Main menu

Liverpool:

+44 (0)151 600 3000

Manchester:

+44 (0)161 836 8800

Preston:

+44 (0)1772 823 921

Search form

Search form

A B C D E F G H I J K L M N O P R S T V W Y

Realty

A quarterly publication covering topical issues relating to the commercial property sector. The newsletter is designed to provide useful information and advice to landlords, tenants, property agents and surveyors.

Latest Issue

In the latest issue of Realty we look at the new provisions impacting directly on the real estate sector from the Queens Speech, plus what happens if a contract of sale is signed by one of two joint purchasers and not the other. We also look at property VAT and a variety of other topics that we hope you will find of interest.

To stay up to date with this bulletin and see others - sign up to any of our free newsletters.

The Never Ending Highway...

Monday 9th March 2015

Share this article:

Realty - Issue 11

A recent case sends a clear message to developers of the importance of both understanding the implications of S 38 (6) of the Highways Act 1980 in relation to the potential liability for future maintenance costs of adopted highways and entering into negotiations with the relevant local authority as early as possible.

The recent Court of Appeal ruling in R (on the application of Redrow Homes Ltd) v Knowsley Metropolitan Borough Council [2014] EWCA Civ 1433 has elucidated that a developer’s liability for the payment of maintenance costs of an adopted highway will not necessarily end after a S 38 agreement has been entered into. The Redrow Homes case provides the first authority on this issue.

When constructing estate roads during a development it is routine for a developer to enter into an agreement pursuant to S 38 of the Highways Act 1980, routinely known as a S 38 agreement. Under the Act, as the road becomes an adopted highway, the local authority accepts liability for its maintenance at the public expense.

Whereas parties may have previously thought that the developer’s liability for maintenance of roads ended at the point at which the S 38 agreement was entered into, the Redrow Homes case clarifies that S 38 (6) of the Highways Act 1980, enables a local authority to include a provision in the S 38 agreement that the developer remains liable for the future maintenance of the highway.

The facts of the Redrow Homes case are that in February 2011, Redrow Homes obtained planning permission to build 525 dwellings on land at Huyton. The first stage of the planning included the construction of estate roads. Both parties agreed that a S 38 agreement would be entered into, however, the local highways authority imposed a condition into the agreement that Redrow Homes pay the sum of £39,000, calculated as a commuted sum for the estimated capital cost of future maintenance of the street lights on the roads. Redrow Homes argued that the local highways authority was not lawfully entitled to impose this condition in a S 38 agreement.

Much of the case rested on the interpretation of S 38 (6) of the Act which states:-

(6) An agreement under this section may contain such provisions as to the dedication as a highway of any road or way to which the agreement relates, the bearing of the expenses of the construction, maintenance or improvement of any highway, road, bridge or viaduct to which the agreement relates and other relevant matters as the authority making the agreement think fit.

Redrow Homes argued that S 38 (6) was restricted to providing for an agreement for construction, maintenance and improvement before the road became maintainable at the public expense and not afterwards, hence it contended that it could not be made liable for future maintenance costs once the agreement was entered into.

The Court rejected that argument and determined that whilst the highway was maintainable at public expense, it was up to the local highways authority whether it wished to carry out the work itself or insist on the developer carrying it out.

No doubt developers will now wish to include a fact finding exercise in their due diligence checks on prospective land purchases to establish the relevant local authority’s stance with respect to adopted highways maintenance.

If you would like more information about any of the issues raised in this article please contact:


Hannah Carter
Solicitor, Property Solutions
Tel: 0151 600 3056
Email Hannah


Chancel Repair Liability - May Still be Live

Monday 9th March 2015

Share this article:

Realty - Issue 11

Those of us gripped by Wolf Hall on BBC2 recently might be forgiven for thinking there is little from that era which still has relevance to property law today.

Chancel liability is one of those areas however, having its origins in the dissolution of the monasteries under Henry VIII. Monasterial land was appropriated to the Crown and then sold off or transferred to lay institutions and individuals; Eton and some of the Oxford Colleges for example were built on such land. Liability for the upkeep of the chancel was transferred with it, and would run with the land thereafter. 

If a property (commercial or residential) is now built on what was then monasterial land, it could be affected by chancel liability, and the Church could have a claim today against the owner(s) for the cost of repair. 

Finding out definitively whether a property is affected, or what the extent of that liability might be, is not possible due to the lack of any central register or record open to the public, and the standard approach in recent years had become to insure against the liability.

Chancel liability has been subject to some debate for many years, and it has been recognised as unsatisfactory for a property to be subject to a liability that it is not possible for a purchaser to be aware of before purchasing. In the 1980s a Law Commission report recommending phasing chancel liability out, which the Church of England supported at that time. However, nothing was done about it legislatively until the Land Registration Act 2002.

The most well-known case involving chancel liability was Aston Cantlow PCC v Wallbank, which formed part of the backdrop to the 2002 Act. In short, the Church Commissioners sought roughly £100,000 from the Wallbanks in 1990 towards repair of the chancel of a mediaeval church. The Wallbanks fought the claim, taking the fight to the House of Lords where they were ordered to pay approximately £500,000 including costs.

The 2002 Act introduced a 10 year time limit – until 12 October 2013 - for the Church (and the owners of other similar manorial rights, such as the right to mines and minerals in some areas) to register a notice of a property’s liability at the Land Registry.  

The first purchase for value of a property after that date would then take free of that liability, although there would still be a risk of a notice being registered after 12 October 2013 but before the first sale for value. Campaigners at the time expressed disappointment that the reforms stopped short of abolition.

Most commentators and advisers have therefore advised that if a property is sold for value after that date, then chancel liability will fall away and there would be no risk of the Church lodging a notice against the property, and a purchaser for value today would not need to take out chancel liability insurance.

That is correct up to a point, however it has recently transpired that the Land Registry are accepting the registration of unilateral notices by the Church of England notwithstanding that a sale for value has occurred since 12 October 2013, or that a purchaser has the benefit of a priority search. The Land Registry argue that it is not for them to decide on the merits of a claim, but for the Courts following a registered proprietor’s application for any such unilateral notice to be removed.

The presence of a unilateral notice to that effect is clearly going to have an effect on the marketability of the property, and a purchaser’s willingness to buy it. It may also mean insurance is either not available, or only available at a much higher premium than would be the case without the notice.  

It therefore seems that, despite the attempts at reform in 2002, which presumably intended to achieve a phasing out of chancel liability, a property owner could still be faced with a potentially expensive battle through the courts to remove a notice of chancel liability despite having bought a property after 12 October 2013 in the belief that chancel liability is of no relevance.

Unless and until further reforms are introduced (which they may be; there is still an active campaign for abolition, and a Private Member’s Bill was introduced into Parliament in 2014 proposing abolition), the most prudent course would still therefore seem to be to consider taking out insurance against chancel liability, even where purchasing a property after 12 October 2013.

If you require more information about chancel liability or for any other property issues you may have please contact:


Kevin Manley
Associate, Property
Tel: 0151 600 3340
Email Kevin


Meet the Agriculture and Landed Estates Team

Monday 9th March 2015

Share this article:

Realty - Issue 11

The Agriculture and Landed Estates Team has long-standing expertise in acting for the farming and land-owning community. The Team works closely with landowners, agricultural businesses, land agents, planning consultants, surveyors and other agricultural professionals. They draw on a wide range of experience and knowledge of both contentious and non-contentious agricultural issues for pre and post 1995 agricultural holdings and tenancies and all other aspects of agricultural matters.

The Team also offers a specialist service dealing with the transfer of property, tax planning and trusts for the farming community. Combined with this, the team also offers specialist advice on tax and succession planning for landed estate clients.

The Team

Rupert Jackson - Head of Agriculture
Rupert is a partner in our Real Estate Team with a wealth of experience in agricultural areas of land management and landed estates for individuals, trusts and companies advising on a wide range of estate management issues including complex rights, title, renewable options and other matters affecting rural holdings.

 

Charles Hansford  - Partner
Charles is a partner with huge experience in all types of commercial property including landlord and tenant, sales and acquisitions, corporate support, development and renewable energy projects matters. Specialises in acting on landed estates and agricultural property and deals with matters ranging from farm and land sales and purchases to mines and minerals (both title issues and the grant of options and mining leases), sporting rights and fell rights. 

 

Helen Ryan - Associate
Helen is an Associate and acts for a number of landed estates, including those with historic houses. Wealth of experience in dealing with the sale, purchase and mortgage of farms and agricultural land, property aspects of tax planning and succession, title and access problems, boundary disputes, Agricultural Holdings Act tenancies, Farm Business Tenancies and commercial leases, options over agricultural land with development potential and charity aspects of property transactions.

Hannah Carter - Senior Solicitor
Hannah is a Senior Solicitor in our Property Solutions team. Hannah acts on agricultural landlord and tenant disputes, adverse possession claims, rights of way and boundary disputes amongst many other matters relevant to the farming world.

 

 

The Team's services (with input from other sectors in the firm where relevant) include:

  • Agricultural litigation and dispute resolution
  • Employment
  • Environmental including habitats/conservation, waste management. Environmental permitting including waste exemptions water pollution and nuisance (odour dust and noise)
  • Equine matters
  • Event management
  • Farming partnerships
  • Fell rights
  • Health and safety including directors’ duties
  • Landlord and Tenant
  • Matrimonial
  • Mines and minerals
  • Planning and development
  • Renewables including solar wind biomass and anaerobic digestion FITS and RHI.
  • Rights of way and boundary disputes
  • Sale and purchase of estates, farms and agricultural land.
  • Share farming
  • Sporting rights
  • Succession issues
  • Tax and financial
  • Tourism and leisure
  • Wills and probate

An Unusual Approach to HMO Prosecutions … Brabners Discuss a Successful Recent Case

Wednesday 3rd December 2014

Share this article:

Realty - Issue 10

The question of whether or not a property is classified as a house in multiple occupation under the Housing Act is usually fairly clear cut. However, a recent case in which Brabners were instructed gives cause for concern, particularly with regard to older buildings upon which conversion works may have been carried out some time ago.

Local Authority officers have a range of powers to inspect rental property and a range of statutory tools at their disposal to enforce against landlords and agents who permit tenants to occupy unsatisfactory or unsafe properties. Commercial landlords will be aware of the ever increasing amount of regulation impacting their businesses. In addition, Selective Licensing has cropped up in consultations around the country and in Liverpool, the confusingly named Citywide Selective Licensing Scheme looks set to be implemented early next year.

The Housing Act 2004 applies broadly three core tests as to whether a property is defined as an HMO; the “standard test”, the “self-contained flat test” and “the converted building test”. In addition, a property can be subject to an HMO declaration or defined as an HMO pursuant to section 257 of the Act which relates to “converted blocks of flats”. This latter section proved to be problematic in the context of the case which we dealt with.

The Act defines a “converted block of flats” as a building or part of a building which has been converted into, and consists of self-contained flats.

If less than two-thirds of the flats are owner-occupied and the works undertaken to effect the conversion “did not then and do not now comply with the appropriate building standards," then the property may be defined as an HMO whether the owner or managing agents were aware of that position or not.

The “appropriate building standards” in the case we were instructed upon were, by reason of the date upon which the conversion works were carried out (prior to the 1st of June 1992), the Building Regulations in effect as at the 1st of June 1992.

The point, of course is that, if the local authority take the view that the property is an HMO, then the regulations applicable to HMO’s apply – and the managing agent, Directors of the managing agent and registered owners are exposed to the possibility of criminal proceedings being brought for alleged breaches.

In the recent case the two owners of the “bricks and mortar” and the company thought to be the managing agent of the property were prosecuted, each facing eight allegations under the HMO regulations. Each allegation gave rise to a maximum fine of £5,000.

In this case it was not initially made clear within the evidence exactly how the local authority had determined the status of the property but in subsequent correspondence it was confirmed that the environmental health officer who had attended the property in response to a complaint from a tenant, had formed the view based upon his knowledge and experience that the property did not conform to “current” building standards.

During the course of further correspondence, it was pointed out to the local authority that the property did not need to comply with current building standards and that, as yet, the prosecution had failed to adduce any evidence as to why it was they held the view that the property failed to comply with the Building Regulations at the time of the conversion works or currently.

On behalf of the defendants, an expert surveyor was instructed and a trial was listed. On the day of trial the prosecution, having discontinued proceedings against one of the owners some months previously, offered no evidence against the remaining two defendants.

It seemed to be the case that the prosecution had failed to direct itself properly as to the black letter of the law and had failed to understand what it needed to prove in order to bring the case. Worryingly, as the case unfolded, it appeared clear that many similar cases had been dealt with on this basis previously and that, because landlords and agents are necessarily commercial creatures, many had taken the view that the allegations were not worth contesting – perhaps because in their respective cases fewer charges had been laid and the cost benefit analysis suggested a guilty plea as the most cost effective way forward. The prosecution in our case appeared to have assumed that its decision to designate the property as an HMO, seemingly for the purposes of permitting a prosecution, would go unchallenged.

Further, the prosecution failed to obtain, until the day before trial, evidence as to why they said the property did not comply with the relevant building regulations. Remembering that the prosecution needed to prove that the property did not comply with the regulations at the time of the conversion works (approximately 30 years ago in this case) and still did not comply with the regulations in order to define the property as an HMO, it was crucial that the prosecution adduce evidence as to why the building regulations were not met. In other words, what is actually wrong with the property by reference to the requirements of the regulations?

Until that point, the defendant expert had been left in the position of trying to “prove a negative”.  In this way, the prosecution seemed to prefer to allow the defendants to attempt to discharge an evidential burden that was not properly theirs to discharge.  Even when some evidence was provided, it was apparent that it was not expert evidence not least because it relied, as evidence of non-compliance with the building regulations, upon matters which were not included within those regulations.

All of these issues were of course raised, and were sufficient to defeat the prosecution case, before the defendants put forward evidence of their statutory defence. The regulations provide that a Court may acquit a defendant where it finds that the defendant had a reasonable excuse for failing to comply with the regulations - the burden resting with the defendant in this regard.

This leads on to a more surprising aspect of this case – the fact that the prosecution had failed to ask any of the defendants for an account of themselves before prosecuting them. You might think it unfair to proceed with a serious prosecution case without having interviewed the defendants – without having given them an opportunity to provide their version of events.

Failing to understand the defendant’s respective position before bringing criminal proceedings against them is at best unwise. How, for example, do you know as a prosecutor, that they are the correct defendant(s)? How can you assess their level of culpability? How can you assess whether or not they have a valid or “reasonable excuse” for not complying with the regulations?

In this case, had an “interview under caution” been conducted, it is highly likely that the prosecution case would not have been started at all.

You might think however that, where it fails to interview a defendant, the prosecution assumes the risk of coming away without a conviction, and that that is a matter for it. However, you should consider the fairly recent changes to the way in which criminal cases are funded. Following acquittal in this case, the individuals were awarded a defence costs order to be paid from central funds. The amounts which can be recovered under such order are strictly limited both in terms of fees paid to experts and solicitors and barristers costs. Usually no more than around 30% will be recovered. Any company prosecuted before the criminal courts, acquitted or not, will be precluded from recovering any of its costs. We should all of course remember also that the public purse paid for the prosecution.

Far better than to avoid the prosecution altogether, but that simply could not be achieved in this case because the prosecution did not allow an opportunity for the defendants to engage, give their accounts, and possibly persuade the prosecution that the case was ill-founded or that an alternative disposal would be more appropriate.

In this case all of the defendants were acquitted but the potential financial exposure of those involved ran to a maximum of £120,000 in fines, together with a substantial award for prosecution costs, lost time and expense of senior managers and staff and the defence costs. Nobody can put a price upon the reputational implications of course!

So, be aware, the status of a given property is not always clear. If your property is subject to an investigation by a local EHO you should seek advice at an early stage. In the case above, had lawyers been engaged early on, it is likely that proceedings would have been avoided altogether and much time and money saved.

If you require more information about any of the issues raised in this case or for any other regulatory matter you may have please contact:


Lachlan Nisbet

Partner, Litigation  
Tel: 0151 600 3444
Email Lachlan


Termination Time for Troublesome Tenants

Wednesday 3rd December 2014

Share this article:

Realty - Issue 10

A look at the Youssefi v Mussellwhite [2014] case

Landlords may well be well aware of their commercial tenants’ ‘right to renew’ at the expiry of a lease and the narrow grounds upon which landlords are entitled to oppose such a renewal. However, the Courts have recently bolstered the position of landlords who want to be rid of tenants who have constantly breached their duties set on in the lease.

Whilst landlords have confidently been able to oppose a tenant’s application for a lease renewal in the scenarios in which the property is to be occupied by the landlord, reconstructed or an adequate alternative is found, the ability to oppose renewal on the grounds of ‘substantial breaches of a tenant’s obligations’ and ‘other reasons connected with the lease’ have proven to be a prohibitively vague basis for non-renewal.

In Youssefi v Mussellwhite [2014] the Court made findings which will have significant implications for tenants who seek to renew following breaches of their obligations. In the case, a ‘combative and obstructive’ tenant had unlawfully:

  1. Persistently refused to allow the landlord to inspect the premises despite serious concerns having been raised as to its use and the property’s state of repair; and
     
  2. Failed to use the property for the specific commercial purposes set out in the lease.

The Court found that both of these factors operated to allow the landlord to prevent the renewal of the lease. However, the particularly interesting issue here is the background to these breaches.

It was not necessary for the landlord to show that these issues had caused a reduction in value of the property. It was also irrelevant that the tenant could have applied relatively easily to change the requirement to use the property as required in the lease and that the landlord would not have been able to refuse - the failure to allow the landlord access and to use the property for the specified commercial premises were both sufficient grounds for opposing renewal.

A further point to note was that the landlord in the Youssefi case also freely admitted that she did not want to renew the lease or seek another tenant; and instead, she wanted to sell the property free of any tenants. The fact that the landlord appeared to be motivated not by obtaining a better tenant but by preparing the property for a vacant sale was irrelevant - the tenant had failed to adhere to the terms of the lease, and this was sufficient to enable the landlord to oppose renewal.

Interestingly, whilst the landlord was ultimately able to prevent renewal, she also argued that the failure by the tenant to carry out his repair obligations was also sufficient grounds for opposition. The repair question centred on an overgrown ‘creeper plant’ which would cost £350 to remove. Ultimately, the Court found that this plant growth was the landlord’s responsibility but ruled that, if it had been the tenant’s responsibility, this failure would not be sufficiently serious to prevent a lease being granted.

The impact of this decision is that, provided that a tenant’s breach of covenant is substantial, a landlord will be justified in objecting to the grant of a new tenancy, even if he cannot show any direct financial loss arising from those breaches. The ‘nuisance value’ of the breaches will often suffice. This might prove to be a useful tool when negotiating and dealing with troublesome tenants.

If you require more information about any of the issues raised in this case or for any other property litigation matters you may have please contact:


Jeff Lewis 

Head of Litigation, Manchester
Tel: 0161 836 8872
Email Jeff


Empty Property and Business Rates: A Reminder - Attractive if you Need a Short Term Christmas Let

Wednesday 3rd December 2014

Share this article:

Realty - Issue 10

Generally a property owner is liable to pay business rates on non-domestic buildings even if they are empty. In the case of property that is subject to a lease, then the property owner for the purposes of business rates will usually be the tenant.

If the premises are incapable of beneficial occupation then an application can be made to remove the premises from the rating list. Recent cases have confirmed that:

  1. The fact that premises are in disrepair does not render them incapable of beneficial occupation
     
  2. It is also not sufficient that occupying the premises could render the property owner liable to prosecution, e.g. on health and safety grounds.

A property owner can apply for exemption from business rates for a limited period if the premises are empty (for a continuous period of up to 3 months for offices and shops and 6 months for industrial premises). If the premises are then occupied or let for a period of more than 6 weeks then a new exemption period can be claimed. This can be attractive for retail property owners at this time of year when they may be able to find a short term Christmas let.

If you require more information about business rates on empty buildings or for any other property matter you may have please contact:


Paul Nicholls

Associate, Real Estate
Tel: 0161 836 8884
Email Paul


Property Partnerships: A Marriage and Divorce of Convenience

Wednesday 3rd December 2014

Share this article:

Realty - Issue 10

It is increasingly common to find that separating spouses own the family home, buy to let property portfolio and business premises, often with the added complexity of the business premises being owned with other co-owners or leased to the family company, without a formal lease agreement in place between the spouses and the company.

For the family lawyer the first property consideration is the nature of the property ownership and whether the non-owning spouse’s interests should be protected. In the case of joint owners, if the couple own the property as joint tenants should the joint tenancy be severed to ensure that each spouse’s share of the property passes by their Will in light of their separation.

The next key consideration is the date of the separation to ascertain whether commercial property transfers can take place within the tax year of separation to avoid capital gains tax on transfer. This is often only possible where there is an agreed transfer of a business property or buy to let property portfolio, without complicated liquidity issues.

With the improvement in the property market and the continued limited returns on cash savings, family lawyers have noticed that separating spouses are increasingly open to the idea of maintaining joint ownership of commercial property, as neither spouse wants to relinquish their share in the business property as a result of the rental returns or because of the impact on the sale of commercial property on the family business that operates from it.

Continued post-divorce joint commercial property ownership is a very alien concept to family lawyers whose normal priority is to secure a financial clean break, especially when representing the financially stronger spouse, to prevent continued financial ties or claims for financial support. When representing a financially weaker spouse continued joint commercial property ownership is often seen, by the family lawyer, as a potential recipe for disaster as the financially weaker spouse may need to rely on commercial rental income leading to property law claims if there is a divorce financial  clean break order in place  preventing further family litigation.

For separating spouses who see the advantages of remaining in property partnerships, or at least agreeing to defer the sale of commercial property for an agreed period or until the development has been completed, the key is to combine a bespoke family divorce court order with a property partnership agreement between all the co-owners of the commercial property and, where necessary a formal lease between the company and the spouses or property owning partnership. If the spouses are to remain in business together as well as maintaining joint ownership of commercial premises these agreements need to be complimented by a shareholder agreement to provide checks and balances and protection for both spouses. In appropriate cases, in order to ensure that the financially weaker spouse is not left vulnerable as a result of continued joint property ownership the divorce court order can preserve spousal maintenance claims, to be revived if rental income is not paid for non-genuine business reasons.

Thinking outside of the standard family advice, that on spousal separation, commercial property must be transferred or immediately sold can be to spouses mutual benefit, provided the family, property and business and estate planning documentation is all in place to ensure that it is a property marriage of convenience, despite the divorce.

If you require more information about property partnerships or to discuss any other family law matter you may have please contact the Family team.


Realty - Issue 9 July 2014


Download pdf

Realty - Issue 8 March 2014


Download pdf

Realty - Issue 7 December 2013


Download pdf

Pages