welcome to the pma event 2015

Welcome to the PMA event 2015

Taking stock… another look at

the state of the market

Sarah Parkinson

Omni-channel retailing

• Flexibility needed? Landlord’s reactions?

• Connecting to shopping centre wi-fi

• Turnover leases – here to stay? Are those internet

sales covered in the calculation…… and do you

care?

Your preferred terms

• Monthly rents

• Shorter term or longer term?

• Break right conditions

• Service Charge cap - challenges

Market Trends

• Competitors buying deals… driving up rents

• Increase in dilapidation disputes

The single biggest issue over the

next 5 years?

• Money

• Space

• Watch out for your competitors!

You have a magic wand….

….what would you change in the market place?

From the general to the specifics

Practical tips on securing

landlord’s consent

Considerations if you receive a

Ground F Notice

Pamela Shepherd

Introduction

• Practical tips for securing landlord’s consent.

• Considerations on receipt of opposed notice

pursuant to section 30(1)(f) of the Landlord and

Tenant Act 1954.

Landlord’s consent – pre

application checks

• What are the restrictions on alienation in the

lease?

– Absolute covenant;

– Qualified covenant - (Section 19(1) Landlord and

Tenant At 1927);

– ‘Section 19(1A)’ conditions (if new lease under

Landlord and Tenant (Covenants) Act 1995); and

– Check if actually need consent

Landlord’s consent - pre

application checks

• Form of application

– Check notice provisions

– Usually in writing (not email unless the lease

provides for it)

• Service provisions

– Check the lease – service on landlord

– Section 196 of the Law of Property Act 1925

Landlord’s consent – content of

application

• Must be clear, unequivocal and specific

• Two considerations -

- What is required by the lease; and

- Other information that needs to be given for the landlord

to be able to consider the application.

• Information required by the lease

– Read lease carefully and provide all required


application

• Other information to consider –

– the identity of the third party and any guarantor;

– the address of the third party and guarantor;

– description of trade or business and proposed use;

– a bank/accountant’s reference;

– a previous landlord’s reference;


application

– three years previous audited/management accounts

which show roughly pre-tax profits net of salaries

and drawings x3 the anticipated outgoings that the

proposed third party will be liable for (or a

satisfactory position as regard net assets);

– valuations of other properties held by the third party

with proof of the level of borrowings against those

properties (if necessary).


application

– In the case of a proposed sublease, a draft sublease

or sufficient detail about proposed terms (having

particular regard to the lease terms)

– Provide an explanation as to urgency (if applicable)

– Offer to meet reasonable and proper legal and other

costs in connection with the application and the

grant of consent (see below).

Landlord’s consent – the costs

undertaking

• Landlord entitled to its “reasonable and proper

legal and other costs”

– What should be provided in the application?

• Usual to agree an amount which should reflect the

complexity of the application

• Timing considerations

Landlord’s consent – the costs

undertaking

• If the landlord considers that amount offered is not

enough or insufficiently secured it should promptly

give reasons

• Delay by landlord in this regard could mean an

unreasonable refusing of consent

Landlord’s consent - delay • Statutory duty under section 1(3) of the Landlord

and Tenant Act 1988 -

– the reasonable period runs from a complete

application being received by the landlord to when

the landlord notifies the tenant of its decision

– Once the decision has been communicated the

landlord is not entitled to consider further issues

• Length of time is calculated in weeks rather than

days but weeks rather than months

Landlord’s consent - delay

– If the tenant communicates urgency that needs to be

taken into account by the landlord

– If response takes too long it can be the equivalent of

a refusal of consent without reasons - this could

mean a damages claim by the tenant even if

subsequently the landlord shows that he did have a

good reason

Landlord’s consent - grounds for

refusal

Reasonable reasons to withhold consent or impose

conditions -

• Conditions in lease are not met

• Real problem with assignee’s covenant strength

• Proposed assignee’s use is prohibited under the lease

• Good tenant mix

• Possibly good estate management

Landlord’s consent - grounds for

refusal Unreasonable reasons to withhold consent or impose

conditions –

• To force compliance by the outgoing tenant with

covenants that are easily remedied by the incoming

tenant

• Possibly good estate management

• Any grounds that have nothing to do with the landlord

and tenant relationship with regard to the subject

lease.

Landlord’s consent - remedies

If consent unreasonably withheld – either due to

delay or unreasonable reasons what can you do?

• Proceed anyway; or

• Apply to court for a declaration.

Landlord’s consent - The

Alienation Protocol

• Sets out good practice, but not adopted formally

• Last amended February 2015 on the issue of costs

undertakings

Ground F Notice – The ground

“That on the termination of the current tenancy, the

landlord intends to demolish or reconstruct the

premises comprised in the holding or a substantial

part of those premises or to carry out substantial

work of construction on the holding or part thereof

and he could not reasonably do so without obtaining

possession of the holding”

Section 30(1)(f) of the Landlord and Tenant Act 1954

Ground F Notice – Initial points to

remember

• Termination of current tenancy

– Date of trial

• Landlord “intends”

– Settled intention coupled with the ability to carry it

through

– Look at totality of works

• On the “holding” (or part thereof) - so excludes

– Works outside holding


remember

• On the “holding” (or part thereof) - so excludes

continued…

– Works under tenant’s obligations

– Works under landlord’s obligations

– Those the landlord is legally entitled to undertake

anyway through reservation in the lease

• A tenant will need specialist help on the

information given by the landlord


remember

• The landlord must require possession from the

tenant to undertake the works

– Section 31A(1)(a)

The inclusion of terms giving access and other

facilities

Landlord able to ‘reasonably’ carry out the works

Interference to the tenant will not be substantial in

extent or in time


remember

• The landlord must require possession from the

tenant to undertake the works

– Section 31A(1)(b)

Tenant will accept ‘economically separable part of the

holding’

May need to show 31A(1)(a) applies

Landlord able to ‘reasonably’ carry out the works

Test for ‘economically separable’

Ground F Notice – Considerations

If a tenant decides not to fight it – Advantages

• Entitled to compensation (as long as not combined

with a fault ground which is then proven)

• Can probably negotiate timing of exit with landlord

(you get certainty)

• Can probably negotiate down any interim rent/final

rent payments/dilapidations


Advantages continued…

• No risk on costs

Disadvantages

• Landlord may change its mind and not carry out the

works

• Compensation will not cover all losses

• Need to find new premises with all the associated

costs


If a tenant decides to fight it –

Advantages

• Still entitled to compensation at end of day if not

successful (as long as not combined with a fault

ground which is then proven)

• Opportunity to put landlord to strict proof

• Delays matters which may bring landlord to

negotiating table


Advantages continued…

• If successful, will get a new lease of holding, or

part thereof or possibly whole

• Continuity of trade

Disadvantages

• Considerable risk on costs

• May not get a new lease at all

• Landlord may ‘drip feed’ evidence


Disadvantages continued…

• The new lease granted may not be as envisaged -

– Redevelopment breaks

– Interim rent and increased new rent

• Uncertainty for business for a considerable amount

to time


And finally don’t forget –

• Tenant may not decide the pace of any proceedings

– Termination applications (section 29)

– Summary judgment

• Full demolition is generally a ‘slam dunk’; but…

• Misrepresentation

Collateral Warranties and

Third Party Rights

Michael Sadler

Structure of session

• Why do you need them?

• What’s the difference between CW and TPRs?

• What do they say?

• Things to look out for in CW and TPRs

• What’s wrong with the standard forms?

• General points to be aware of

Why do you need them?

Employer (Developer)

Contractor

Employer’s

Agent

Architect

Subcontractor Subcontractor

Tenant/

Purchaser

Funder (Bank)

Structural

Engineer

JCT Design and Build

Subcontracts

Professional

Appointment

Professional

Appointment



Contractor

Employer’s

Agent

Architect


Tenant/

Purchaser

Funder (Bank)

Structural

Engineer


• To create a direct contractual link between:

– yourself (as the beneficiary); and

– the contractors or designers who carried out the

work.

• Property is more attractive to future purchasers/

tenants.

What’s the difference?


Contractor

Employer’s

Agent

Architect


Tenant/

Purchaser

Funder (Bank)

Structural

Engineer

Collateral

Warranty



Contractor

Employer’s

Agent

Architect


Tenant/

Purchaser

Funder (Bank)

Structural

Engineer

Third party

rights

Third party

rights


• Collateral Warranties are a separate agreement

between the warrantor (eg Contractor) and the

beneficiary (eg tenant).

• Third Party Rights rely on the Contracts (Rights of

Third Parties) 1999.

– Used to give a non-party to a contract a right to

enforce some terms of the contract.


• Third Party Rights might be used in large

commercial developments with multiple tenants

and multiple construction companies.

• Funders and tenants still like physically holding an

executed collateral warranty.

What do they say?

• That the warrantor has complied with the underlying

contract.

• Designed with reasonable skill and care.

• Contractor/Consultant can rely on any limitations

contacted in the underlying contract and raise

equivalent rights of defence.

• For a funder – likely to contain step in rights.

• Copyright licence to use ‘Material’ – FM? BIM Model?

What do they say?

• Maintain professional indemnity insurance

• Liability period (12 years from practical completion –

note this is traditionally a long-stop only)

• Assignable twice (so you can transfer it to a future

purchaser/ tenant)

Things to look out for • Warranty is only as good as the underlying contract

(equivalent rights of defence).

– Underlying contract executed as a deed?

– Exclusions of certain types of loss?

– Limitations or caps on liability?

• Consistency with underlying terms (standard of care,

copyright etc).

• Priority of step in (if you’ve got more than one)

• Limitations on liability in the warranty

– Net contribution clause?

What’s wrong with the standard

forms? • Their effect depends on how they are completed

(various options which change their meaning).

• Unlikely to be consistent with the underlying contract

(unless standard form contract used).

• Generally ‘contractor/ consultant’ friendly – contain

net contribution clauses and limitations.

General points to be aware of

• At the heads of terms stage make sure:

– You are to get warranties from the Contractor, the

professional team and key sub-contractors;

– You are also to received certified copies of the underlying

contracts;

– Completion of the lease is conditional on receipt of the

warranties.


• Follow up receipt of the collateral warranties after

completion

– It may not be possible to get all sub-contractor warranties on

completion (because they’ve not been employed yet); and

– Ensure that the provided forms are in the agreed form.


• I’ve got a warranty/ third party rights – I’m protected

right?

– A warranty is not money in the bank.

– Relies on the solvency of the relevant contractor/

consultant and whether they carry insurance to cover

your loss.

– Legal costs in making a claim for damages for breach of

the warranty – is it worth it?

– Get your surveyor to survey the property.

General points to be aware of • So what’s the construction lawyer do?

– Reviews the construction provisions of the agreement for lease

or sale and purchase agreement;

– Reviews the form of the collateral warranties;

– Reviews the underlying construction contracts to check they

are in market norm form/ are they executed correctly (unusual

to check form of sub-contracts)

– Aligns the construction documents with any funder

requirements (to report on the ‘security package’)

– Do you want a report on the construction documents?

– Do you want your lawyer to spend time (and your money)

following up the warranties after completion? (Banks do)

Case Law Update

Suki Tonks

Legislation

Wales– Devolution of Power

Minimum Energy Efficiency Standards (“MEES”)

• What they say

• How they affect existing leases

The Deregulation Act 2015

Legislation

The Smoke and Carbon Monoxide Alarm (England)

Regulations 2015

Right to rent and the Immigration Act 2014

Case Law

The Creative Foundation v Dreamland Leisure Ltd

and others [2015] EWHC 2556 (Ch)

Case law



• The Facts

• Issues

• Decision

Case Law



Points to Consider

Case Law

Cavendish Square Holding BV v Talal El Makdessi;

ParkingEye Limited v Beavis [2015] UKSC 67

The Facts

Issue

Decision

Case Law

Cavendish Square Holding BV v Talal El Makdessi;

ParkingEye Limited v Beavis [2015] UKSC 67

Points to Consider

Talk to us….

Sarah Parkinson | 0115 976 6575 |

[email protected]

Pam Shepherd | 0121 237 3937 |

[email protected]

Michael Sadler | 0115 976 6599 |

[email protected]

Suki Tonks | 0115 976 6519 |

[email protected]

mailto:[email protected]




welcome to the pma event 2015

Real Estate