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

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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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Guides & Advice

Your Guide to Commercial Landlord and Tenant Dispute Resolution

Helping commercial landlords and tenants resolve rental disputes following the COVID-19 pandemic.

Introduction

Over the past 15 months, since March 2020, commercial rent arrears have increased to unprecedented levels in the UK. And, with Government restrictions still being applied to some of the usual remedies to recover rent arrears for commercial landlords, it’s all the more important for landlord and tenant disputes to be settled quickly, through negotiated agreements for the future.

Recent announcements have indicated that new legislation is likely to be published in the coming months, which could force landlords and their tenants into binding arbitration rather than going to Court. This will impact any arrears discussions and potentially put landlord and tenant relationships and enterprises at risk.

Given this situation, our expert team of property litigation and debt recovery specialists will work with both parties to try and achieve mutually beneficial agreements and will provide support during these negotiations. As such, we’ve put together this useful guide to give you all the information you need as a commercial landlord or tenant, to help you take the necessary steps to avoid further financial complications and build a lasting relationship that protects both of your enterprises.
 

The current situation

The Coronavirus Act 2020 initially gave a three-month moratorium on forfeiture of lease due to rent arrears in respect of commercial property in England, Wales and Northern Ireland. This was due to expire on 30 June 2021, but following the Government’s announcement on 16 June, this has now been extended to 25 March 2022. The current moratorium on action by landlords to recover rent arrears via bailiff action under the CRAR process has been similarly extended. These extensions mean commercial landlords are now faced with further delays in rent collection for arrears accrued during periods of enforced closure during the pandemic.

It’s important to note that the moratorium does not excuse tenants from paying their rent during the pandemic. All commercial tenants remain liable for payments due since March 2020.

So far, many commercial landlords have been successful in negotiations with their tenants for new, improved lease agreements that align better with current financial situations. It is possible these successful rent concessions could have followed the Government’s publication of The Code of Practice for Commercial Property Relationships in June 2020. A key takeaway from this documentation was that tenants were (and still are) required to be transparent with their landlords regarding their finances, although the code itself has not been seen as a mandatory order.

 

Binding arbitration

In the Government’s recent announcement, it was declared that new legislation will be introduced in the coming months to ring-fence arrears which have built up while commercial tenants were forced into temporary closure due to successive pandemic lockdowns. It is still expected that landlords and tenants will try to negotiate agreements in terms of all arrears relating to COVID-19, but naturally, not all negotiations will result in success. To address this, the Government advised that a new legally binding arbitration process will be introduced for landlord and tenant disputes that have yet to be resolved.

No date has yet been given as to when this proposed legislation will be published but it is expected in Autumn 2021, which is why we strongly encourage commercial landlords and tenants now to seek legal advice early on in their negotiations. It is expected that tenants who can pay should pay. We understand the difficulties involved with securing early settlement of these types of disputes between landlords and tenants, but it is even more important to try to achieve this quickly, otherwise, both parties risk being forced into binding arbitration later this year.

Find out more about our
rent dispute resolution service

Our property litigation experts work closely with both commercial landlords and tenants,
to help both parties reach commercial solutions, provide legal advice and support during any negotiations.

We have worked with a variety of landlords and tenants and have a market-leading property disputes teams
who can support you at all stages of your dispute.

What can commercial landlords do?

We understand the importance of generating income quickly and efficiently, particularly given the financial crisis following COVID-19. We also know it’s crucial for any commercial landlord to protect their capital value and maintain bank interest covenants; it’s a case of striking a balance between these that can be challenging at the moment.

 

Commercial landlord remedies for non-payment of rent

Any commercial landlords facing rent arrears resulting from the pandemic have a number of options to consider. As a commercial landlord, the remedies for non-payment of rent currently include starting Court proceedings to recover rent arrears. Nevertheless, it is always better to first explore with your tenant whether both parties can find a solution which they can agree to commit to.

Problems can occur when tenants assume/expect their landlords to offer reduced rent (under false assumptions that they can afford to do so). This risks placing landlords into a negative cash situation with their tenants. These are the sorts of issues that can cause disagreements between both parties, which could put successful negotiations at risk.

 

Risk of insolvency

Many landlords will accept that negotiations and rental concessions are crucial to long-term financial stability. Being able to reach mutual agreements is important to allow tenants to continue their business, given that finding replacement tenants who can afford to pay (and who aren’t still reeling from the pandemic) can be challenging.

If landlords were to lose tenants to insolvency in this current climate the costs of going through the insolvency process are high, and they would potentially need to survive with empty premises and be liable for business rates.

 

Debt recovery

Some landlords may nevertheless choose to adopt a debt recovery strategy. It’s widely known that many commercial landlords or tenants do not look upon debt proceedings favourably, as reputational damage can be a factor. There is currently no bar on landlords starting debt proceedings in the Court – and they may decide to still do so and risk them being stayed to arbitration if they are not concluded by the time the proposed new legislation becomes law. Landlords will normally be able to include within their proceedings a claim that their tenant pays their legal costs as well.

We have a team of debt recovery specialists who can help if you wish to start the recovery of debt proceedings against your tenant.

How we can help

Our solicitors are highly experienced in commercial landlord representation.

  • We can help commercial landlords negotiate new terms, so both parties can come to an arrangement for commercial rent arrears recovery that minimises the impact on their business.

  • We have a team of experts in property litigation and debt recovery, who can provide legal advice for negotiations with your tenant.

  • We can give specialist support to help you find a commercial solution, or equally, we’re able to represent you throughout any commercial rent arrears recovery proceedings.

To discuss your options and to find out how we can help you and your business call us on 0330 024 0333 or request a call back, and one of our rent dispute resolution experts will call you.

What can commercial tenants do?

Many commercial tenants have felt the financial strain of the pandemic lockdowns, and equally the strain it has posed on relationships with their landlords. We understand the priority for all tenants is their business, and how important it can be to ensure they can keep trading from their current premises to enable business as usual.

Throughout the moratorium, tenants have been encouraged to pay as much as they can afford and give their landlords as much financial transparency as possible. The Code of Practice says as much, with the concept of enabling landlords to provide appropriate support wherever they can, to avoid any insolvency proceedings or bad faith between parties. Unfortunately, the Code as we know does not have any teeth as it is not mandatory legislation.

This means there are still many tenants who are yet to agree on concessions with their landlords. From our perspective, it’s advisable that any commercial tenant looking to negotiate in this way should take note of what the Code outlined, and to consider providing details of their financial information to their landlord in negotiations.

We also strongly advise commercial tenants to get in touch with our team, so we can give appropriate legal advice to support them throughout the negotiation process.

It’s worth noting the importance of trust here too. If trust is broken down between landlord and tenant due to unwillingness to share information or at least trying to negotiate properly with transparency, this is likely to form a barrier to success.

 

What happens after 25th March 2022?

Regardless of the moratorium, tenants are still expected to pay their rent whether it fell due during the pandemic or afterwards. The impending arbitration process will only apply to pandemic arrears, and there is every chance that the actual legislation (once published in the Autumn) may include various exemptions so that some tenants may still be at risk of action for pandemic arrears. There will naturally be questions from both parties, and unfortunately in the meantime, the Courts are choked with a significant backlog of rent proceedings. There is a large value of unpaid rent locked up in those proceedings.

It is clear that commercial tenants are expected to “sort out their differences” by early negotiations with their landlords themselves, otherwise, they risk facing the consequences of either Court action or forced arbitration.

It’s important to note all tenants could still be sued for arrears accrued for non-payment of rent during the pandemic. If a tenant and their landlord are forced into binding arbitration, this process is only likely to cover arrears accruing due throughout the pandemic. That also means tenants are still liable to face proceedings for post–pandemic rental payments (as they are not likely to be subject to the arbitration process in any event) which could leave them in a worse financial state than if they’d agreed to concessions with their landlord.

 

Breathing Space: The Debt Respite Scheme

On 4 May 2021 the Government introduced “Breathing Space”, a debt respite scheme that gives some debtors legal protection from their creditors. Standard breathing space is available to anyone with problem debt; it gives them legal protection for up to 60 days. There is also breathing space available to certain individuals on mental health grounds.

Some commercial tenants who are individuals may qualify for this.

Find out more about the Breathing Space Debt Respite Scheme >>

How we can help

Our solicitors are highly experienced in commercial tenant representation.

  • We can help commercial tenants negotiate new terms, so both parties can come to an arrangement for commercial rent arrears recovery that minimises the impact on their business.

  • We have a team of experts in property litigation and debt recovery, who can provide legal advice for negotiations with your landlord.

  • We can give specialist support to help you find a commercial solution, or equally, we’re able to represent you in terms of resisting any debt recovery action.

To discuss your options and to find out how we can help you and your business call us on 0330 024 0333 or request a call back, and one of our rent dispute resolution experts will call you.

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Ban on evicting commercial tenants extended - this time until March 2022

Updated 17 June 2021 - On 16 June 2021 the Government confirmed that the evictions ban on commercial tenants for non-payment of rent will be extended again until the 25 March 2022 and a new piece of legislation to boot

This further extension of the commercial tenant evictions ban will help those worst affected by the pandemic, such as bars and restaurants, who are still suffering due to ongoing restrictions, due to reduced capacity and some venues not being able to open some 16 months on and being forced to close.

In an effort to lessen financial pressure on tenant businesses, the Government has also extended the restriction on the use of the Commercial Rent Arrears Recovery (CRAR) process by landlords until 25 March 2022. This measure does not, it seems, increase the total number of days' outstanding rent required for CRAR to be used, namely:

• 457 days (between 25 March 2021 and 23 June 2021), and

• 554 days (between 24 June 2021 and 30 June 2021).

The Government is also planning on introducing a new Act of Parliament to deal with the accrued arrears of businesses forced to close during the pandemic – effectively forcing landlords to agree on a payment plan with their tenants who have been forced to close through COVID or be thrust into an arbitration process where an agreement may be imposed upon them.

Can commercial tenants be evicted?

No, the commercial eviction ban means that tenants cannot be evicted for non-payment of rent until 25 March 2022. However, this only applies to disputes regarding rent arrears. If a commercial tenant is in breach of the covenants in their lease, the landlord may still take action against them (and the outcome could include forfeiture of the lease).

We help commercial landlords and tenants to resolve property disputes fairly and with commercial objectives in mind, whether this relates to non-payment of rent or breach of covenant – get in touch to find out how we can support you.

How will the business evictions ban extension help tenants?

The commercial evictions ban extension will continue to provide a much-needed lifeline for those businesses still struggling, particularly those in the hospitality sector, helping them get back on their feet after months of restrictions and closures.

However, it is important to stress that this extension will only delay the landlord’s rights; it does not affect a landlord’s right to forfeiture after the March 2022 extension ends and commercial tenant evictions will once more be possible from this point onwards. The new act of parliament is essentially creating a ring fence around accrued debt during periods of closure and businesses are being encouraged to prioritise new and future rent.

As a landlord, is there anything I can do about the commercial evictions ban?

Many commercial landlords have shown flexibility, understanding and commitment to protecting businesses during an exceptionally challenging time. However, with yet another delay, the extension of the commercial evictions ban will significantly impact their own cash flow in some cases.

It is important that landlords use upcoming months to assess their position and seek to resolve the matter with their tenants. At the moment, there is little detail on the proposed new act and no date given as to when it will come into being, so for some this will mean continuing to issue proceedings at court for debt claims of arrears accrued before being forced into arbitration.

But for many others, continuing to negotiate with their tenants to reach an agreement on unpaid rent may be the most commercially astute way forward (particularly if the alternative is to force the tenant into an insolvency situation).  Either way, landlords would be well advised to grasp the nettle now, as doing nothing is not a helpful strategy.

If a negotiated solution is reached, it’s important to remember that:

  • any voluntary arrangements, including monthly rent payments or rent holidays, are properly and legally documented to protect both parties;
  • new agreed terms are clear and binding and do not prejudice any other lease provisions; and
  • the arrangements do not require either a lender or bank consent.
We’re here to help

Our commercial property disputes team can help you through these difficult situations and guide you towards a solution - contact James Fownes, Martin EdwardsJustine Ball or another member of the property disputes team, for advice and support. 

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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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.

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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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Update - A double win for CVAs: what do recent High Court rulings mean for landlords?

UPDATED 3 June 2021

With many retailers struggling to cope with the effects of COVID-19 on their revenues, there has been an increase in businesses applying for Company Voluntary Arrangements (CVA) and the new rules for restructuring plans under the Corporate Insolvency and Governance Act 2020 (“CIGA”). New Look and Virgin Active bring two examples of businesses that have chosen these business recovery routes, with the aim of cutting rental costs.

Whilst this is helpful for struggling retail who may need support in the current market, CVAs and restructuring plans can both have a range of negative impacts for landlords. From cutting off rental income in an already challenging period, to further straining the relationship with tenants, these recovery routes can leave landlords facing uncertainty from slashed rental income streams.

As a result, not every landlord agreed with New Look and Virgin Active’s terms, leading to two High Court battles.

Business vs landlord

With this being New Look’s second CVA in three years, many landlords were left concerned that their voices were going unheard and that these decisions were setting a ‘dangerous precedent’ for other businesses. As a result, although the majority of the clothing brand’s landlords agreed to the CVA, others decided to appeal the decision. A number of Virgin Active’s landlords also took a similar view to the terms agreed in the gyms group’s restructuring plan, launching their own appeal.

The new rules brought in by CIGA allow the court to sanction a restructuring plan even where it is not approved by 75% of the creditors provided two conditions are met – (1) the court must be satisfied none of the dissenting creditors would be worse off when compared to the relevant alternative and (2) the restructuring plan was approved by over 75% of one class of creditors who would receive a payment or have a genuine economic interest in the company if the relevant alternative did take place.

Virgin therefore argued that the relevant alternative was either to enter administration with a view to sell certain parts of the business or liquidation and argues that both of these options would leave the dissenting creditors in a worse off position.

For both businesses, landlords voiced fears over a lack of transparency, accusing the brands of abusing these recovery routes as a simple way to cut down on rent and write off rent arrears. Landlords believed they represented a bias against property owners, with the business giants squeezing profits at the expense of landlords, rather than acting out of necessity.

In the same week, both New Look and Virgin Active won against the appealing landlords, enabling them to continue to take advantage of the flexibility that their respective CVA and restructuring plan offer. By ruling in favour of the tenant businesses, the courts have signalled that they are currently the priority, rather than their landlords.

More than a tool for survival?

CVAs have become more ambitious in their aims over recent years, and these rulings against landlords show that tenants are continuing to push their limits. The new rules for restructuring plans also show that by continuing to divide landlords into several different categories with reducing levels of recovery, the majority of landlords can be disadvantaged. It is notable that all Category B-E landlord creditors in the Virgin Active case voted against the scheme. The pandemic has led to a rescue culture developing, arguably with the needs of businesses put above those of individual landlord creditors in this context.

Now that non-essential businesses are open once more, this may begin to change, but for now, these rulings act as a green light for insolvency practitioners to push CVAs and Restructuring Plans further, making them an increasingly powerful tool for tenants. It could even lead to the threat of such recovery methods being increasingly used as a bargaining chip in landlord and tenant negotiations.

There are some countervailing forces with recent cases allowing landlords to recover debts at court from tenants which are not subject to an insolvency regime. However, for landlords, the use of CVAs and restructuring plans is another blow in an already difficult retail market. It shows that the courts may accept the view of the majority of creditors even if others take the view that this seems to unfairly prejudice other parties.

A continuing trend?

The popularity of CVAs among struggling retailers has grown quickly in recent years, and the confidence that these rulings will provide businesses means this is likely to continue with more businesses turning to CVA’s or the new restructuring plan rules. As the economy improves, this trend may reverse, but in the meantime, all parties should aim to cooperate in order to reach an agreement that is fair for all.

A recent update

Since the decisions made in the above to cases there has been a third case determined by the High Court which may be a small beacon of light for landlord creditors.

The High Court has recently revoked a CVA entered into by Regis UK Ltd on the basis that it left the shareholder unimpaired and unfairly prejudiced landlord creditors. As part of their CVA, Regis sought to categorise their sole member (“IBL”) as a critical creditor and to permit their debts to be repaid in full under the CVA. This would clearly have a large impact on all other creditors with some landlords only being entitled to receive a dividend of only 7% on their claims.

The court therefore held that revocation was the proper course of action, despite it being of little practical effect in this case with Regis most likely being unable to pay the landlord’s costs.

The above decision together with permission to appeal having been granted in the New Look decision discussed above it is likely there will be more decisions from the court on the use of CVAs and restructuring plans and their impact on landlord creditors.

Contact us

For further information, please contact James Fownes or another member of the property disputes team in your local office.

Our updated guide to recovery and resilience covers everything you need to navigate your business 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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June 2021 - key dates for businesses and individuals

1 June marks the start of a number of major changes coming up in the real estate and employment landscapes that businesses and individuals need to be aware of.

Changes to possession proceedings – 1 June
An end to the eviction ban

As of today (1 June), landlords can once again apply to evict tenants. The eviction ban was introduced by the government at the start of the pandemic to protect people from losing their homes in such a turbulent period. However, for landlords this ban has meant a strain on cash flow, putting some into difficult financial circumstances, especially for those owed large amounts of unpaid rent.

Although evictions are now able to take place once more, landlords must give 14 days’ notice and, due to COVID-19 safety concerns, bailiffs are being asked not to carry out evictions if anyone living in the property has COVID-19 symptoms or is self-isolating.

Reduced notice periods

The government has also set out to shorten notice periods for landlords seeking possessions. Also form today (1 June), the current six-month notice period will be shortened to just four months. Although the current exceptions will still be applicable, there are a number of key changes for grounds of possession and their notices, including:

  • 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)

Read more about the changes in our blog on key changes for possessions proceedings. If you’re a landlord and need advice then contact Habib Khan in our housing management team who can guide, you through any housing management and litigation issues you may face.

Concessions on ‘right to work’ checks will come to a close – 20 June

Businesses that intend to hire an international workforce in the UK should know that the government guidelines on 'right to work’ checks will be updated on 20 June. The new guidelines are being reintroduced as the world of work returns to normal after the pandemic and will require businesses to receive physical proof of a person’s right to work, such as a visa, not just a scanned or digital version of the documents.

Businesses should take this change in legislation as an opportunity to review their employment processes to ensure they are compliant with the new rules.

Register for our free webinar on right to work checks in 2021 and beyond, taking place on 17 June.

If you’re are unsure of what the changes mean for you, or you require assistance with the right to work checks and general compliance, speak to Tijen Ahmet in our business immigration team.

Ban on evicting commercial tenants likely to end – 30 June

As it currently stands, the evictions ban on commercial tenants for non-payment of rent will come to an end on 30 June 2021.

When the extension of the ban was announced on 10 March, it provided a much-needed lifeline for businesses who are still struggling with the impact of COVID-19.

However, if the ban on eviction is not extended once again, landlords will have the right to forfeiture from 1 July.

If you’re a landlord and struggling to resolve matters with your tenants then our commercial property disputes team can help you through these difficult situations - contact James FownesMartin EdwardsJustine Ball or another member of the property disputes team for advice and support.

The wind down of the stamp duty holiday – 30 June

Homeowners should be aware that the stamp duty holiday comes to an end on 30 June, with a staggered return to previous rates over the coming months.

First introduced in July 2020 and then extended in March 2021, the stamp duty holiday was designed to boost the property sector, which had come to a halt at the start of the pandemic. This meant that property purchases up to £500,000 were exempt from stamp duty land tax, saving people up to £15,000.

From 30 June 2021, the threshold will decrease from £500,000 to £250,000, considerably reducing the number of eligible properties. By 1 October, the thresholds are planned to return to their pre-pandemic levels.

This holiday has helped many people purchase properties without worrying about additional tax bills, which has lowered costs overall.

Homeowners looking to benefit from the tax exemption should expedite their completion dates, if possible.

If you’re looking to sell or buy your own home then our dedicated residential conveyancing team is here to help and make the journey as straightforward as possible. For guidance and support contact Tom Ansell or complete our 'contact us' form and a member of our team will call you back to discuss your enquiry.

We’re here to help

Being aware of these key events can help you and your business better prepare, seeking expert guidance to assist with navigating this constantly changing landscape.

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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Guides & Advice

Telecoms Leases - Do you have a mast on your land or property? You could be missing a trick

Following the introduction of the New Telecoms Code back in December 2017 (the New Code), there has been a noticeable shift in the balance of power from landowners in favour of telecoms operators.

This is particularly true in relation to the rent payable by operators to landowners. Prior to the New Code being introduced, landowners were receiving a market rent from operators, however, the rent now payable by operators is much lower as rent is determined by a statutory valuation mechanism contained in the New Code.

How has this affected social housing providers?

This has resulted in a number of social housing providers seeing a reduction in the income being received from telecoms operators following a renewal of an expired lease. This is far from ideal as the cost of accommodating operators on land/buildings may now outweigh the benefit of the rent received. Social housing providers are having to incur the time and cost of frequent access requests from operators to gain access to their equipment as well as disputes that arise in the event damage is caused to their premises by virtue of the apparatus being in situ (e.g. roof leaks).

What can be done to maximise rental, despite the New Code?

It is crucial that social housing providers are able to obtain the highest sums for rent from operators, notwithstanding the principles of the New Code, to retain its income stream for as long as possible.

It is vital that any existing telecoms leases are reviewed to assess how rental levels can be maintained.  There may also be the possibility of obtaining additional sums for rent from telecoms operators too.  One of the ways we have assisted is through reviewing the rent review provisions in a telecoms lease and activating these in order to secure additional sums of backdated rent from operators.

It is often the case that rent reviews have not been actioned for many years. However, seeking to activate past rent reviews now could result in thousands of pounds of unpaid back rent which social housing providers are entitled to and need. We have been able to successfully obtain back-dated rent for a number of our clients.

However, it will not be a one size fits all, as each telecoms lease is different – varying rent review terms, the valuation mechanism of the rent review and the trigger dates for the review.

How we can help

We can review your telecoms leases, advise you on your position and how you may be able to seize an opportunity to maintain rental levels or receive back-rent owing to you.

Contact us

Please do not hesitate to get in contact with our specialist telecoms litigation team or contact Justine Ball directly.

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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Case Law Update – There’s Movement in the Commercial Lease Market

There has been a flurry of recent cases looking at the impact of the COVID-19 pandemic on disputes that have arisen between landlords and tenants of commercial leases over the past 12 months.

The recent case of WH Smith Retail Holdings Limited –v- Commerz Real Investmentgesellshaft MBH resulted in the court supporting the tenant’s claim for the insertion of a pandemic rent suspension clause. However, the cases of Bank of New York Mellon (International) Ltd & Ors v Cine-UK Ltd & Ors and Commerz Real Investmentgesellschaft mbh v TFS Stores Ltd saw the court grant judgment in favour of landlords and requiring tenants to pay all rent owing under their leases which they had failed to pay during various periods of the pandemic.  At the time of writing, it may be that these decisions are the subject of appeal by the tenants.

Nevertheless, this raft of cases demonstrates there is a lot more activity between landlords and tenants in the commercial lease market and subject to change.

Main Takeaways

 

  • Reduction in rent - The valuers acting for the landlord and tenant in WHS had already agreed that there should be a 20% reduction in the market rent being solely attributable to the impact of the pandemic. This reflects the reality of pressure on retail rents in shopping centres but should not necessarily be taken as a new “rule of thumb.”

 

  • Pandemic rent suspension clauses – the court inserted a clause into the WHS lease which provided that only half the rent is payable in the event of a pandemic event whenever non-essential stores are required to close (even if the unit itself remains open as an essential retailer). Whether this becomes the norm remains to be seen. But crucially, there is still some debate as to the extent to which landlords may seek an uplift in rent by virtue of introducing new rent suspension clauses on renewal.  On the specific facts of the WHS case the court was not persuaded that the insertion of such a clause should attract an increase in the market rent.

 

  • Payment of rent under a lease is absolute – none of the arguments advanced by the tenants so far have persuaded a court to waive or reduce the tenants’ liability for rent. As indicated above though, the matter has not as yet been settled by the Higher Courts.

 

  • Business Interruption Insurance - it is clear that tenants should be looking to insure themselves as the case law to date shows they are not able to seek to invoke rent suspension provisions under their leases and to pass this burden onto their landlords.
What should you do if you are involved in a rent dispute or a 1954 Act renewal?

 

  • Watch this space – there are likely to be further judgments in the near future that will provide more clarity

 

  • In the meantime landlords and tenants would, at least initially, be well advised to try to follow the spirit of the existing Code of Practice and to seek to resolve their disputes rather than rushing into costly litigation

 

  • Take care when negotiating pandemic rent suspension clauses – they seem set to become more common but bear in mind there are many variations in play and one size does not fit all.

Our real estate disputes team can provide you with expert assistance in understanding your position whether as landlord or tenant before and during any negotiations or assist you with any prospective or ongoing Court proceedings.

We’re here to help

For help, please do contact Martin Edwards, James Fownes or Justine Ball in the real estate disputes team.

Our construction team is ranked as a Leading Firm in the Legal 500 2021 edition.

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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Commercial tenant CVAs | What landlords need to know

With England starting 2021 in another national lockdown, and many businesses forced to close their doors once again, it’s likely there will be an increase in businesses entering Company Voluntary Arrangements (CVAs).

What is a CVA?

A company voluntary arrangement (CVA) provides a framework for a debtor company to reach a binding settlement with its creditors for pre-arrangement debts, often at a figure less than their full value.

The impact of CVAs for commercial landlords

The restrictions introduced as a result of COVID-19 have further highlighted the problems landlords have been facing. This is particularly true for those in the retail sector, with many of the usual remedies for recovering rent from their commercial tenants now restricted:

  • An evictions ban on commercial tenants for non-payment of rent is currently in place until 30 June 2021.
  • There is currently a stay on possession proceedings. Although now expired, this means landlords have to file and a reactivation notice confirming they wish to have the case in question listed, relisted, heard or referred.
  • There are limitations on commercial rent arrears recovery, depending on the length of time for which rent has been unpaid.
  • The presentation of statutory demands and winding-up petitions, save in certain carefully designated circumstances, is currently prohibited.
What are the options if a commercial tenant enters a CVA?

Many might consider that the above restrictions have created a charter for tenants to avoid their contractual obligations. However, where struggling businesses are building up significant rent arrears, their landlords have some important recovery options still available to them.

1. Recovery from former tenants and their guarantors, or from existing guarantors or potentially sub-tenants.

If the tenant entered a lease agreement before 1996 its landlord may be able to pursue the original / previous tenants for breaches. However, if the lease was granted on or after 1 January 1996 there are restrictions. For example, there must be an authorised guarantee agreement (AGA) in place with the previous tenant and, even then, that route can only be pursued for certain types of claim.

In addition, only the immediately preceding tenant can be pursued (not the original tenant). It is therefore worth checking carefully for the availability of former tenants and also current guarantors (e.g. parent company / director guarantees).

2. Landlords may hold a deposit

In addition to holding a deposit, subject to the contractual wording of this deposit, landlords may also be able to draw down funds or consider revisiting any other security the tenant may have provided.

3. Court proceedings

As debt claims are not prohibited, landlords can still bring proceedings in the country courts or High Court in order to recover any rent arrears. Furthermore, while statutory demands are currently restricted for use against businesses, they are not restricted for individuals or sole traders, meaning an enforcement option still remains.

While there is understandable sympathy for business that are struggling during this difficult times, the British Property Federation has made it clear that landlords are businesses too. The pension funds of millions of individuals are invested in the commercial property sector alone. Therefore it’s essential that all parties work together.

The government has published a code of practice for the commercial property sector to encourage commercial tenants and landlords to work together.

This is in addition to the RICS Commercial Rental Independent Evaluation Service, which offers support with fair and structured negotiations, helping to avoid issues ending up in court.

The Corporate Insolvency and Governance Act 2020

Rent is only one obligation that struggling businesses have – they are also likely to owe sums to suppliers, employees and HMRC. When businesses reach this level of financial difficulty they will likely seek restructuring options, with one options being the moratorium procedure introduced by the Corporate Insolvency and Governance Act 2020.

This gives viable businesses who are currently struggling some protection from court or other enforcement action, offering a period of time to reorganise their operations or seek reinvestment. It is a short-term option where existing management stays in place, but are overseen by a qualified insolvency practitioner who acts as monitor.

It remains to be seen whether this is an effective solution for struggling businesses, many of whom are currently being supported by financial relief from the chancellor in the form of the furlough scheme and financial support.

The moratorium only suspends a landlord’s rights of action for a limited time - it does not affect the general obligations of the tenant under a lease. However, these obligations may be varied by other restructuring options available, such as a CVA.

CVAs - making arrangements

Like the new moratorium, a CVA also leaves the debtor company under the control of its directors, with the arrangement managed by an insolvency practitioner.

With certain CVAs involving substantial property portfolios, the only creditors adversely affected by the scheme of arrangement are landlords and local authorities. All other creditors paid in full. This ensures that the CVA receives the necessary majority of 75% of creditors voting for approval.

Under a CVA, a landlord may be forced to receive a reduction in the contractual rent payable under leases and closures of unprofitable stores. The only recourse available to the landlord is to assert in the courts that the CVA contains a material irregularity, or unfairly prejudices their interests as a creditor.

In the widely reported Debenhams case Discovery (Northampton) Ltd & Ors v Debenhams Retail Ltd & Ors [2019] EWHC 2441, the court decided that treating landlords differently to trade suppliers does not amount to unfair prejudice. As a result, they may be justified by carrying out a balancing exercise to determine the overall fairness of the CVA proposal.

However, the judgment did reassure landlords that a CVA cannot restrict the right of a landlord to forfeit a lease.

To minimise the risk of a vacant property, in certain circumstances, a landlord may wish to consider a turnover-based rent agreement. This takes into account the uncertain nature of future trading. This may also be favoured by the tenant as it may give them the flexibility it needs to survive.

The importance of having a proactive debt recovery strategy

Under a CVA the landlord will often recover a substantial proportion of the rent they are owed under its lease. This is a better outcome to what would be the case if the tenant were to enter liquidation or administration. However, while CVAs may not seem immediately attractive, landlords should consider other potential alternatives too.

Before a tenant enters administration

If there is a risk of tenants entering administration or liquidation, being proactive and issuing letters before taking any legal action and/or court proceedings for the debt should always be the first port of call. It’s also like to work to a landlord’s advantage if the tenant is keen to avoid judgments that may breach its banking covenants or other commercial arrangements.

Following administration or liquidation

If a business is forced into administration or liquidation, a landlord’s claim will now most likely rank alongside other unsecured creditors behind HMRC, after having regained its preferential status in relation to certain tax liabilities with effect from 1 December 2020.

However, if the tenant enters a formal insolvency process, ongoing rent can be demanded as an expense of the administration or liquidation if they remain in occupation of the premises,

As we emerge from the pandemic and more commercial properties face risk of closure and lying vacant, landlords may choose to consider more open dialogue with their tenants, particularly around turnover-based rent agreements, rather than taking the more traditional option of enforcement action.

Contact us

We’re here to help you through these difficult situations and guide you towards a solution - contact Sean Moran in our corporate restructuring and insolvency team, or James Fownes in our commercial property disputes team, for advice and support.

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

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

Commercial rent recovery: no CRAR, no problem

In an effort to lessen financial pressure on businesses, on 10 March 2021 the government extended the restriction on the use of the Commercial Rent Arrears Recovery (CRAR) process by landlords.

This measure will increase the total number of days' outstanding rent required for CRAR to be used to:

  • 457 days (between 25 March 2021 and 23 June 2021), and
  • 554 days (between the 24 June 2021 and 30 June 2021).

However, with this being a popular option for landlords looking to recover unpaid rent, what other debt recovery routes are available in the meantime?

What is CRAR?

Commercial Rent Arrears Recovery (CRAR) is a procedure that allows commercial landlords to recover rent by taking possession of a tenant’s goods with a view to selling them. No court proceedings are necessary, with certificated enforcement agents able to enter the property and seize the goods for sale at auction after seven clear days’ notice to the tenant has been given.

Negotiating commercial lease terms/concessions

Although CRAR is an efficient way to regain funds, renegotiating contracts can be the best alternative for the longer term.

During this process, compromise on both sides is key. For example, this could mean lowering the amount of monthly rent in return for an extension on the lease (or another benefit to the landlord).

Issuing court proceedings

The second alternative involves issuing court proceedings to recover the debt. Much like CRAR, this option means that, once a judgment is secured against the tenant, enforcement officers are able to enter the tenant’s property to remove goods.

Unlike CRAR, this method also gives landlords the opportunity to issue a claim for other sundries, meaning more money can be recovered. However, this does come at a cost, from court fees to further expenses that may come later down the line.

When choosing this path, landlords must:

  • Issue a Letter Before Action (LBA), which informs the tenants that court proceedings are being considered. This acts as a formal demand for money owed and gives the tenant chance to pay or contest.
  • Be clear about what they are claiming for and why, whether it be purely rent or other items as well.
Can a landlord forfeit a commercial lease?

As a last resort, landlords can forfeit (i.e. terminate) the lease. However, bear in mind that finding another tenant can be hard in the current climate.

Light at the end of the tunnel

With the rollout of the COVID-19 vaccines, there is the hope of financial recovery in 2021. However, if landlords are struggling with cash flow due to unpaid rent, court proceedings are always an option.

Nevertheless, negotiation often should be the first port of call, with the outcome potentially being better for both parties. These are complicated times for everyone and demonstrating flexibility landlords and tenants can keep relationships strong.

Contact us

Our commercial property disputes and debt recovery teams can help you through this difficult period and guide you towards a solution - contact James Fownes or Jayne Gardner for advice and support.

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

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Guides & Advice

What do the new insolvency guidelines mean for construction contractors?

On 25 June 2020, the Corporate Insolvency and Governance Act 2020 introduced some of the most transformative changes seen in insolvency since the Insolvency Act 1986.

For the construction industry, the Corporate Insolvency and Governance Act 2020 (‘the Act’) presents hurdles for contractors in terms of their ability to operate contractual termination clauses in the unfortunate event that their employer becomes insolvent.

What are the new changes to insolvency law?

The key points to be aware of are that the new provisions:

  • stop a contractor from exercising a contractual right to terminate where an employer has entered into a formal insolvency procedure (within the meaning of the Act);
  • stop a sub-contractor from exercising a contractual right to terminate a contract where a contractor has entered into a formal insolvency procedure (within the meaning of the Act);
  • prevents contractors and sub-contractors (as suppliers of goods and services) from withholding works on the basis that unpaid invoices for work done made before the start of the insolvency period are paid first. Therefore, contractors/sub-contractors under the Act are obligated to continue works despite non-payment; and
  • prevents the pursuit of unpaid invoices by way of a winding up petition based on:
    • service of a statutory demand between 1 March 2020 and 31 March 2021; or
    • service of a winding up petition based on a statutory demand before 1 March 2020, so long as it can be shown that the pandemic has not had a “financial effect” on the company or that the company would have become insolvent regardless of the pandemic.
The impact on contractors

For contractors, the new provisions can lead to a degree of uncertainty about what they can do if:

  • their employer become insolvent;
  • their ability to serve statutory demands/winding up petitions if employers do not pay their bills;
  • they are experiencing cash flow problems as a result of COVID-19 and receive statutory demands/winding up petitions;
  • they enter into an insolvency procedure themselves and what their continuing contractual obligations are; and
  • they want to use their statutory rights under Housing Grants, Construction and Regeneration Act 1998 to suspend works due to non-payment of goods/services and/or commence adjudication for non-payment and successfully enforcing the decision.
Can the parties reach a mutual agreement to terminate due to an employer’s insolvency?

One key question raised by contractors is likely to be whether parties can still mutually agree to terminate works due to an employer’s insolvency. The answer appears to be yes, but only on the basis that:-

  • The insolvency practitioner agrees; or
  • The insolvent party agrees.

It is likely that consent from an insolvency practitioner or insolvent party will be hard to come by, given the current economic climate, the strong onus and commitment by the UK government to restart the economy and insolvency practitioner’s duties to creditors.

One argument that could be used by a contractor when seeking to reach a mutual agreement to terminate is that it is not commercially viable (for either party) to continue with the works but this will need to be carefully considered and discussed between the parties.

If it is not possible to reach a mutual agreement to terminate, one final option for a contractor is to seek permission from the court on the basis that it should allow termination as continuing with the works by the contractor would cause ‘hardship’. Presently, the new rules do not provide any definition of ‘hardship’. However, on the face of it, larger contractors may have more of a struggle persuading the court that continuing the works will cause ‘hardship’ compared to smaller companies who may be more significantly impacted.

Supplies of goods and services by small suppliers

For a short window, there is a temporary suspension in the application of the new rules to small suppliers until 30 March 2021.

To count as a ‘small supplier’, they’ll need to tick two of the following criteria:

  • A turnover of less than £10.2m;
  • A balance sheet total of less than £5.1m; and
  • Less than 50 employees
What does this mean for the future of the construction industry?

Some of the temporary changes to the insolvency rules brought about as a result of the Act were originally due to expire on 30 September 2020., but these changes were extended until 31 December 2020. 

Unsurprisingly, these changes have now been extended for a second time until 31 March 2021. As a result: 

  • I’s not possible to issue a winding up petition based on a statutory demand served between 1 March 2020 and 31 March 2021; and
  • The prohibition on presenting winding-up petitions or making winding-up orders is extended until 31 March 2021. 

Given the ever changing nature of the restrictions as a result of the COVID-19 pandemic, and the challenges that these restrictions present, it remains to be seen whether these changes extended a third time. 

In the meantime, contractors should remain vigilant as to their employer’s financial position. It also makes sense to ensure that construction contracts entered into going forward include appropriate drafting to ensure that, as far as possible, the consequences of insolvency and the new rules from the Act are addressed and properly covered off.

We’re here to help

If you have concerns around the implications the new insolvency rules may have on your business then our construction disputes team can help – contact Kate Onions or Adam Watson for advice and support.

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.

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

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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.  

How can we help?

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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.

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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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Guides & Advice

Collecting monies via adjudication and enforcement proceedings on behalf of insolvent construction companies

In the landmark case of Bresco the courts confirmed that a liquidator of an insolvent company has a right to refer a dispute to adjudication at any time (See our previous blog).

The courts have now provided some welcome guidance for liquidators on how an insolvent construction company can enforce a favourable adjudicator’s decision.

The background

The background facts to the case of John Doyle Construction v Erith Contractors are, in many respects, irrelevant.  What’s important to note is that JDC is an insolvent sub-contractor who has been awarded the sum of £1.2m in an adjudicator’s decision.

JDC sought to enforce the adjudicator’s decision seeking an order from the court for Erith (the main-contractor) to make payment. Erith, resisted this and so the matter came before the specialist construction court.

In reaching its conclusions, the court helpfully set out five principles which should be considered where an insolvent party (such as JDC) seeks enforcement of an adjudicator’s decision:

1. Does the dispute referred to adjudication relate to the whole of the parties’ financial dealings under a construction contract or only a discrete element of it?

2. Are there any dealings between the parties that are outside of the scope of the construction contract to which the adjudicator’s decision relates?

3. Are there any other defences available to the defendant (i.e. the responding party in the adjudication) which were not deployed and used in the adjudication?

4. What security is the IP prepared to offer?

5. Is there a risk that the summary enforcement of the adjudicator’s decision will deprive the paying party (i.e. the responding party in the adjudication) security for its cross-claim?

Applying these principles, the court found in favour of the Erith and, on this occasion, refused to enforce the adjudicator’s decision. The court decided that the key issue was that JDC had offered inadequate security. . For instance:

  • the IPs had not offered to ring-fence the monies of £1.2m that Erith would have to pay;
  • there was no letter of credit obtained from a funder (only a letter of intent to apply for credit on the receipt of funds – clearly not one and the same thing); and
  • the ATE insurance policy (in respect of Erith’s costs of bringing its cross-claims) contained a number of exclusion terms and so was not considered to be adequate security.

In light of these factors, the court decided that there was a real risk that the enforcement of the adjudicator’s decision would deprive Erith of security for its cross-claims and would not put Erith in the position that it would have been had JDC been solvent.

Why is this case important?

It was underlined in the Bresco case that issues surrounding the enforcement of an adjudicator’s decision should properly be dealt with at the enforcement stage and should not hinder the commencement of an adjudication.

This recent case helpfully goes a step further than Bresco and considers the circumstances in which an adjudicator’s decision in favour of an insolvent party may be enforced and what security may be required.

The five principles provided by the court shine a light on the ‘grey area’ of enforcement that was not fully addressed in the decision in Bresco. It provides useful guidance as to what additional steps an insolvent party will have to take before a favourable adjudicator’s decision will be enforced by the courts.

What does this mean for IPs?

This guidance should enable IPs and their legal advisors to better assess the merits of commencing an adjudication on behalf of an insolvent company and the likelihood of recovering monies which can be distributed to the creditors. It helpfully outlines the type and extent of security that IPs will need to be prepared to offer.

This decision reinforces the fact that adjudication remains a useful tool in the armoury available to IPs – especially where the adjudication deals with all of the outstanding matters between the parties (and not simply discrete smaller disputes) and sufficient security can be offered.

A brief side point; the court criticised the time in which it took for the adjudication and the subsequent enforcement proceedings to be commenced (some eight years following the initial insolvency of JDC!). It is key that IPs do not delay in commencing adjudications and any subsequent enforcement proceedings to collect in the monies awarded by an adjudicator.

Ahead of starting an adjudication, it’s important to get specialist advice from experts who understand every step of the process. The team has developed a fixed fee consultation enabling IPs to investigate ways to recover debts owed to insolvent construction companies. For further information, contact Kate Onions or Laura Taylor.

How can we help?

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Guides & Advice

FCA Test Case Judgment - The Devil is in the Detail

The judgment handed down last week in the recent test case brought by the Financial Conduct Authority (“FCA”) reached a number of different conclusions about different policy wordings.

Some of the wordings were in the favour of the insurers but in the main, the court decided that it agreed with the FCA on many of the issues raised in the case. This is potentially good news for policyholders with business interruption insurance claims (although at the time of writing it is unknown whether any of the insurers will seek an appeal of any aspect of the judgment).

The key findings from the judgment

1. For notifiable disease policy wordings, where the disease is arising within a certain radius or vicinity of the premises, the cause of business interruption is established (in the main - as there are some exceptions depending upon policy wording), where the outbreak in the relevant policy area is an indivisible part of the disease across the country. In other words, it is the notifiable disease itself being in existence that establishes cause - such that local outbreaks are indivisible from the existence of the disease itself. The court went further and suggested that each of the individual occurrences were separate but, in themselves, were causes of the national actions taken by Government.

2. Cover is not therefore now for the local occurrence of a notifiable disease or the effects on businesses of a local outbreak but applies where there is an outbreak of the disease which cannot be separated from the wider spread of COVID-19 across the country.

3. It means establishing cause is not limited to showing outbreaks within a particular policy area if the policy wording is in the form of the wordings tested in the FCA case. Where wording does not expressly say where the disease must only occur then cover is not limited to first establishing local outbreaks to determine cause. Therefore, business interruption must result from the outbreak itself but the person with the disease has to be within the radius or vicinity as defined in the policy.

4. The definition of vicinity should be carefully reviewed in policies as they could be widely interpreted such that any occurrence within England and Wales could be within the vicinity for the purposes of cover. Some of the policies in the test case had this wide definition of vicinity.

5. An insured party though will still need to prove that the disease occurred or manifested in a certain area (the prevalence test), at a certain location or at a certain time (the proximate test). Some policy wording may be very specific and the insured party may only succeed in a claim if the disease was in a particular area and that had then caused the interruption.

6. Denial of access clauses, for example those that require premises to shut down on public authority say so, that in turn prevent access to premises, are to be looked at more restrictively and so possibly it will be much harder for insured parties to establish.

7. The FCA test case enabled the court to look at various factors, including the nature of the advice and of orders given to shut down, and decided that the Government’s decision to lockdown was said to be advice rather than mandatory instructions.

8. Denial of access clauses will therefore have to be carefully considered to assess whether a business was directly mandated to close (cover more likely) or part of more general advice/guidance (cover less likely but not impossible depending upon wording). If the business could have kept open and diversified then it may struggle to support a denial of access for the purposes of a business interruption claim.

9. The court gave guidance on what the insured peril should be in respect of the various policy wordings being considered by it. For the notifiable disease wordings, it concluded that the insured peril is the interruption or interference after the occurrence of the disease including any response from the authorities. In the case of denial of access, the insured peril is the prevention or hindrance of access to or use of the premises by any authority action due to an emergency or incident that could endanger human life. These insured perils should then be “stripped out” when working out the level of indemnity to be provided.

It is important that polices with notifiable disease wordings and denial of access clauses identical or very similar to those assessed in the test case are reviewed, as those particularly are now more likely to be the subject of a successful claim (as the case decided most, but not all, provide cover). Indeed insurers, subject to any appeal, may take a pro-active step here in light of the judgment and pay out promptly on such cases when claims are made. The FCA guidance is encouraging insurers to take on board quickly the outcome of the test case in their dealing with the insured parties.

There is no doubt that the test case judgment is good news for policyholders but as is often the case, the devil is in the detail.  Clearly the wording of a policy is key to being able to make a successful claim for business interruption and care should be take when purchasing a policy and further down the line if a claim is necessary.

Contact us

For further information, please contact Steven Skiba or Tim Speed or a member of the litigation team in your local office.

Our guide to recovery and resilience helps 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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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

FCA test case ruling – welcome news for businesses

The High Court has today handed down the long awaited judgment in the coronavirus business interruption insurance test case brought by the FCA.

Whilst the judgment may be appealed by the insurers, it is a very positive outcome for most businesses.

The issue of whether business interruption policies cover losses caused by the pandemic was one of the most controversial legal issues resulting from the coronavirus crisis. Today’s decision has provided some welcomed clarification, particularly on the interpretation of policy wording (although you still have to look carefully at the policy wording for each policy before deciding whether a payment is due).

In summary, the High Court has today found that, of the test clauses that were examined, most provided cover for business interruption due to coronavirus and this ruling could potentially cost insurers billions of pounds.

One of the biggest takeaways from the case is that it has clarified that the Government’s response to the pandemic and the pandemic itself were a cause of the loss.

Businesses affected by coronavirus who believe they have business interruption insurance coverage and who have not received confirmation of cover to date from their insurers should be revisiting their policies, assessing them against the judgment and looking to getting their insurers to pay out, given today’s ruling.  If a business is yet to make a claim it’s essential to seek expert support in gathering together the right supporting evidence for aspects such as lost revenues, forecasted revenues and any expenses incurred. Paying close attention to information for the claims process from individual insurers is also vital to ensure the correct formatting and timings are followed, and to boost chances of claims going smoothly.   Policyholders should then also carefully consider how the High Court’s judgment applies to the wording of their individual policies.

This landmark judgment will go some way towards relieving some of the significant financial pressure that many businesses are facing at the moment.  Many businesses have been forced to close or cease trading and this could be the lifeline needed to enable some of them to recover.  A lot rests on this judgment but with insurers expected to appeal the decision, it is looking like the issue is far from over.

Contact us

For further information on this judgment, specific advice on individual policies and how we can help you contact Steven Skiba or Tim Speed or another member of the litigation team in your local office.

Our guide to recovery and resilience helps 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.

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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

All aboard for more changes to possession proceedings following the Government's extension on the stay

August has been a pretty active month in the world of possession proceedings given the quiet period since the stay on possession proceedings and ban on evictions was announced by the Government in March 2020.

The August Bank Holiday weekend saw the Government release updates on how possession proceedings will work moving forward after they announced a further stay on proceedings until 20 September which is covered in our article  The Government’s U-turn on lifting the stay on possession proceedings.

The changes moving forward relate to notices served and the notice period that must be given in that notice.

Our previous update Light at the end of the tunnel covered that any notice that is served before 30 September 2020 needed to give three months’ notice. However, on 29 August 2020 following the Government guidance the position changed in two ways;

  1. the end date of 30 September 2020 has now been extended until 31 March 2021, and;
  2. notices issued after 29 August 2020 must now give a six month notice period

However, there are some exceptions to point ii;

Notices regarding anti-social behaviour

If a notice is served as a result of anti-social behaviour (including rioting), domestic abuse and fraud the normal notice period prior to the Coronavirus Act 2020 will apply. The same applies to those tenants who are subject to Introductory or a Demoted Tenancy.

Notices served due to rent arrears

If a notice is served solely as a result of rent arrears the following will now apply;

  • if rent arrears amount to at least six months of arrears the normal four week notice period applies
  • if the rent arrears are less than six months’ rent, then you will have to give six months’ notice
Notices served as a result of breach of tenancy agreement terms and conditions other than anti-social behaviour

If a notice is served as a result of breach of tenancy agreement terms and conditions, six months’ notice will need to be provided.

Section 21 notices

A six month notice period is required when serving a section 21 notice. In light of this change a notice served after 29 August is now valid for 10 months from the date it is served or four months from the date specified in the notice which after possession is required. This means that you still have the usual four month period to act upon the notice once served to issue proceedings.

If landlords served any notices prior to 29 August given the three months’ notice period, landlords can revoke those notice and serve a new notice with the shorter notice periods if they relate to anti-social behaviour of more than six months’ rent arrears.

The Government has further stated that even at the expiry of the notice “we strongly advise landlords not to commence or continue eviction proceedings during this challenging time and without a very good reason”.

Referring back to our earlier article, to overcome such challenges, it is key for landlords to be able to demonstrate to the court that they have tried all other routes to either deal with either the anti-social behaviour or the rent arrears and commencing possession proceedings is the only option left.

There has also been a further announcement that evictions will not be enforced in local lockdown areas unless in exceptional cases and there will also be a “winter truce” on enforcement with no evictions permitted in the run up to and over Christmas, again exceptional circumstances will apply. The exceptional circumstances are those which involve anti-social behaviour or domestic abuse.

With all the changes taking place, it is important to ensure that landlords are kept up to date with issuing the correct notices and ensuring the correct prescribed forms are also being used.

Contact us

For further information 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 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.

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5G: Changing the future of workspaces

5G: Changing the future of workspaces

Flexible working is not a new concept, but many businesses were yet to embrace it until COVID-19. Working from home went from a luxury bonus to a necessity overnight, with almost 50 percent of British workers calling their home, their office.

However, as we move out of lockdown and enter the ‘new abnormal’, it’s time to address our physical workplaces. Not only do they need to be safe, but they must also be attractive and productive.

Standing out from the competition

Although there will always be a place for the physical office, the way companies use them is likely to change. As such, facilities managers need to keep on top of the cultural and technological opportunities available to them to ensure their buildings offer businesses more than their competition.

5G potential

A new study has found that 5G technology could provide a £150bn boost to the UK economy over the coming decade, suggesting it will be an essential part of the evolving way the public utilises vital services post-COVID-19.

With new technology and working life starting to merge seamlessly, 5G could improve connectivity and security, as well as efficiency and even wellbeing.

The age of visibility

Agile working means the everyday nine to five doesn’t have to be the norm any longer. Rather than turning up to the office at a certain time each day, 5G will allow people to choose when is best to arrive by viewing the quietest times, desk availability and onsite parking.

This ability to be completely flexible will make ‘smart’ buildings more attractive to businesses, so facilities managers should ensure their buildings have these connectivity capabilities, giving them an edge against any competitors.

Increasing efficiency

As well as providing tenants with a slicker service, 5G could also improve the way buildings are run, making them more efficient and safer. 5G-enabled sensors and devices will be able to alert cleaning and maintenance staff to areas that need attention, whether it be a room that needs cleaning or a ventilation system that needs fixing.

Key considerations

In order to stay ahead of the game, facilities managers and commercial landlords should take advantage of new technology now. However, there are several aspects that need to be considered first, including:

  • The commercial implications of installing 5G network infrastructure – Usually the costs of installing and maintaining the kit would be added into tenants’ service charges. However, as company budgets are currently being squeezed, it may be better to class it as a long-term investment and foot the initial bill.
  • Choosing the right 5G solution – Technology is not always one-size-fits-all, so it’s important to weigh up the options and pick the solution that will suit the building and its tenants best, both now and in future.
  • The rights of current tenants – Tenants have a right to ‘quiet enjoyment’ of the premises, meaning landlords must ensure that any major changes to the building disturb tenants as little as possible.

COVID-19 has caused an agile working revolution, and physical offices are unlikely to be viewed in the same way again. As a result, facilities managers should make their buildings as attractive as possible, offering new technology, such as 5G, that will benefit their tenants and improve the way workplaces function.

Contact us

If you’re a landlord and would like guidance and advice on the implications of installing a 5G network infrastructure, and how this may impact on your tenants and their rights,  then speak to James Fownes in our property disputes 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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No DSS – finally unlawful

No DSS – finally unlawful

A ruling from the county court should be the final nail in the coffin for the practice of landlords and letting agents discriminating against tenants in receipt of housing benefit.

The ruling came from a case heard at York County Court which was brought by a single mother who was on the receiving end of a ‘No DSS ‘ response from a letting agent, when she had inquired about renting a two bedroomed property.

District Judge Victoria Mark, found the claimant to have been indirectly discriminated against on the grounds of sex and disability in contravention of the Equality Act 2010.

This judgment should signal the end to this once common practice and is being hailed as a victory for the millions of home renters in the UK.

Danielle Sodhi, team manager of the housing management team, commented:  “This is a landmark case, and after much debate surrounding the issue, landlords are now finally provided with clarity that the statement of ‘No DSS’, ie tenants in receipt of housing benefit, on lettings advertisements is unlawful. However, this does not mean that landlords and letting agents should not carry out their affordability and credit checks to ensure the tenant has sufficient means to afford the rent. In fact, affordability checks are even more important to protect both landlords and tenants from disputes relating to rent during the course of the tenancy”.

Contact us
For further information on your housing management issues please contact Danielle Sodhi or another member of the housing management team.

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

Rights of light - the hidden costs of building up, up, up!

Rights of light - the hidden costs of building up, up, up!

As Birmingham City Centre continues to see more plans being put forward for tall, striking buildings, Broad Street is being dubbed Birmingham’s Skyscraper Alley, with at least five new mixed-use towers proposed for Broad Street, and more proposed for the Eastside too.

Many will find the proposals exciting and they undoubtedly show an impressive resilience to the current difficult circumstances we all find ourselves in. There can however be hidden costs and consequences of looking up to the sky, including rights of light.

What are rights of light?

Put simply, rights of light are easements of natural light passing over someone else’s land for the benefit of windows/doors in a building. The rights can arise from enjoyment of light for 20 years and the rights are based on fairly technical areas of law.

Often, such rights are regarded as complicated and relegated to the ‘too hard pile’. However this can prove hugely costly for a developer, who has perhaps ‘closed its eyes’ and ‘hoped for the best’, or even for those who have taken a calculated risk. Similarly, owners of adjoining or nearby buildings risk allowing significant property rights being rendered worthless if they do not raise their concerns and, if necessary, follow up by issuing court proceedings in time.

Light obstruction notices

Rights of light/potential rights of light can be interrupted and light obstruction notices are a very handy device under the Rights of Light Act, 1959, used by developers to put up a ‘notional’ obstruction with a neighbouring owner’s rights of light (sometimes years before planning permission has been sought and well before a spade is put in the ground).

If the notional obstruction remains unchallenged on the register for one year from registration, the developer will have either successfully stopped the acquisition of a right to light for a further 20 years or, if an affected owner already had 20 years’ use of the light, made it considerably harder for that owner to bring a claim.

However, making best use of light obstruction notices (obtaining, registering and fending off any suggestions of a challenge for one year) can be tricky, and not for the faint hearted.

When to use light obstruction notices

The best time to deploy light obstruction notices is quietly before any suggestion of development hits the press. At that point, developers are hoping that an innocuous looking envelope containing a notification to adjoining owners of such a notice will go unnoticed or, more frequently even if noticed, will not be formally challenged before it has been on the local land charges register for one year.

Conversely, land owners will routinely become aware of developments close to their premises, which might at first glance raise a few eyebrows, but not much more. However, it might be worth tasking someone with assessing the impact of the development on your property to prevent, what can be, a permanent interruption of your property rights.

Perhaps, unsurprisingly, the courts’ have regularly accepted that all property rights are a valuable asset, which can be protected from infringement to preserve the value of property. If rights of light have arisen, and have not been successfully managed by use of a light obstruction notice, a developer risks an injunction being obtained by an adjoining owner who can show a significant infringement of its rights.

Each case will turn on its own particular circumstances. However, the courts have shown themselves willing to make an injunction, effectively requiring a developer to cut back its building (even after it has been built), or to pay damages ‘in lieu’ of an injunction - which can include an element of the developer’s profit arising from being allowed to keep its building intact!

Beaumont Business Centres Ltd v Florala Properties Ltd

In a recent rights of light case, Beaumont Business Centres Ltd v Florala Properties Ltd (March 2020) which has received widespread attention, we’ve been reminded by the High Court that the primary remedy for an infringement of a property right is an injunction. The fact that the building is already completed, or mid-build, has not prevented courts from granting an injunction.

Here, the Court was persuaded that there was evidence, that by virtue of the reduction in light, Beaumont’s premises had been made “substantially less comfortable and convenient than before”. Consequently, it was prepared to grant an injunction for the new building to be cut back to avoid the nuisance.

It was then for the developer to demonstrate to the court why an injunction should not be awarded and that, using its discretion, the court should award damages in lieu of an injunction. In this case, if Beaumont was not entitled to an injunction in the first place, common law damages would have been £240,000.

However, where the court was persuaded to grant an injunction, as an alternative to an injunction, Beaumont was entitled to damages in lieu of an injunction - which were based on the profit to the developer in being allowed to retain the building as developed, without having to cut it back. In this case, those negotiated damages were assessed at £350,000.

Communication is key

This case is widely being considered to be a warning to all parties to engage reasonably with each other before and during any proceedings. The decision to award an injunction was, to a large degree, influenced by the fact that the developer on this occasion went ahead with the development, knowing of the potential concerns raised by Beaumont and the risk that it was taking. It had acted in a high-handed, or at least an unfair, and un-neighbourly manner.

The lesson to take away must be for all parties to keep rights of light firmly on the agenda. This way, developers will not be surprised by court proceedings that could stop the development in its tracks, or, even worse, require further work to remove parts of the building and adjoining owners taking the necessary steps to protect their property rights being significantly infringed.

The Florala case also makes it clear that the Court expects parties to behave in a neighbourly way, and that affected parties should make their concerns known at an early stage - and avoid any suggestion that they’re simply in it for the money!

While this case does not represent new law, it does serve as a timely reminder that these matters are far from routine and, if mishandled, can be very costly indeed for the wrongdoer both in terms of time and outcome.

New permitted development rights from 1 August
From 1 August 2020 a new permitted development right is being introduced, allowing an additional one or two storeys to be constructed on top of existing blocks of flats. Read more about the changes here. For advice and support on the new ‘upward extension’ permitted development rights, or any other planning query, contact a member of our planning consultancy team, Marrons Planning. 

Contact us

Our experienced property disputes team can help you manage and resolve any issues you face quickly and efficiently, whether you’re a developer or an adjoining owner.

If you have concerns around property rights, including rights of light, then speak to Pia Eames by phone or email, or James Fownes by phone or email.  

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.

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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