 consultations

Tribunals may impose conditions upon a landlord when granting dispensation from consultation requirements under section 20ZA Landlord and Tenant Act 1985 (Aster Communities v Chapman & Ors [2021] EWCA Civ 660)
Background to the case

Where a landlord is planning “qualifying works”, which will result in a spend of more than £250 per leaseholder, it must enter into a legal consultation process as required under Section 20 of the Landlord and Tenant Act 1985.

This case dates back to March 2016 when Aster Communities (Aster), the freeholder of Kingsway Gardens (a development comprising of 5 blocks of flats with 114 flats in total), sent its long leaseholders a notice of its intention to carry out works on the development and subsequent estimates of the works.

The notice detailed numerous proposed works including works to concrete, windows and doors. However, balcony works were not mentioned in the notice or referenced in the original cost estimates sent to leaseholders - although there was provision for this work included in the price specifications which were available for inspection at the time.

(The balcony asphalt replacement works were completed as a result of two flats suffering water ingress caused by the asphalt on their balconies. Aster therefore decided to complete asphalt replacement works on all balconies of the flats.)

In January 2017, Aster made an application to the First Tier Tribunal (FTT) under section 27A Landlord and Tenant Act 1985 for a determination, in relation to on account service charges required from the leaseholders. The FTT found the balcony asphalt works were unnecessary and, in any event, were not part of the section 20 consultation.

As a result of the FTT’s decision, Aster made an application for dispensation from the section 20 consultation requirements in February 2019. Several leaseholders objected to the application, stating that the lack of consultation prevented them from being able to obtain expert advice in relation to the necessity of the works, and they had therefore been prejudiced.

What are the key points from the case?

The FTT applied the principles from earlier case law - Daejan Investments Ltd v Benson [2013] - which tested whether the lessees would suffer any relevant prejudice as a result of the landlord’s failure to comply with the consultation requirements.

The FTT held that the asphalt works had already been found to be unnecessary and therefore there was a relevant prejudice.  As a result, the FTT granted dispensation, but this was conditional on the landlord paying the costs of the lessees in obtaining a report to advise on the necessity of replacing all of the balcony asphalt. The FTT also ordered Aster to pay the respondents' reasonable costs of the application and that the costs of Aster's application should not be recoverable through the service charge.

Aster appealed the conditions imposed upon them to the Upper Tribunal, and then the Court of Appeal. Their appeal was dismissed with the Court of Appeal applying the principles in the Daejan case and the reasoning of the FTT.

What does this recent case highlight for landlords?

This case highlights the importance of completing section 20 consultations correctly from the start, and that landlords need to consider whether their leaseholders are likely to suffer prejudice as a result of the dispensation from consultation requirements prior to any application to the FTT being made.

Dispensation may be an appropriate solution in some circumstances, for example where works need to be completed as a matter of urgency, so there may be no time to consult. However, landlords should be aware of the potential conditions the tribunal may impose when granting dispensation from the consultation requirements. This may be relevant where there is a dispute with leaseholders in relation to the works required.

We’re here to help

If you're a landlord and have any queries or concerns on the outcome of the above case then speak to Danielle Sodhi from our housing management team.

Our updated guide to recovery and resilience covers everything you need to navigate your way out of lockdown, unlock your potential and make way for a brighter future. Further advice in relation to COVID-19 can be found on our dedicated coronavirus resource hub.  

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Key changes for possession proceedings

Although we are only just approaching the halfway mark into May 2021 it has already been a busy month, with a flurry of information from the government on possession proceedings.

On 12 May 2021 the government confirmed a number of key changes that will come into effect over the next few months. Our blog on the Debt Respite Scheme covers some of the changes previously announced that came in to force on 4 May 2021.

Here we outline the upcoming changes for possession proceedings.

The ban on evictions will come to an end

The government has announced that the ban on evictions, which is currently in place until 31 May 2021, will come to an end on this date. This means that landlords can apply for a warrant from 1 June 2021.

However, the government has stated that bailiffs have been asked not to carry out an eviction if anyone living in the property has COVID-19 symptoms or is self-isolating.  A 14 day notice is also required before an eviction can take place.

Reduced notice periods for notice seeking possessions

From 1 June 2021 the notice period is set to change again for notice seeking possessions, and the new notice period will be four months rather than the current six months’ notice period.  Although the current exceptions will still be applicable, below is a summary of the key changes;

  • anti-social behaviour (immediate to four weeks’ notice)
  • domestic abuse in the social sector (two to four weeks’ notice)
  • false statement (two to four weeks’ notice)
  • four months’ or more accumulated rent arrears (four weeks’ notice)
  • breach of immigration rules ‘Right to Rent’ (two weeks’ notice)
  • death of a tenant (two months’ notice)

It is key to note that, from 1 August 2021, where a tenant is in rent arrears of less than four months, the notice period will reduce to two months’ notice.

What do these changes mean for landlords?

The changes will be welcomed by many landlords, however, it is key to ensure that the correct forms and correct notice periods are given in line the up and coming changes.

We’re here to help

If you’re a landlord and need advice regarding possession proceedings then contact Habib Khan in our housing management team, who can guide, help and support you and your teams to deal with any housing management and litigation issues you may face during these evolving times.

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Housing update - May 2021 | Debt Respite Scheme

On 4 May 2021, new changes were introduced that will impact landlords who are considering possession proceedings based on rent arrears.  In addition, there is also a change to the notice used to seek possession of a property.

What are the changes?

The government has introduced a new Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020, also known as Breathing Space Moratorium, which gives someone who is in problem with debt the right to legal protection from their creditors.

What is a Breathing Space and who can apply for one?

The scheme sets out two types of Breathing Spaces;

 

  1. Standard Breathing Space

This is available to anyone with problem debt and provides a person with legal protection from creditor action for up to 60 days. The protection includes pausing most enforcement action and contact from creditors and freezing most interest charges on the debt.

 

  1. Mental Health Crisis Breathing Space

This is only available to someone who is receiving mental health crisis treatment. The protection that is offered here lasts as long as the person’s mental health crisis treatment lasts, plus 30 days after the treatment ends. There is no limit to how long the crisis treatment lasts.

A Breathing Space can only be started by a debt advice provider who is authorised by the Financial Conduct Authority to offer debt counselling or a local authority, where they provide debt advice to residents.

Who is eligible for a Breathing Space?

To be eligible for a Breathing Space, the person must be:

  • an individual;
  • owe a qualifying debt to a creditor;
  • live or usually reside in England or Wales;
  • not have a debt relief order or an individual voluntary arrangement, an interim order or be an undischarged bankrupt at the same time they apply; or
  • not already have a Breathing Space or have had a standard Breathing Space in the last 12 months at the time they apply.

There are also a further two conditions which must be met which are:

  • the debtor cannot, or is unlikely to be able to, repay all or some of the their debt; and
  • a Breathing Space is appropriate for the person.

When dealing with a Mental Health Crisis Breathing Space, the above criteria applies and the person must also be receiving mental health crisis treatment at the time that an application is made. Therefore, if a debtor has had a Standard or Mental Health Crisis Breathing Space in the last 12 months, they may not be eligible for another Mental Health Crisis Breathing Space.

How does the Breathing Spaces Scheme impact landlords?

The aim of a Breathing Space is to offer protection to a debtor for at least 60 days, depending on the type of Breathing Space they may have. The qualifying debt for a Breathing Space includes mortgage or rent arrears.

If a tenant, who is in rent arrears, seeks any one of the two Breathing Spaces and it is granted, a landlord would not be able to:

  • serve a Notice Seeking Possession;
  • purse a possession order which includes holding a hearing;
  • apply for a warrant for possession;
  • obtain a money judgment; or
  • enforce a money judgement

In addition, if a Breathing Space is granted, a landlord is not able to contact the tenant to request any payment(s) towards the debts or make any attempts to apply for third party deductions from any benefits the tenant may be receiving (unless the landlord has permission from the court).

In circumstances where the legal proceedings have already been commenced and the tenant applies for Breathing Space, those proceedings cannot be enforced until the Breathing Space ends, unless the landlord has permission from the court or tribunal to continue. If the Breathing Space means there is a pause in those proceedings and the time limit for enforcement or new claims relating to the claim runs out during the Breathing Space, this time is extended to eight weeks after the Breathing Space ends.

What about current rent owed by a tenant?  

Not all debts can be considered for a Breathing Space and these are known as ongoing liabilities which include current rent, but not rent arrears.

If a Breathing Space is in force and the tenant fails to continue paying their current rent, the Standard Breathing Space could be cancelled by a debt advisor unless, the debt advisor believes that the tenant does not have the financial means to pay the current rent. As part of the Standard Breathing Space the debt advisor must also complete a midway review between 25 and 35 days. This is to ensure that the tenant is complying with their obligations.

There is no midway review for a Mental Health Crisis Breathing Space as this continues as long as the treatment continues.

What can a landlord do?

The Debt Respite Scheme will impact many landlords who will need to put in to place additional steps to recognise if a tenant has a Breathing Space in place, and to ensure no contact is made with the tenant to chase any debt or no court orders are enforced or new proceedings are commenced.

Should a Breathing Space be applied for and granted during ongoing legal proceedings, landlords will also need to be put measures into place to ensure that such proceedings are put on hold and the courts are also properly notified, as well as key dates being noted should they need to rely  on the eight week extension period.

A landlord can also challenge a Breathing Space that has been granted by requesting a review of the Breathing Space, or of specific debts being included, if a landlord considers the Breathing Space unfairly prejudices its interests or material irregularity. For example, the tenant is not eligible for a Breathing Space.

Step one

The first step for a landlord would be to make an application to review the Breathing Space, which must be made within 20 days from when the Breathing Space was granted. The application must be made in writing and supporting evidence must also be provided to demonstrate why the Breathing Space should be cancelled.

Step two

If the grounds are made out, the debt advisor must consult with the tenant, unless the debt advisor finds the grounds for cancelling the Breathing Space make it unfair or unreasonable to cancel based on a tenants personal circumstances

What if the challenge to review is unsuccessful?

Should the challenge to review not be successful a landlord does have the option to make an application to the county court for cancellation of the Breathing Space. Again the application has to be made in writing with supporting evidence and the application has to be made within 50 days from the start of the Breathing Space. It is important to note that this step can only be taken if the challenge to review has been carried out and the landlord was unsuccessful.

When seeking to challenge a Breathing Space a landlord would need to balance out the prospect of being successful in challenging, versus the costs and time involved in making an application to challenge.

Changes to Form 3 – Notice Seeking Possession

As a result of the new Debt Respite Scheme there have been changes to Form 3 – Notice Seeking Possession to reflect the above. Landlords who issue a Notice Seeking Possession from 4 May 2021 will now need to ensure that they are using the most up to date Form 3 regardless of what ground(s) they are using to seek possession of the property.

Contact us

For further information contact Habib Khan in our housing management team, who can guide, help support and you and your teams to deal with any housing management and litigation issues you face during these evolving times.

Our updated guide to recovery and resilience covers everything you need to navigate your way out of lockdown, unlock your potential and make way for a brighter future. Further advice in relation to COVID-19 can be found on our dedicated coronavirus resource hub.  

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Leasehold reforms: the change the system needs?

  • In recent years a level of controversy has surrounded the leasehold system, with some people feeling they have been cheated out of their money. As a result, a number of reforms have been proposed, including lengthening lease terms to 990 years and removing ground rent with the new leasehold changes.

However, although welcome news for leaseholders, landlords could be left with a considerable drop in their income.

 

What is leasehold?

Initially created in 1925, leasehold enables landowners (freeholders) to make money off their land by leasing out the properties on it to those seeking a home. A contractual relationship is entered into between the freeholder and the leaseholder, with the former operating, managing and maintaining the building for a fee. Once the lease term expires, the property is returned to the freeholder, allowing them to lease it out again. At least, this was the original intention.

 

What issues have arisen?

  • Lease term length – Typical lease terms have increased from 99 years to 125 years recently, however, this is still relatively short. High street lenders become hesitant to lend once the lease reaches 80 years or less and therefore, the lease must be extended. A statutory valuation is carried out to assess the ‘marriage value’ payable to the landlord, which is a form of compensation, due to the freeholder not regaining their asset. This can be a considerable amount of money that the leaseholder did not factor in when they first bought the property.
  • Leasehold houses – Although the leasehold system suits apartments best, some house builders have recently started to offer leasehold houses. There is no justifiable reason for this, due to the leaseholder maintaining their own property. If leasehold terms were being granted at 999 years, then this may provide some justification, but as this isn’t usually the case it seems these landowners are only seeking profit from inevitable lease extensions.
  • Multiplying ground rents – A mechanism has always existed that allows freeholders to review ground rents. However, this has led to them doubling or even tripling in some cases, catching leaseholders by surprise and often reaching unaffordable levels.

 

What are the proposed leasehold reforms?

The leasehold reforms proposed by the government aim to tackle these issues head on, with standard 990-year lease terms removing the need for extensions, and the removal of ground rents. Consequently, this means there will be no nasty surprises for leaseholders.

The reforms include the following changes:

 

  • The leasehold law changes will give leaseholders the right to extend their lease for 990 years.
  • The leasehold law changes could see households save tens of thousands of pounds.
  • The elderly are protected by the leasehold law changes. Ground rents can be reduced to zero for all new retirement properties.

 

What impact will the leasehold reforms have?

There is no real downside to the leasehold reforms, but they will mean that leasehold will no longer be a way for landowners to generate income from their land and property.

Land will essentially be lost to the freeholder once it is sold, and there will be no compensation to make up for this. As a result, freeholders may try to sell their properties at a higher price to balance out the loss in revenue. Lenders should stop this from happening by valuing properties at lower prices, however, this could lead to people being unable to get a mortgage, in turn causing the market to stagnate.

In short, the leasehold system is not a broken one, it merely relies on landlords using it as intended. Instead of punishing those that use it correctly, perhaps the focus should be put on stopping rogue landlords from taking advantage of their leaseholders.

No matter the consequences, these leasehold reforms will make leasehold a much more permanent way to own property, moving the system far away from its original intentions.

 

We’re here to help

To find out more about how the proposed leasehold reforms could affect you, contact Louise Drew.

Our updated guide to recovery and resilience covers everything you need to navigate your way out of lockdown, unlock your potential and make way for a brighter future. Further advice in relation to COVID-19 can be found on our dedicated coronavirus resource hub.  

From inspirational SHMA Talks to informative webinars, we also have lots of educational and entertaining content for life and business. Visit SHMA® ON DEMAND.

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Our expert lawyers are ready to help you with a wide range of legal services, use the search below or call us on: 0330 024 0333

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Blog

What role do landlords play in the high street of the future? 

What role do landlords play in the high street of the future? 

The UK’s high streets have undeniably felt the sting of COVID-19, with restrictions leading to reduced footfall and widespread closures. 

Mounting pressures from reduced profits and the growth of e-commerce have made people question whether it’s time to write off the local high street as we know itHowever, this doesn’t have to be the case, with the improvement of landlord-tenant relationships providing a light at the end of the tunnel for the future of the high street.   

Time to work together 

Local communities have come together in support of their high streets, but challenges still remainCommunity support alone is not enough to keep this staple of British culture afloat, but with the cooperation of landlords, it can be protected.  

By showing flexibility to struggling businesses, landlords can ease the pressure on retailers and ensure they maintain some form of continuous cash flow. The alternative of finding new tenants is certainly something to try and avoid during these difficult times. 

Embracing agility 

There are a number of options for landlords to help struggling retailers, including:  

  • Rent holidays, where the tenant and landlord agree on pausing payments temporarily 
  • Implementing turnover-based rent agreements, where rent is determined by current market conditions and the financial performance of the tenant 
  • Restructuring leases to make them more tenant friendly 

Showing flexibility and communicating clearly and openly with tenants will go a long way towards building a stronger and longer lasting relationship between retailers and landlords 

A new type of high street? 

Major retailers, such as John Lewis, have shown an interest in restructuring the high street, taking a residential approach rather than commercial.  

However, it is unlikely that this form of change will take off, with local high streets not owning the entirety of their trading space.  

Instead, landlords could consider adapting empty units into workspaces – or even try to create new relationships with larger chains seeking to make their mark in a more “local” manner. 

One thing is guaranteed: that the high street will endure, but the form it takes in future is down to the choices that landlords make now. 

We’re here to help 

For guidance around the solutions available if you’re experiencing difficulties, a member of our commercial development team can help - contact Julian Joseph for advice and support. 

From inspirational SHMA Talks to informative webinars, we have lots of educational and entertaining content for life and business. Visit SHMA® ON DEMAND.  

Our free legal helpline offers bespoke guidance on a range of subjects, from employment and general business matters through to director’s responsibilities, insolvency, restructuring, funding and disputes. We also have a team of experts on hand for any queries on family and private matters too. Available from 10am-12pm Monday to Friday, call 0800 689 4064.  

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Lockdown 2.0 and enforcing warrants for possession of a property - Still possible in extreme cases

UPDATED 5 NOVEMBER 2020

With the country under a new set of national restrictions commonly being called Lockdown 2.0, there are more changes to how warrants for possession of a property are executed.  But landlords and residents can rest assured that in the worst cases of anti-social behaviour, possessions can still be progressed.

After the stay on possession proceedings and ban on evictions was lifted on 23 August 2020 which is covered in the earlier article Light at the end of the tunnel on possession claims, things slowly started moving through the court system.

The Government then announced a ‘winter truce’ on evictions which meant bailiffs were unable to carry out any evictions from 11 December 2020 to 11 January 2021.

For those landlords who had possession orders in place prior to the lockdown in March, it was key to ensure an eviction date was set before the ‘winter truce’ came into force.

We then saw the Government introduce a tiered system, which meant that any area which was in a tier 2 or 3 meant that evictions could not be carried out.

We now see a further change which again impacts on how warrants are executed. As of 5 November 2020, all evictions are put on hold until 11 January 2021, effectively bringing the ‘winter truce’ forward. However, this time around there isn’t a blanket ban on evictions and if a possession order has already been granted then the following exceptions apply;

  • Following a claim against trespassers to which rule 55.6 (services of claims against trespassers) of the Civil Procedure Rules 1988 applies;
  • Under section 84A of the Housing Act 1985;
  • On Ground 2, Ground 2A or Ground 5 in Schedule 2 to the Housing Act 1985;
  • On Ground 7A, Ground 14, Ground 14A or Ground 17 in Schedule 2 to the Housing Act 1988;
  • Under case 2 of Schedule 15 to the Rent Act 1977; or
  • On Ground 7 in Schedule 2 to the Housing Act 1988 and where the person attending is satisfied that the dwelling house is unoccupied at the time of attendance

The above criteria was set out in a letter by RT HON Robert Buckland QC MP.

The criteria this time around allow landlords to continue to apply for warrants of possession for the most extreme cases which involve severe anti-social behaviour, illegal trespassing or squatting by persons unknown in a property along with domestic abuse. This will also offer neighbouring residents who have had to face ongoing anti-social behaviour and nuisance, some welcome respite whilst the country is under further national restrictions. This will subsequently allow both private and social landlords to gain possession of their properties in order to house those on waiting lists and in need of accommodation during the pandemic.

There is also the possibility that the Government intends to introduce an exemption on cases which involve extreme pre-COVID-19 rent arrears which would be added to the list above. Further details about this will be published when they are made available.

Contact us

For further information contact Habib Khan in our housing management team, who can guide, help support and you and your teams to deal with any housing management and litigation issues you face during these evolving times.

From inspirational SHMA Talks to informative webinars, we also have lots of educational and entertaining content for life and business. Visit SHMA® ON DEMAND.

Our free legal helpline offers bespoke guidance on a range of subjects, from employment and general business matters through to director’s responsibilities, insolvency, restructuring, funding and disputes. We also have a team of experts on hand for any queries on family and private matters too. Available from 10am-12pm Monday to Friday, call 0800 689 4064.

How can we help?

Our expert lawyers are ready to help you with a wide range of legal services, use the search below or call us on: 0330 024 0333

SHMA® ON DEMAND

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Guides & Advice

Webinar roundup: Guidance for landowners and developers

Even with the pandemic taking over many aspects of our lives, developments are going ahead, and that means landowners and developers will still be in need of support.

Below you can find a summary from a number of helpful webinars, offering guidance on a range of issues, including obtaining vacant possession and land promotion.

Obtaining vacant possession and the impact on land development

In real estate, it is not uncommon to hear the term ‘vacant possession’ used. Simply put, it means the purchaser has the right to exclusive use of the property on completion of the sale. However, when land is bought for the purposes of redevelopment, how to obtain vacant possession must be considered.

In our vacant possession webinar, we look at when to consider vacant possession in long term land promotion, what impacts the land and the ability to give vacant possession and the timescales involved.

View the 15 minute webinar on obtaining vacant possessions on SHMA® ON DEMAND >>

Land promotion from a landowner perspective

Although we are living in uncertain times, there are still opportunities out there for strategic development. In fact, the pandemic has forced landowners to find new ways of thinking and collaborating, potentially making the future of developments a more positive one.

However, it is clear that more development is needed, and there’s no time like the present to start planning. Our land promotion webinar covers everything from the perspective of the landowner, looking at:

  • The legal and planning framework
  • The importance of common interest
  • The different stages of the process
  • The considerations for promoting land
  • How best to protect your interests

View the 20 minute webinar on land promotion (from a landowner perspective) on SHMA® ON DEMAND >>

Land promotion from a promoter/ developer's perspective

We also have a second land promotion webinar - this time discussing things from the promoter or developer’s perspective.

As well as covering the legal planning framework, the importance of common interest and the different stages of the process, they also explore the obligations on promoters and developers, the consideration of risk, and strategies for planning success.

View the 20 minute webinar on land promotion (from a promoter/developer’s perspective) on SHMA® ON DEMAND >>

 

VAT and Stamp Duty Land Tax issues

The pandemic has caused one question to come to the forefront of developers, house builders and landowners’ minds: ‘To let or to sell?’. With the current environment constantly changing, strategies are having to alter to fit demand, but the VAT and stamp duty implications of doing so must be considered.

Our VAT and SDLT webinar discusses the tax structures and VAT issues that developers and landowners must put thought to, both in terms of long and short-term lettings, as well as sale and land promotion agreements.

View the 25 minute webinar on VAT and Stamp Duty Land Tax issues on SHMA® ON DEMAND >>

If you’re a developer, read our blog on how to tackle tax during COVID-19 >>

SHMA® ON DEMAND

Register for all of our upcoming webinars and live events at SHMA® ON DEMAND. From inspirational SHMA Talks to informative webinars, we have lots of educational and entertaining content for life and business.

Our free legal helpline offers bespoke guidance on a range of subjects, from employment and general business matters through to director’s responsibilities, insolvency, restructuring, funding and disputes. We also have a team of experts on hand for any queries on family and private matters too. Available from 10am-12pm Monday to Friday, call 0800 689 4064.

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Products & Propositions

Sending in the bailiffs… no longer an option for landlords

Updated 15 September 2020 | Sending in the bailiffs… no longer an option for landlords

On 15 September 2020, the government announced further measures to protect commercial tenants from recovery action by restricting the ability of landlords to recover unpaid rent by utilising the Commercial Rent Arrears Recovery process (“CRAR”).

The British Property Federation have reacted with disappointment, as some businesses are taking advantage of the crisis by refusing to pay rent - despite them having the funds to pay. However, this announcement will no doubt be very welcome news for those tenants who have struggled to rebuild their businesses since the national lockdown earlier in the year.

What has now changed?

On 24 April 2020, the Taking Control of Goods and Certification of Enforcement Agents (Amendment) (Coronavirus) Regulations 2020 (“the 2020 Regulations”) came into force and restricted the use of CRAR, unless 90 days’ of rent remained unpaid.

In June 2020, the government extended the law so that CRAR could only be utilised if 189 days’ of rent remained unpaid.

Now, a further amendment has been made, which will come into force on 29 September 2020, and the law provides that:

A. CRAR can only be utilised between now and 24 December 2020 if there is 276 days’ of unpaid rent; AND
B. CRAR can only be utilised after 25 December 2020 if there is 366 days’ of unpaid rent.

What does this mean for me now?

This effectively means that landlords can only utilise CRAR between now and 24 December 2020 if a tenant has not paid 276 days’ worth of rent. This equates to the rent that was owed for the March, June and September 2020 quarters.

The law then goes further and states that if landlords wish to utilise CRAR on or after 25 December 2020, then there must be 366 days’ of unpaid rent owing. This equates to a further 90 days of rent and essentially means that landlords will also be unable to utilise CRAR if the December 2020 quarter rent remains unpaid.

If you are a landlord

If you are a landlord, CRAR may no longer be an effective recovery method available to you for unpaid rent from March 2020. However, you may be able to utilise CRAR if there are larger sums of unpaid rent which pre-date March 2020.

Further, remember that there are alternative remedies that landlords can utilise to seek recovery of rent and other sums if your tenants are not engaging with you. Our real estate disputes team can advise and guide you through the options.

If you are a tenant

If you are a tenant, you should carefully review any Notice of Enforcement that is served upon you, as these are now likely to be invalid. It appears CRAR will be an ineffective method of recovery until March 2021.

We can advise you on any Notice of Enforcement you receive and your options. We have developed a tailored fixed fee service to guide you in this process – so please get in touch with a member of the team.

Contact us

We can help and advise you in these difficult situations but time is of the essence.  We have developed a tailored fixed fee service to guide on your options.

Please contact Martin Edwards or Justine Ball for further information on another member of the property litigation team in your local office.

We have launched our guide to recovery and resilience, helping to support businesses and individuals unlock their potential, navigate their way out of lockdown and make way for a brighter future. Further advice in relation to COVID-19 can be found on our dedicated coronavirus resource hub.

From inspirational SHMA Talks to informative webinars, we also have lots of educational and entertaining content for life and business. Visit SHMA® ON DEMAND.

Our free legal helpline offers bespoke guidance on a range of subjects, from employment and general business matters through to director’s responsibilities, insolvency, restructuring, funding and disputes. We also have a team of experts on hand for any queries on family and private matters too. Available from 10am-12pm Monday to Friday, call 0800 689 4064.

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Guides & Advice

£50m social housing retrofit programme: An addition needed for the long term

£50m social housing retrofit programme: An addition needed for the long term

During the Chancellor’s summer statement on Wednesday 8 July, plans were announced for a £50m fund for social housing retrofit programme. This comes as part of a wider £3bn fund for green jobs, aiming to kickstart the economy’s road to recovery.

The plan 

Heat pumps, insulation and double glazing will be used to improve the energy efficiency of the UK’s social housing offering, potentially reducing people’s annual energy bills by around £200. 

Undeniably, this all sounds very positive, but is it that straightforward? 

The logistics and engaging with supply chains 

The £50m fund for social housing retrofits certainly provides food for thought for registered providers, however, the announcement could throw up numerous logistical difficulties. Many contracting partners will undoubtedly be keen to be involved in these projects given the current economic climate and registered providers should use this opportunity to reflect on how they engage with their supply chains. 

How will tenants benefit? 

Ensuring value for money is essential, but tenants themselves mustn’t be forgotten either. Registered providers should be looking for construction partners who are willing to enter into collaborative contracts with transparent working agreements, which put tenant engagement and satisfaction at the centre of the retrofit process. 

If you’re a construction partner, read more about our team of specialist construction lawyers and how we can help. 

Helping you achieve your ambitions 

Although a welcome step in the right direction, this £50m funding is just the beginning. A focus on the quality of social housing is needed in the long term, not only now as a way to boost the economy. More than anything, the wellbeing of those who live in social housing must be prioritised. 

To see how our team of experts can help create a more sustainable future for your organisation, as well as the wider community, contact a member of our social housing team. 

Contact us

We have launched our guide to recovery and resilience, helping to support businesses and individuals unlock their potential, navigate their way out of lockdown and make way for a brighter future. Further advice in relation to COVID-19 can be found on our dedicated coronavirus resource hub.  

From inspirational SHMA Talks to informative webinars, we also have lots of educational and entertaining content for life and business. Visit SHMA® ON DEMAND. 

Our free legal helpline offers bespoke guidance on a range of subjects, from employment and general business matters through to director’s responsibilities, insolvency, restructuring, funding and disputes. We also have a team of experts on hand for any queries on family and private matters too. Available from 10am-12pm Monday to Friday, call 0800 689 4064. 

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Guides & Advice

Stamp Duty Tax Relief announced – starting with immediate effect

Stamp Duty Tax Relief announced – starting with immediate effect

The Chancellor’s budget has come good on the news that there is to be a six month Stamp Duty Holiday for home buyers breathing life into the housing market, starting with immediate effect.

The announcement today is one of a raft of measures with the objective being to kick start the economy over the next few months.

The UK economy has contracted enormously since March 2020 and whilst lockdown measures are starting to ease and more people are going back to work, there is a desire by many for additional measures to be implemented by parliament to encourage the population to spend.

Until now first time buyers have been exempt from paying stamp duty on the first £300,000 of a purchase price, which rises to £500,000 in London.  Other buyers pay stamp duty incrementally on the value of the house – the higher the value, the higher the stamp duty. That limit has now been raised for all buyers for house purchases up to the value of £500,000 from today 8 July 2020. It is calculated that these measures will benefit seven out of 10 home buyers and could save people up to £15,000 in stamp duty costs – a sizable chunk of anyone’s moving budget. This holiday will be in place until March 31 2021.

Neil Gosling, head of residential development, commented, “This is a welcome announcement that will hopefully support the continued re-emergence of the housing market and support economic growth. Aligned with this news, if lenders re-assess recent decisions regarding LTV criteria, and Government funding schemes like Help 2 Buy are extended, which in both cases are integral to supporting the first time buyer market, the housing sector will be well placed to bounce back to pre-COVID-19 sales levels.”

Contact us
For further information please contact Neil Gosling or another member of the residential development team.

We have launched our guide to recovery and resilience, helping to support businesses and individuals unlock their potential, navigate their way out of lockdown and make way for a brighter future. Further advice in relation to COVID-19 can be found on our dedicated coronavirus resource hub.

From inspirational SHMA Talks to informative webinars, we also have lots of educational and entertaining content for life and business. Visit SHMA® ON DEMAND.

Our free legal helpline offers bespoke guidance on a range of subjects, from employment and general business matters through to director’s responsibilities, insolvency, restructuring, funding and disputes. We also have a team of experts on hand for any queries on family and private matters too. Available from 10am-12pm Monday to Friday, call 0800 689 4064.

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Listen to our SHMA® ON DEMAND content covering a broad range of topics to help support you and your business.

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Peter Snodgrass, Partner & Head of Agriculture
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Your guide to recovery and resilience

Buildings, workspaces and leases

Your guide to recovery & resilience | Buildings, workspaces and leases

house image

COVID-19 restrictions have had a massive impact on the commercial real estate market at every level, whether that is bringing some major projects to a halt or simply making it impossible to access and use premises.

As the world and economy moves forward, owners and investors of real estate as well as occupying tenants, will have to consider the adjustments they now need to make whilst the restrictions around social distancing continue.

When businesses emerge from full lock down this will be a slow process and they will need to find new ways of working and inevitably different ways to use their space over the coming months. And at the same time consider how to manage the cost of premises in these changed circumstances.

We may not be going back to ‘normal’ any time soon, or ever reach the heady heights of pre-COVID life, but what we do know, is that now is the time to plan your route to recovery in order to bounce back.

Landlords & Tenants

Are you a landlord?
You may have no choice but to consider rent freezes, deferments or other concessions for your tenants as they struggle to do business in the new future – do keep the communications lines open. Forcing them into insolvency is not generally the solution. Consider how you will manage service costs/charges as businesses re-open in order to mitigate service charges whilst still keeping people safe.

Are you a tenant?
You may be struggling through no fault of your own in some cases, if ordered to close your premises by the government. A landlord knows a good tenant is hard to find so talk to your landlord about rent holidays, suspensions, reductions or more manageable payment schedules as you try to maintain cash flow. You may find yourself needing less space if your business has contracted – monitor your lease break options so that you are sure they can be exercised if required and how much that may save/cost.

Change management

Review and prioritise
Any plans you had underway in terms of capital expenditure or major projects. Prioritise those that are critical and look to reschedule others.

Review your operations
Is it possible to consolidate the number of sites / people into one location? Can you redeploy space to be used in a more cost effective way?

New working practices
You should make plans to adapt your space to comply with all new legislation. You may need more space to comply with social distancing practices which could go on for some time. You will certainly need to reconfigure the space you have to ensure employees can work safely at a distance of 2m from each other. Alongside this remote working will become the norm where practicable.

Adapting your business
Is it possible that more of your business can go online? Is it time to bring forward those plans? E-commerce is likely to continue growing as customers avoid physical stores/premises and crowded gathering places, but it could create logistical challenges.

IT security
If you are considering more online activity, do review your IT security systems to ensure they are robust enough to cope and you have the correct measures in place to ensure data security.

New protections introduced
Remember to check whether the raft of protections introduced by the new coronarivus legislation may be of assistance to your business – for example those measures designed to protect tenants from facing immediate action by their landlord if they should fall into rent arrears. This legislation evolves on a daily basis so it is vital to stay up to date. But remember you still have to comply with existing legislation (e.g. health and safety) and you may need to make adjustments to reflect

Risk to third parties
Consider and assess the risks of third parties coming into your workplace e.g. suppliers, customers. As an occupier and as an employer you have a legal obligation to these people too.

Review your insurance policies
See if any of these additional costs mentioned can be claimed on your insurance.

Take time to review your insurance provision
Going forward ensuring it is fit for purpose and takes into account the new situations we all find ourselves in and you are suitably covered.

Insurance breaches
Check no breaches have occurred during any time you may have had away from your premises that could lead to a claim.

Review any regulatory licences
You need to ensure you are up to date, nothing has expired and review any additional requirements you may need.

Safety of workplace premises

Consider your facilities and maintenance activities
Additional procedures may be necessary to reassure employees that the workspace is a safe environment to work. This may require scheduling of additional deep cleans etc. You may need to consider providing additional hygiene facilities such as hand sanitiser, soaps etc.

Back to work plan
When employees do start to come back into the work environment, if they have not already, a lot will have changed and is likely to be changed for the foreseeable future. Communicate openly and consider producing a back to work plan/information pack detailing the changes/requirements, commitments you are making to the working environment and how you need them to respond and play their part. This will help employees feel safe back in the workplace.

New or additional signage
We will all be working to new legislation and new working practices so ensure you comply with any new legislation/best practice and tell everyone about it – social distancing, wearing of appropriate PPE etc.

Travelling to work
Many of your employees will be looking for new ways to travel to work to avoid crowded public transport, following recent government guidance. Consider finding and providing additional safe facilities for bicycles and lockers for employees or additional car parking.

Contact us
In response to the pandemic we created our coronavirus hub which includes advice, guidance and insight to help you navigate through these uncertain times. As we all begin to adapt and prepare for the future, our hub will evolve to provide you with further help and resources for surviving, reviving and beginning to thrive in life and business, throughout the challenging times ahead.

Our free legal helpline offers bespoke guidance on a range of subjects, from employment and general business matters through to director’s responsibilities, insolvency, restructuring, funding and disputes. We also have a team of experts on hand for any queries on family and private matters too. Available from 10am-12pm Monday to Friday, call 0800 689 4064.

For legal support in relation to the coronavirus or any other matter, get in touch with your team today.

From inspirational SHMA Talks to informative webinars, we have lots of educational and entertaining content for life and business visit SHMA® ON DEMAND.

More guides to recovery & resilience

We are here to help in your business and personal life - contact us today to find out more.

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Opinion

Turnover rents: Is it time for a comeback?

Turnover rents: Is it time for a comeback?

Retail is one of the sectors that COVID-19 has hit particularly hard. The UK High Street was already struggling, and with the restrictions implemented by the Government causing the majority of shops to close their doors, a positive change cannot come soon enough.

E-commerce has lightened the load for some retailers, but many are finding it difficult to keep up with rent and overhead costs on empty outlets. In order to survive, commercial landlords and tenants must change the way they operate. Could turnover rents be the answer?

What are turnover rents leases?

The aim of this form of lease is to allow both tenant and landlord to share in the good times and the bad. Generally, it works by dividing the payment into a fixed term base rent, which is determined by current market conditions, and a turnover element, which is determined by the financial performance of the tenant. The percentages of the base rent and the turnover element can be negotiated by both parties.

On the whole, this makes them a very helpful agreement for retailers, although their reputation does need to improve among landlords. This being said, what works for one does not work for all, and so retailers should first assess whether turnover rent will benefit them in the long-term.

With great power comes great responsibility

Although turnover rents can hand some power back to the tenant, retailers must consider whether they can cope with the level of responsibility they carry.

Compliance is key, with retailers required to keep careful and detailed records of all items sold and to provide their landlord with regular ‘turnover certificates’. Should the trust between landlord and tenant be broken, a full audit can be undertaken, including a right to inspect and query any business’ records.

Negotiate your agreement

To avoid time consuming and costly disputes, retailers should create an agreement with landlords prior to signing a lease. Conversations should include:

  • Whether online sales, VAT and bad debts can be excluded from the turnover calculation
  • Whether discounted goods should appear in the turnover figures at full price
  • Whether a tailored turnover calculation is needed for each brand a retailer sells

Agreements should also contain a disputes provision in case the turnover rent element cannot be agreed.

Expert advice is essential when negotiating agreements and turnover rent percentages. Addressing any issues at an early stage can help to mitigate against unnecessary cost and time delays.

Don’t be afraid to talk

As always, honest communication is vital to negotiating a solution that benefits both parties. The current unstable climate means landlords may be hesitant to sign a turnover rent agreement at this time. As such, retailers should assess what they can offer a landlord in return. For example, agreeing a slightly longer lease to give the landlord more security.

Flexibility is necessary if the retail sector is to come out of the other side of this pandemic fighting. Considerable change is needed, and conversations between landlords and tenants regarding the reintroduction of turnover rents could be a good place to start.

Contact us
For further information please contact Julian Joseph or another member of the real estate team.

Shakespeare Martineau has launched a free legal helpline offering bespoke guidance on a range of subjects from employment and general business matters, through to director’s responsibilities, insolvency, restructuring, funding and disputes. We also have a team of experts on hand for any queries on family and private matters too. Available from 9am-5pm Monday to Friday, call 0800 689 4064.

From inspirational SHMA Talks to informative webinars, we have lots of educational and entertaining content for life and business - visit SHMA® ON DEMAND.

SHMA® ON DEMAND

Listen to our SHMA® ON DEMAND content covering a broad range of topics to help support you and your business.

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Guides & Advice

Coronavirus – what it may mean for commercial landlords and tenants

UPDATE | Many landlords and tenants will be paying close attention to how the continuing spread of coronavirus over the coming months may affect their business and in particular their leased premises.

Now that the Government has closed down the majority of retail, hospitality and leisure business to stop the spread of the virus, landlords and tenants should be aware of the parameters of their leases to see if they can minimise the impact of these necessary restrictions during this challenging period. We take a look at some of the points which you may be considering.

If you’re a tenant

Reducing your rent

If you’re a tenant and pay rent in accordance with a turnover clause, then you may see a significant decline in takings for your business if Government restrictions/recommendations affect your footfall.  You may expect to see a reduction in the amount of rent that you pay to the landlord at the end of the rental period.

Whether or not this applies will depend on the terms of the turnover rent clause in your lease and whether there are any other lease requirements on the tenant to keep open and maintain active trading throughout the period.

If you pay a fixed sum for rent, you could seek to negotiate a rent concession or rent deferment with your landlord. If your landlord is unwilling to engage with you, then there is the drastic option of withholding payment of the rent, as temporary changes to the law mean that landlords cannot forfeit your lease for at least three months (from March). However, this carries obvious risks including landlords still being able to begin recovery action against a tenant (or a guarantor), even if they are unable to terminate the lease.

Breach of your quiet enjoyment

You may be the tenant of a multi-let building or a shopping centre. If a landlord is required to close all access to your building then, arguably, the landlord has breached its lease obligation to you to allow quiet enjoyment to your premises as the closure will have been taken without your agreement.

If this is the case, it is worth considering taking steps now to preserve evidence in order to raise this claim for damages against your landlord once any coronavirus restrictions are lifted and you have regained full use of your premises.  For example, you should track and retain full records of the takings of your business and loss of profit and any other direct costs which you have incurred over the period of closure.

However, tenants are unlikely to succeed with such a claim, given that the current Government guidance is for non-essential businesses to close. Nevertheless, for those that can potentially run a take-away service and adhere to guidelines safely, a discussion can be had with the landlord to keep the premises open. If a landlord is still not willing to permit access, then tenants could consider a claim for breach of the quiet enjoyment provisions.

If you’re a landlord

Frustration of the lease

Landlords are likely to face claims by some tenants that they cannot survive as a business even for a short period of a few months without full access to and use of their premises. Those tenants may even try to argue that their lease should now be brought to an end altogether as a result of the footfall restrictions resulting from any spread of COVID-19.

It is extremely difficult to argue that a lease has been frustrated due to external influences in this way, as the case of Canary Wharf (BP4) T1 Ltd v European Medicines Agency [2019] highlighted. In this case, the European Medicines Agency failed to persuade the Court that Brexit as an event was capable of “frustrating” the purposes of the lease. Landlords should take some comfort therefore that similar principles ought to apply to COVID-19 and should be ready to resist any challenges by their tenants on this basis.

Insurance

Tenants may seek to invoke rent suspension clauses in their lease if they can show that a connection between COVID-19 and the typical insurance provisions in their lease. Landlords should be able to resist these claims by reference if they can show that COVID-19 does not fall within the definition of Insured Risks in the lease.

Likewise, standard Uninsured/Insured Risk provisions require there to be destruction/damage to the premises. It could be considered stretching the argument too much to say that the requirement to decontaminate/deep clean premises is sufficient to classify premises as damaged property. In light of the above, it is unlikely that the rent suspension provisions will apply.

As ever, the extent to which you may be able to invoke any of the above – whether you are a landlord or tenant – will depend on the precise terms of your lease and how those provisions can be interpreted in the circumstances.

Contact us

To discuss how any of the above issues may affect you please contact Justine Ball or a member of our real estate disputes team in your local office.

You can register for one of our online webinars, or contact the events team for more details. For more general business advice in relation to coronavirus visit our dedicated resource hub.

For advice or guidance on any other legal issue, a member of our team can help – please click here to discuss.

How can we help?

Our expert lawyers are ready to help you with a wide range of legal services, use the search below or call us on: 0330 024 0333

SHMA® ON DEMAND

Listen to our SHMA® ON DEMAND content covering a broad range of topics to help support you and your business.

Agriculture: diversifying or leasing your land to create habitat banks

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Peter Snodgrass, Partner & Head of Agriculture
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Agriculture: diversifying or leasing your land to create habitat banks

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We know that biodiversity net gains provide a significant opportunity for landowners to diversify […]

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For many small, family-owned and SME businesses, this will be a huge relief to what is already a difficult time. The business rates holiday, however, only applies to retail and leisure companies who are likely to bear the brunt of the current coronavirus concern with customers staying in, avoiding travel, and staying away from cafes, gyms and restaurants.

But what about everyone else?

Commercial landlords, and property agents have been calling for changes to the business rates system for a significant time. A further review is promised later this year, but as it stands, there are no firm proposals. The current business rates holiday for small businesses and SMEs may, however, have unforeseen consequences.

Currently, a 50% business rates retention scheme applies to all local authorities. This means that 50% of the funds that they recover through business rates are kept within the local authority. That scheme has been so successful in increasing business rates collection, that there have been further trials where some local authorities retain 75% and even 100% of the business rates collected. Why is this important? Under the scheme, the local authorities’ retained funds go back into the local authorities’ budgets and can be used to fund other services. Quite simply, it is in the local authority’s best interests to collect as much as it can.

The incoming business rates holiday announced earlier this week, will have a significant financial impact upon local authorities and their collections. Local authorities are already under significant financial pressures, and will seek to offset those losses through other means. We are increasingly seeing local authorities challenging landlords and tenants in relation to the application of business rates reliefs, particularly in relation to whether empty property relief or charitable relief applies. These challenges are becoming tougher and we are seeing a greater willingness from local authorities to take these matters to the Magistrates’ Court for a full challenge of a Liability Order.

That said, it is very possible to contest these challenges and wrongly sought liability orders from local authorities and we’ve seen success in these decisions being overturned including high profile cases within the Magistrates Court and high Court.

What should you do if challenged?

Make sure you collect and retain as much evidence of your, or your tenant’s occupation, so you are prepared if this happens. If an occupation or application for relief is challenged, get legal advice as soon as possible as many of these matters can be sorted before any liability order is obtained and court action required. If, however, a liability order is obtained against you, you need to act fast in order to persuade the local authority to change their mind or in order to dispute that liability order at Court.

If you are experiencing challenges from a local authority in relation to a business rates bill, or have been challenged as to whether a particular business rates relief should apply, contact Ben Humphreys or Barry Jervis in the dispute resolution team.

For advice or guidance on any other legal issue, a member of our team can help – please click here to discuss.

What is super-prime real estate?

Prime real estate generally refers to the top five percent of property by value, whereas super-prime property represents the top one percent. These properties are rare and exclusive, targeted at only the wealthiest of the population.

What are the features of super-prime property?

Capital value isn’t the be-all and end-all for super-prime real estate. Features such as valet parking, concierge services, terraces or luxury interiors are also considered when it comes to defining property as super-prime.

Rent or buy?

Although the market has been stable, a shift in the approach to super-prime property has occurred in recent years. Reforms to Stamp Duty Land Tax have led to more people opting to rent instead of buy. As a result, there are now many more top-end rental properties available on the market. However, now that there is a majority government and a level of certainty has returned, people may become more willing to buy once again.

What drives the interest in super-prime real estate?

The capital has consistently been the area of choice f